Activist hedge fund urges Kindred to explore sale option as shareholding hits 10%
New York-based hedge fund Corvex Management has wasted no time in turning up the heat on Kindred Group’s board and management team after increasing its stake to 10.12%.
The so-called activist fund – launched in 2011 by noted investor Keith Meister – acquired an initial 5.29% stake in the Stockholm-listed operator in February before doubling its position and publicly disclosing its stake to shareholders on 28 April.
The Corvex announcement coincided with Kindred’s Q1 2022 financial results, which made for miserable reading amid a 30% revenue decline and 77% dip in EBITDA. The operator’s share price had already tanked by 13% due to an earlier profit warning.
“Given recent developments, we believe the Kindred board should immediately retain a leading, global financial adviser to evaluate strategic alternatives, including the potential value that could be achieved through a sale or business combination,” read the most important line in the statement issued by Corvex.
“A fully informed board will be in the best position to weigh any strategic alternatives, compared with Kindred’s stand-alone business plan.
“While we have not pre-judged any path for Kindred, we believe the board should possess all relevant market information and let the data drive the decision-making process. We look forward to continuing to work with the Kindred team.”
Corvex Management: “Given recent developments, we believe the Kindred board should immediately retain a leading, global financial adviser to evaluate strategic alternatives, including the potential value that could be achieved through a sale or business combination.”
Corvex said it had already enjoyed “constructive” conversations with the Kindred Group board and senior management team since increasing its shareholding.
LeoVegas, a fellow Stockholm-listed gambling company operating primarily from Malta, is now set to be snapped up by MGM Resorts.
The US casino operator’s non-negotiable $607m bid, lodged on 2 May, triggered a mammoth 51% one-week upturn in the share price of LeoVegas.
Corvex could be eyeing similar stock market gains via Kindred, which is already climbing.
Meister, who is managing partner and chief investment officer at Corvex, currently sits on the board of directors at MGM Resorts. In February, Corvex offloaded 4.5 million shares of MGM stock for $405m.
According to Investopedia, Corvex uses an “opportunistic methodology” to make its stock picks, including special situations, event-driven strategies and value investing.
Prior to launching the Corvex fund in 2011, Meister made a name for himself as Carl Icahn’s right-hand man.
Carl Icahn is one of Wall Street’s most successful investors and has been shaking up corporate America for decades. He is worth $16.5bn according to Forbes.
The Investopedia entry on Corvex reads: “Meister took Icahn’s philosophy of being aggressive, contrarian and confrontational and bolstered it with $250m in seed capital from George Soros.”
Kindred felt compelled to respond to the Corvex statement. In a note to shareholders, Kindred chairman Evert Carlsson said: “The board and management are fully committed to the group’s current strategic direction.
“We are confident about the long-term opportunities for the company and value creation potential for all our shareholders.
“We welcome and look forward to continuing a constructive dialogue with all our shareholders going forward,” he added.