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Money Managers Stop Taking the Money and Running

Chris Hughes

(Bloomberg Opinion) -- Two close-run European deals suggest a welcome revival in long-term thinking by institutional investors.

On Tuesday, Blackstone Group LP & Hellman & Friedman failed to secure enough support for their bid to buy Scout24 AG four years after the pair took the German directories business public. They got 43% of the vote, short of the 50% plus one share they were seeking.

Inmarsat Plc is being taken over by group of private equity firms including Apax Partners LLP and Warburg Pincus LLC. Owners of 79% of the company’s stock backed the deal, exceeding the offer’s 75% threshold. But that’s less impressive given the result benefited from the support of Lansdowne Partners, an 11% holder. 

Both situations are embarrassing for the respective boards, which had advised shareholders to accept the bids. True, stock market movements are a big factor. Despite recent wobbles, equities are above where they were a few months ago when the two companies entered talks. The rise has eroded the bid premiums that were initially agreed.

What’s more, fund managers may feel under less pressure to accept takeovers in the first half of the calendar year than in December when they’re about to be judged on their annual performance.

Just possibly, investors may be thinking more critically about what they might do with the proceeds from relatively low cash bids. The targets here are rare animals and it’s not easy to find replacements that enjoy the same economic benefits. For marketplaces like Scout24, the reward of becoming the dominant player are considerable -- but take time to build. Likewise, Inmarsat is stuck in a round of heavy capital expenditure which could take years to pay off. But if it succeeds, its owner will possess a lucrative asset in aviation broadband. 

There are still plenty of companies taken public by private equity firms whose shares are languishing below their initial public offering prices. This universe of poor performers was looking like an attractive hit list for bankers and buyout firms alike and a lucrative investment theme for money managers. Their shelf life as public companies may have just been extended.

(Corrects percentage of shares voted in support of Inmarsat deal to 79% in third paragraph.)

To contact the author of this story: Chris Hughes at chughes89@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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