Rebel shareholders seek Vodafone changes

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John Mayo, the former deputy chief executive of Marconi, is backing a group of investors who are seeking to restructure Vodafone and unlock up to £38bn of value in the mobile phone group.

Efficient Capital Structures, an activist investment group backed by Beehive Capital, Mr Mayo’s investment fund, has written to Vodafone asking for a series of resolutions to be put to next month’s AGM.

One of the resolutions it has proposed seeks to gear up Vodafone’s balance sheet by issuing £34bn of bonds and create a security with direct interest in Verizon Wireless, Vodafone’s 45 per cent owned US joint venture.

Glenn Cooper, chairman of ECS, said the Verizon shareholding was “a passive investment which we believe brings no commercial benefit”.

“Vodafone’s share price has underperformed the FTSE 100 over the past five years by 28 per cent. A major reason for this is Vodafone’s inefficient capital structure,” Mr Cooper argued.

“Together, these proposals can be executed in an efficient manner and we estimate they would release between £17bn and £38bn of shareholder value.”

Mr Mayo said the move was not aggressive to the management or the board. “The proposal is simply to improve the capital structure,” he said.

The group is also seeking to limit how much Vodafone can spend on acquisitions in any one year without seeking shareholder approval.

Vodafone confirmed it had received the letter on Wednesday night and said it would review the contents.

The price equates to between 190p and 230p a share. Although Vodafone has rallied to a five-year high in recent weeks on speculation it could break itself up, the stock remains below its 400p high.

Vodafone shares opened 3 per cent higher at 160p on Thursday, making the mobile group the leading gainer on the FTSE 100. But by mid-morning some of these gains had been given up and the shares were up 2.8p or 1.8 per cent at 157.9p.

To obtain the resolution, ECS plans to use a clause in the 1985 Companies Act which requires companies to circulate proposed resolutions if more than 100 shareholders holding shares on which there has been an average sum paid of £100 push for a requisition. It is understood that ECS has the required level of support for its resolutions even though they own just 0.0004 per cent of the company’s shares.

Mr Mayo was one of the architects of Marconi’s push into communications at the end of the 1990s when GEC jettisoned its defence interests.

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