Activist Crystal Amber gets a dose of its own medicine
Saba Capital Management has built up a stake of more than 25% in Crystal Amber, a level that is significant thanks to an important vote that is coming up.
At an extraordinary general meeting of the fund held in July 2013, a resolution was passed for a vote to be held at the 2021 annual general meeting (AGM) requiring a 75% majority of votes to be cast in favour of the company continuing in its present form.
You can see where this is going, can’t you?
Saba Capital, which has its head office in Manhattan’s famous Chrysler Building, has indicated to Crystal Amber that it intends to vote against the extraordinary resolution, thus ensuring it has no chance of passing.
Crystal Amber is consulting its shareholders in order to formulate proposals to be put to the vote to reorganise, reconstruct, or wind up the company in the event of the continuation vote not being passed at the next AGM.
As at the end of June 2020, Crystal Amber’s major holdings were:
- De La Rue
- Allied Minds
- Equals Group
- Redde Northgate
- Hurricane Energy
- Board Intelligence
- Sutton Harbour Group
- GI Dynamics Inc
- Kenmare Resources
According to its website, “the fund invests in a concentrated portfolio of undervalued companies predominantly listed on UK markets (usually the Official List or AIM) and which have a typical market capitalisation of between £100 million and £1,000 million. Following investment the fund engages with the management of those companies with a view to enhancing value for all their shareholders.”
In that respect, it has failed spectacularly with Hurricane Energy PLC (LON:HUR), where the shares have slumped from 5.8p at the end of June 2020 to 1.9p now but it has fared better with its main holding, De La Rue PLC (LON:DLAR), where the shares have risen over the last year to 193.4p from around 130p.
Banknote printer De La Rue was the subject of an opportunistic bid from French rival Oberthur Technologies in 2010 when it was reeling from quality issues with the lucrative Reserve Bank of India contract – a contract it subsequently lost and it remains a company that is often cited as a takeover target.
As recently as July 2019 Crystal Amber was calling on De La Rue’s senior management (all of whom have since moved on) to engage with “a leading industry player who had indicated to Crystal Amber that it was open to a dialogue with De La Rue to explore mutually beneficial strategic opportunities”.
As such, Crystal Amber’s 13% stake in De La Rue is likely to be of interest to the banknote printer’s rivals.
Germany’s Giesecke & Devrient and Crane Currency of the US are in the frame as potential buyers, according to London’s Evening Standard.
Meanwhile, Ben Harrington on his Betaville blog has observed that Saba has significant short positions – bets that the shares will go down – on Crystal Amber’s biggest holdings, De La Rue (2.21%) and Allied Minds PLC (LON:ALM), and that a sale of Crystal Amber’s De La Rue stake would likely lead to Saba taking a bath on its short position.
All of which suggests Saba, led by former derivatives trader and Deutsche Bank credit trading chief Boaz Weinstein, is in the process of shooting itself in the foot but this one looks set to run and run.