LONDON--(BUSINESS WIRE)--Elliott Advisors (UK) Limited advises funds (together “Elliott”) which collectively have disclosed an interest in excess of 5% in the ordinary shares of GEA Group AG (“the Company”, or “GEA”).
Elliott believes GEA’s shares remain significantly undervalued following a protracted period of profit warnings, guidance downgrades and limited progress vis-à-vis execution of the Company’s “OneGEA” transformation program. Despite leading market positions in structurally attractive segments and high quality products, during the tenure of the current Chairman Dr. Helmut Perlet, GEA’s Total Shareholder Return (“TSR”) has been a disappointing -28%, ranking it amongst the worst performers in the Euro STOXX 600 Industrial Engineering Index which enjoyed a TSR of +29% over the same period. As highlighted by leading proxy advisor Institutional Shareholder Services (ISS), GEA also suffers from concerning governance issues such as a lack of independence amongst key Supervisory Board members, including the Chairman, on account of excessively long Board tenure, and a disconnect between executive pay and the Company’s performance.
Elliott invested in GEA because it believes there is a substantial value-creation opportunity for the Company and all of its stakeholders. By acting decisively and swiftly in the wake of the recently announced departures of its CEO and CFO, and getting the right leadership and governance in place, GEA can regain its investors’ trust and avoid a lengthy period of business drift and market uncertainty.
Elliott encourages the Company to announce the following without further delay:
- Acceleration of the CEO succession timeline. Mindful that a formal selection process was launched in March 2018, it is disappointing that the Company has not already completed this process. Elliott urges the Company to announce a new CEO without further delay and, once appointed, invites the new CEO to commence a strategic review in which all options to enhance stakeholder value should be considered.
- Steps to strengthen the composition of the Supervisory Board, including replacement of the current Chairman Dr. Helmut Perlet. Elliott believes that the shareholder representative positions on the Supervisory Board must be refreshed over the coming months, in consultation with GEA’s largest investors to improve the Company’s independence and accountability.
- Initiation of a substantial share buyback program. GEA’s liquidity profile, commitment to refrain from material M&A in 2018, and currently depressed share price create an attractive environment to initiate a substantial new share buyback program. The Company’s comments at its March 2018 Capital Markets Day and Elliott’s own analysis suggest that GEA could take advantage of the renewed authorization to acquire and use treasury stock without risking its investment grade credit rating.
Elliott Management Corporation manages two multi-strategy investment funds which combined have approximately $35 billion of assets under management. Its flagship fund, Elliott Associates, L.P., was founded in 1977, making it one of the oldest funds of its kind under continuous management. The Elliott funds’ investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, high net worth individuals and families, and employees of the firm. Elliott Advisors (UK) Limited is an affiliate of Elliott Management Corporation.