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Should C&C listen to activist hedge fund’s demands for a sale?

Irish drinks maker faces call from activist hedge fund to put itself up for sale

The Irish-based but London-listed company is facing calls to sell itself

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Cantillon
Tue Jun 25 2024 - 06:00

What next for C&C?

In the weeks since it spooked markets with the loss of its (latest) chief executive after barely a year amid the restatement of three years’ earnings, there has been steady speculation the Dublin listed drinks company could be taken out by a competitor or possibly private equity. That talk came amid a struggling share price but solid brands and a business that an operating level, at least, appears to be performing in line with expectations.

That speculation probably wasn’t helped by the emergence of Carlsberg’s repeated moves to buy Ballygowan owner Britvic (ironically, the British drinks group bought the Irish water brand and the Club range of soft drinks from C&C some years ago), and now New York activist hedge fund Engine Capital has written to the C&C board explicitly calling for the company to slap the “for sale” sign on its front door.

In an open letter to the C&C board, Engine’s managing partner Arnaud Ajdler accuses the company of “a host of self-inflicted issues over the last few years, including succession missteps, strategic mistakes, execution blunders, and an inability to return to its higher historical earnings profile”.

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He does have a point. The fact that C&C is heading for a fourth CEO in less than five years is damning, as are the multiple financial charges it has had to take in that time.

But should, as Ajdler demands, the company explore “strategic alternatives” in a sale process that, he says, could result in a 58 per cent premium over where the share price has been trading at? That might be a more difficult question to answer.

The company is still set on its plan to return €150 million to shareholders over the next three years, as well as hitting a target of €100 million adjusted operating profit per year. In the aftermath of CEO Patrick McMahon’s resignation this month, analysts seem to have been largely reassured by the company’s strategy and observers question whether now would be the time to sell.

Still, C&C’s statement on Monday was notable in that it did not dismiss Engine’s proposals out of hand. Interim boss Ralph Findlay appears to be keeping his options open.

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