AC Milan's Franck Kessie, center, celebrates with his teammates after scoring his side's second goal during the Serie A soccer match between AC Milan and Parma at the San Siro Stadium, in Milan, Italy, Sunday, Dec. 2, 2018. (AP Photo/Antonio Calanni)
AC Milan's players celebrate a goal earlier this month. Elliott Management took control of the football club in July © AP

Paul Singer’s Elliott Management is known for its boldness. Notorious for seizing a ship in a dispute with the Argentine government, the activist US hedge fund is now cutting a swath through Europe.

This month alone, Elliott emerged with positions at Bayer, the German chemical and drugs conglomerate, and Pernod Ricard, the French spirits group. In May it turned up at ThyssenKrupp, the German steelmaker. In July, it seized control of AC Milan, the Italian football club. Even for Elliott, taking ownership of the Rossoneri is audacious.

Yet the reaction to this burst of activity has been strangely muted. In 2005, German politician Franz Müntefering compared US private investors to locusts, fretting that they could lay waste to the country’s corporate sector.

Now the activists have arrived in force. Boards sometimes still protest loudly — ThyssenKrupp’s outgoing chairman accused the activists of “psycho-terror” — but they have few allies. There is no locust talk from prominent politicians. It’s mainly crickets.

The French government did at least speak up this week on the Pernod Ricard investment: “Big French companies [should] have stable and long-term shareholders who are willing to support their development and anchor them in France, so they are not subject to pressure from shareholders who want only short-term financial profitability.”

But the locusts have mutated and the environment has changed — no longer reflexively hostile to foreign interlopers. For its Pernod Ricard investment, Elliott hired as its adviser Alain Minc, a businessman and philosopher who is a fixture of and fixer for the French establishment. It also deploys warm words: “Pernod’s journey from a small local niche player to an iconic French multinational leader has been impressive, and the Ricard family deserves credit . . . ” 

Elliott has not taken a €1bn position to flatter the family. It wants higher margins, better corporate governance and a potential break-up. It has just learned that its message, like a glass of Ricard, is more palatable when watered down.

“The US activists who are successful over here are the ones that recognise how they need to act in different jurisdictions,” said Michael Henson, partner at Statera, which advises companies on how to deal with activists.

In Telecom Italia, Elliott seemed to deploy more of an iron fist. It succeeded in ousting the board in May, which had been controlled by France’s Vivendi, and celebrated “a powerful signal to Italy and beyond that engaged investors will not accept substandard corporate governance”. 

But it also used a canny knowledge of the local scene — it may be run by Americans but there are plenty of Europeans in high places at the hedge fund. The Italian Treasury’s Cassa Depositi e Prestiti had a 5 per cent stake in Telecom Italia and was willing to get into bed with the Americans to thwart the French. Showing it has learnt the local language, Elliott even accused Vivendi of “short-termism”.

In a previous decade, Pernod Ricard would look impenetrable. The Ricard family is the biggest shareholder with 20 per cent of the voting rights. Also prominent on the shareholder register is Caisse des Dépôts, the national fund once dubbed “the armed wing of the state” for its ferocious defence of French companies.

On paper, many of the defences that were thought to make Europe a hostile hunting ground for activists — dual boards, long-term institutional investors, super voting rights and interventionist governments — are still in place. In practice, they have eroded.

The rise of passive investing has changed the equation. Loyalties have shifted. Existing investors are more likely to be neutral or even delighted to see activists arrive. It only remains to restore glory to the red half of Milan and Elliott’s European integration will be complete.

tom.braithwaite@ft.com

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