The activist investor Edward Bramson will this week ramp up his battle with the Barclays chief executive, Jes Staley, in his attempt to force the group to scale back its poorly performing investment banking division and install him on the board.
Bramson, a British-born lawyer based in New York, has built up a 5.5% stake in Barclays via his Sherborne Investors vehicle, making him the third-largest shareholder after the investment fund BlackRock and Qatar’s sovereign wealth fund.
Bramson, 68, who has been described as a corporate raider and compared to Mr Burns in The Simpsons, is expected to increase the pressure on Barclays if the bank’s first-quarter results, published on Thursday, fail to impress.
A showdown will take place on 2 May at Barclays’ annual meeting, at which Bramson will call for other shareholders to vote him on to the board.
The investor’s campaign was given a shot in the arm at the weekend when Pirc, which advises pension funds and other investors, abstained on the matter for this year and said shareholders might be advised to vote for Bramson at the 2020 meeting.
The other two largest shareholder advisory services, ISS and Glass Lewis, have come out in support of Barclays and said Bramson’s resolution should be voted down. They tend to hold sway over about 20% of votes, so their suggestions can often prove decisive.
Glass Lewis said: “While we expect the current campaign should serve as something of a clarion call for management and the board, in terms of potentially waning investor patience, we ultimately believe support for Sherborne’s proposal would entail considerably greater risk and uncertainty.”
Barclays’ investment banking division is seen as having underperformed – a point Staley conceded last month. Critics say it has also wasted resources, sucking up too much cash while offering little financial return.
Barclays’ chairman, John McFarlane, revived plans when he took charge in 2015 to expand the once-prized investment bank. That was about the same time he reportedly told senior staff the board would double the bank’s share price from 260p over the next three years.
Fast forward to 2019 and Barclays has completed a major overhaul, cutting staff numbers and selling chunks of its international business in an effort to increase growth. But it continued to throw money at an investment bank that is still dragging its heels. Meanwhile, the share price has slumped to about 169p, though the bank pointed out RBS and Lloyds have had similar declines.
Barclays has held a handful of meetings with Bramson over the past year, but as one of the last UK lenders with a sizeable investment bank, it has refused to bow to his demands.
Investors seem to agree with Bramson’s assessment: shareholders are not reaping large enough rewards, despite patience throughout the long overhaul. Even if Bramson were not part of the equation, investors would likely be turning the screw.
Few shareholders, however, seem convinced that Bramson is the best man for the job, with concerns raised about his source of funding and lack of banking experience. There are also questions about whether regulators would greenlight his board seat. Having moved on from the financial crisis, authorities might not look kindly on a fresh shake-up of a major British bank.
Glass Lewis described Bramson as “an established if outwardly reticent activist”. He is also touted as a turnaround expert who pushed his way on to the financial scene in the late 1970s when he co-founded his first private equity firm, Hillside Capital.
A decade later, he launched Sherborne, where he honed his investment technique: taking small stakes in listed companies and forcing his way on to the board. Sherborne is a two-man firm run by Bramson and his protege, Stephen Welker.
Unlike activist investors such as Bill Ackman or Carl Icahn, Bramson prefers to avoid publicity. He has previously targeted British companies including F&C Asset Management and the private equity groups Electra and 3i.
Sherborne took an initial 10% stake in Electra, which owns TGI Fridays, in 2014, and started to lambast the company for its poor performance. It soon owned 30% of Electra’s shares and a year later won a seat on its board. Once in position, he pushed the sale of key assets and increased shareholder payouts. Sherborne would end up raking in about £600m in fees and dividends from Electra, but the firm did not survive the overhaul and is now being wound up.
In a newspaper interview in 2015, Bramson said the rest of Electra’s board “think we’re scum”. He also went head-to-head against Edward Bonham Carter, the vice-chairman of the investment house Jupiter and brother of the Hollywood star Helena Bonham Carter. Jupiter was a big investor in Electra and rejected Bramson’s bid for control.
Aviva Investors, one of the UK’s largest asset managers and a big Sherborne investor, backed Bramson’s efforts at Electra but has not offered the same support for his Barclays campaign.
The firm, also an investor in Barclays, said it does not see the “merit” in Bramson’s push for a board seat. Instead, it trusts the incoming chairman, Rothschild’s Nigel Higgins, to oversee the bank’s strategy and any required board changes.
But an individual shareholder at Barclays’ AGM last year warned against engaging with the Sherborne boss. “But be careful about inviting him into the house, because this is a fox that will raid our hen house … [it is] bad for shareholders, stakeholders and more importantly bad for our customers,” he said.
The Financial Times revealed last month that Sherborne built its stake with the help of $1.4bn (£1.1bn) from a Barclays rival, Bank of America. It was part of a complex arrangement where Bank of America borrowed Barclays shares to sell to Sherborne, while also providing him with the funds to buy them.
The assault has been lucrative for Bramson so far. Analysis seen by the Guardian shows that since January last year, he has made about £7m in fees for managing the fund used to buy up the Barclays stake. Sherborne did not comment.
Ian Gordon, a banking analyst at Investec, said Barclays has given a “partial nod to Sherborne’s concerns”, adding: “Clearly Mr Bramson would prefer to see more radical and targeted action to reallocate or release capital.” Gordon believes Bramson will not secure enough votes for a board seat.
Sherborne, as expected, is not backing down. “Our public investment record shows that we have consistently assisted boards, that were initially reluctant, to deliver major increases in value for all of the shareholders,” Sherborne said in its latest shareholder letter.
“We believe that, given mutual goodwill, and some change in perspective, Barclays offers similar opportunities.”
Bramson has said he quit the UK for the US in 1975 after getting trapped in a lift during the power cuts that crippled Britain in the early 1970s. He now operates out of offices on the top floor of a 32-storey block in midtown Manhattan with views of the Chrysler Building and the East River.
He has rarely spoken about his private life, but divulged in a Bloomberg interview in 2015 that he went through “a toy phase”. “I did like the houses, all that crap,” he said. Bramson also collects classic cars and owns several horses.
