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(Bloomberg Opinion) -- Shareholder crusaders usually settle for less than they ask for. In Europe’s latest dissident campaign, they ended up with more. Activists who don’t waver are suddenly being handsomely rewarded.
To re-cap the rapid succession of events at Unibail-Rodamco-Westfield: Former Chief Executive Officer Leon Bressler and telecoms billionaire Xavier Niel wanted to stop the mall operator’s 3.5 billion-euro ($4.2 billion) capital increase, take two board seats and add another independent director.
They got it all, plus the chairman role for Bressler, the agreed departure of the current CEO and the immediate exit of four non-executives. The activists will have all the more clout on the Unibail’s shrunken board.
It’s a significant moment for activism, and it’s happened in France, where challenging the status quo is particularly hard.
The snag is that the level of influence obtained is disproportionate to the dissidents’ 5% shareholding: The outcome is close to gaining control without paying for it.
Bressler has a very clear mandate. He arguably represents the majority, elected a director by shareholders fully aware of his plan for the company. The board appointed him chairman with good reason.
Nevertheless, he must clarify whether the setup is a sticking-plaster solution hatched by a company in crisis, and what longer-term arrangements he intends to put in place. He should bring some counterweights into the boardroom. There are too few female directors for a start. And will he make way for an external successor at a given date?
The drama shows what activism achieves when it refuses to compromise. Remember the playing field is generally tilted against rebel shareholders. They have limited voting power, and other stakeholders will often come to the aid of the under-fire company — a lawmaker, union boss or wealthy kingmaker. Witness the billionaires who initially defended Arnaud Lagardere, chairman of publisher Lagardare SCA, against a well-aimed activist campaign earlier this year.
At Unibail, CEO Christophe Cuvillier cut a notably isolated figure in this crisis. Real estate is not a sector to get politicians fuming. A second of his predecessors joined Bressler and Niel in coming out against his strategy. True, the proxy advisory services were supportive up to a point, but not all investors slavishly follow their guidance. The math meant the activists needed only 20% of the shares to be voted “no” to prevent the company getting sufficient approvals to win.
Advised by a legion of big-name banks, it’s astonishing Unibail didn’t strike the obvious face-saving deal — a binding commitment to delay a capital hike in return for Bressler and Niel sanctioning it as an option. It’s too late now.