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Barclays (BARC.L) will today face an attempted boardroom coup by a soft-spoken activist investor who is calling for radical cuts to its investment bank.
Shareholders will vote on Thursday whether to appoint activist investor Edward Bramson to Barclays board at the bank’s annual general meeting. Bramson, who has a 5.5% stake in the bank, has called the vote against Barclays’ wishes.
The two sides have waged a war of words in recent weeks and Thursday’s vote represents the culmination of the battle.
Soft-spoken but deadly
UK-born Bramson runs New York-based Sherborne Investors, which buys stakes in businesses it believes are underperforming and then push for management or business changes to drive the share price higher.
Bramson is notoriously publicity shy, preferring to make his arguments behind closed doors. He has been characterised as “quietly spoken” and “very polite” but has a record of doggedly pursuing companies he targets.
Past investments include Electra Private Equity and chemicals company Elementis. Bramson’s intervention at Electra ultimately led to extensive sell-offs and the remaining business is now being wound up. The Daily Mail dubbed him a “corporate raider” as a result.
Bramson insists Sherborne acts in the best interest of all shareholders. At Barclays, he believes the investment bank is depressing the share price and has been pushing for cuts and a focus on retail banking.
Barclays executives initially met Sherborne to discuss Bramson’s views but the two sides failed to reach a compromise. Relations have become increasingly hostile since.
Barclays said in a letter to shareholders at the start of April that Bramson had “a poor understanding” of the bank and his plan was “based on multiple factual errors.”
Bramson countered with his own letter saying: “An alternative voice on the board would seem to be healthy for the company and its shareholders.”
‘The hard work has been done’
Recent results supported Bramson’s argument. First quarter revenues at Barclays’ investment bank fell by 25% year-on-year.
However, shareholders are expected to back Barclays at the AGM, according to a survey of investors by Reuters.
“It is true that the investment bank is underperforming but that won’t always be the case,” Michael Hewson, chief market analyst at CMC Markets, told Yahoo Finance UK. “The hard work has been done with respect to tidying up this part of the business.”
The showdown is likely to prove a pivotal whatever happens.
For Bramson, a defeat could force a retreat.
Bramson’s $1.4bn stake in Barclays is partly funded through a large loan from Bank of America Merrill Lynch. Barclays argues this leverage — along with “time-limited derivative instruments to hedge against downside risk” — mean Sherborne has a “a shorter term focus.” If Bramson can’t get what he wants quickly, he may sell out to cut his losses.
For Barclays, a defeat could risk the job of CEO Jes Staley. Staley — an investment banker by trade — has staunchly defended the investment bank and recently moved to take more direct control of the division to drive performance. A vote in favour of Bramson could fatally undermine his authority.
Still, most in the City think Staley is safe. Bill Blain, the chief strategist at Shard Capital, called the vote a “non-issue” as Bramson “won’t get on.”
In a bid to swing the odds in his favour, publicity-shy Bramson may appear at Thursday’s meeting to make a final plea to investors. Barclays’ finance director Tushar Morzaria said last week he didn’t know if Bramson or any Sherborne representatives would appear at the AGM.
The AGM begins at 11am in central London on Thursday, with the results of all shareholder votes due later in the day.
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.