Shareholder group seeks breakup of Kleinwort Benson owner RHJI

Tue May 28, 2013 7:13am EDT

* Calls company strategy "erratic"

* Wants RHJI to stop BHF buy from Deutsche Bank

* Analysts see poor chance of success

BRUSSELS, May 28 (Reuters) - A group of hedge funds has demanded the break up of the Belgium-based owner of private bank Kleinwort Benson, citing poor share performance and "erratic" strategy.

The group, representing 4 percent of share capital and led by Geneva-based Equilibria Capital Management, is asking RHJ International (RHJI) to give its more than 200 million euros ($258.78 million) in free cash back to shareholders and work towards a full break up, it said in a statement on Tuesday.

RHJI said its book value at the end of March this year was 7.2 euros per share. Its share price now is just over half that at 3.98 euros per share, down almost a quarter in the past two years.

RHJI, a former investor in industrial companies, changed its strategy to focus on financial firms with its acquisition of Kleinwort Benson in 2009 from Commerzbank for 225 million pounds ($339.78 million).

The shareholders group is asking for RHJ to halt any further acquisitions, and described RHJI's plan to buy Deutsche Bank's BHF-Bank unit, which is currently being examined by the German regulator, as "ill-considered".

"They should focus on the core business which is Kleinwort Benson, rather than hunting another bank when they don't have enough cash to do it on their own," Equilibria Capital co-founder Daniel Tafur told Reuters.

"RHJI has a lot of overhead and needs to slim down its business via divestments, returning cash and looking for the best strategic alternative for Kleinwort Benson."

RHJI did not immediately return a request for comment on the shareholder break up attempt.

However, Deutsche Bank said: "We are still optimistic to conclude the sale of BHF bank with RHJI."

The shareholders group, which also includes Britain's Polar Capital, French Mantra Investissement, Spain's Alpha Plus, and Cayman Islands-based Overseas Asset Management, hopes the request will be included on the agenda of RHJ's annual shareholders' meeting on June 18.

"We are disappointed with RHJI's poor track record and failure to generate value for shareholders, the result of what we believe to be an erratic corporate strategy," Equilibria Capital co-founder Fabio Lopez Ceron said in a statement.

Petercam analyst Matthias De Wit said the group had a low chance of success.

"It seems a relatively small group," he said.

"Given that the quorum for a break up is set at elevated levels so I think that the odds of the plans to succeed are quite low given that the amounts represented are insignificant relative to the required threshold."

RHJ's biggest shareholders are U.S.-based Franklin Equity Group, holding 15 percent, Ripplewood Holdings CEO Timothy Collins with 13 percent, and U.S. fund BlackRock with 9 percent.