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Activist takes aim at Liberty-controlled Belgian telecoms group

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Via Financial Times

An activist French hedge fund has demanded that a Belgian telecoms company controlled by billionaire John Malone’s Liberty Global return almost €1bn to shareholders and accused its US owner of propping up an “extremely unambitious” management team unwilling to turn round the business.

CIAM is a top 10 shareholder with a 1.2 per cent stake in Telenet, one of Belgium’s three large telecoms companies.

It went public with its campaign late last year, becoming the second activist investor to take aim at Telenet recently. US hedge fund Lucerne, which holds a 3.2 per cent stake, successfully pressured the company to pay a special dividend in 2018 and a regular dividend in 2019 after seven years without one.

In a public letter sent on Thursday, CIAM called on Telenet to pay a €970m special dividend ahead of its annual meeting in April. It said this could be paid for from the company’s free cash flow and taking on an additional €840m in debt, sending leverage to levels similar to other Liberty subsidiaries.

CIAM also criticised Telenet’s management given its recent disappointing share price performance. The stock has declined 16 per cent since a capital markets day at the end of 2018, in contrast to similar-sized European rivals that have gained in value.

“We believe that this underperformance is not the consequence of regulatory headwinds and is wholly attributable to management’s poor execution and lack of ‘pro-share price behaviour’,” CIAM’s letter said.

Its criticism extended to Liberty Global, owner of Virgin Media in the UK, which holds a 58 per cent stake in Telenet.

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In an interview with the Financial Times, Catherine Berjal, the chief executive of CIAM, said she believed that Liberty was quite happy for the Telenet share price to languish. “If Liberty wants to buy out the minorities one day, which we think they will do, it is simply not in their interest for the share price to go up,” she said. “The underperformance is the result of bad governance.”

The letter also alleges that Liberty was using its sway over the board to “avoid taking the required actions” to boost the share price, while the management was “solely focused on meeting conservative expectations”.

Telenet said it would meet CIAM on March 9 as part of an investor roadshow. “We value CIAM’s input as shareholders and remain committed to maintaining a constructive dialogue with them as we’ve demonstrated in the past,” the company said. Liberty Global declined to comment.

The minority spat in Belgium is another problem for Liberty Global, which has been unwinding its European empire.

The group has sold its German and some eastern European cable businesses to Vodafone but a deal to sell its Swiss unit UPC to Sunrise collapsed last year. The group has been reviewing its options in markets including the UK, the Netherlands and Poland and launched a $1bn share buyback this month.

CIAM, which was founded by Ms Berjal and her business partner Anne-Sophie d’Andlau in 2010, is one of the few homegrown activist funds in France. With about €700m in assets under management, the fund has been involved in successful campaigns at Euro Disney and Dutch retail group Ahold Delhaize. It has also taken aim at French companies including telecom operator SFR and Renault.

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