Activist Shareholder Reportedly Flexes Muscles Again

Shirin Aguiar

9 December 2021

, a well-known activist hedge fund company, is reportedly investing a stake in UK housebuilding giant Taylor Wimpey, with a possible view to a potential acquisition or, at the least, to encourage a shakeup of the business to improve performance.

This is an example of Elliott Advisors and other activist investors seeking to force boardroom changes to improve shareholder value. The investor has taken a small stake in the FTSE-100 listed firm, according to City blog Betaville on 2 December, which stated that the hedge fund has been “secretly” building a “sizeable” stake in the housebuilder with a view to pushing Taylor Wimpey to strike a sale with a US-based company or private equity group.

Elliott's move could also signal an intent to take over the firm, according to other financial reports. Taylor Wimpey, which has not commented on the matter, has previously forecast that its operating profit this year will be around $1.08 billion (£820 million). Its board has been alerted to the move by the activist. In its annual report, Taylor Wimpey's pre-tax proft slumped by 68.4 per cent to £264.4 million in 2020 from a year earlier. The group employed 5,948 people at the end of 2020. Building completions fell sharply in 2020 from a year before at a time when business activity was being pumelled by the pandemic.

Elliott has been trying to use its market position with other firms. For example, it took aim at a bank well-known to our readers: Bank of East Asia. In March 2020, BEA announced that it would review its business operations after Elliott Management Corporation harried the bank over poor performance, and instigated legal proceedings against BEA, only backing down after the bank announced the review.

Such moves highlight how activist investors seek to capture market-beating "Alpha" by acquiring ownership stakes in firms, and then use their voting muscle to force changes, such as fire management, sell off business units, or make other alterations. It remains a matter of debate whether activists genuinely improve economic performance for economies as a whole or merely drive turnover in share dealing and make money for advisors.

Elliott is also in a face-off with Scottish energy group SSE in which it has a major share, wanting it to spin off its renewables division - a move which has largely been criticised.

This publication contacted Elliott Advisors and Taylor Wimpey for comment but had not heard back at the time of publication.

Meanwhile, Pete Redfern, Taylor Wimpey’s CEO, yesterday announced plans to step down. He will remain in the role until a replacement has been found and the handover process is complete. No one has been named for the position.

“News that Pete Redfern is stepping down from the helm at Taylor Wimpey comes as the UK’s housebuilders turn a corner following a rollercoaster 18 months due to the pandemic," Laura Hoy, equity analyst at Hargreaves Lansdown, said. "Under Redfern’s leadership, Taylor Wimpey took a more aggressive position than most of its peers, taking advantage of the uncertainty with a land-buying spree. This has put the group in a strong position if the housing market remains robust, and Redfern’s successor will reap the benefits of this bold move."