The investor with a unique share tactic
Michael Grade has not had a great deal of luck with the quoted company sector of late. As executive chairman of ITV he eventually had to give way to Sir Archie Norman (the former Asda boss and Tory front bencher) after presiding over the broadcaster during an advertising drought. Now that he has moved on his successors are enjoying the benefit of an 18 per cent rise in advertising revenues.
Back at his old stomping ground of Pinewood Studios, where he is chairman, Grade finds himself being targeted by the little known activist investor Crystal Amber run by former Schroders analyst Richard Bernstein.
In a relatively short period of time Bernstein has acquired a 27 per cent stake in Pinewood and has been seeking boardroom representation.
Some activist investors prefer to keep their prey guessing. Sherborne, the mysterious investor in the historic fund management group Foreign & Colonial, chooses not to engage at all. Bernstein is different. He has opened a dialogue with Grade over what he regards as the under-performance of the company -- seeking change - but so far Grade has not followed through.
Bernstein's charge is that as Pinewood is an iconic brand with tremendous post-production facilities and very valuable property portfolio that is failing at present to perform adequately. In a recent conversation he told me that in 2004, when it was listed on the London Stock Exchange, Pinewood made profits of £10m a year and returned 14.2 per cent on capital. Last year (admittedly one of severe recession) earnings had fallen to £4.5m and the return on capital was down to 6.3 per cent. Among his demands is that Pinewood update its property portfolio which he believes is grossly undervalued and therefore not appreciated by investors.
Bernstein, an old Haberdashers boy (home to such entrepreneurs as Sir Martin Sorrell and Tim Steiner), is not, however, just another dealmaker seeking to make a quick buck for himself. He is also on a crusade to persuade British companies to be more generous in their charitable giving.
In the US it is the most natural thing for wealthy entrepreneurs like Warren Buffett and Bill Gates to give away most of their fortunes and for companies to do their bit for good causes.
The tradition in the UK is rather different. As watchers of the current ITV period soap Downton Abbey will quickly realise for Britain's wealthier classes - the landed gentry - hanging on to land and vast estates for future generations is far more important than charitable giving. With some rare exceptions United Biscuits, (before it fell into private equity hands), pre-merger Lloyds TSB and Lord (David) Sainsbury charitable activity is not second nature to British companies and entrepreneurs.
Bernstein, a member of my own synagogue, Richmond, would like to change that. He is seeking to set an example through his other main investment vehicle Eurovestech. At the height of the technology boom of the late 1990s Bernstein left Schroder having failed to persuade his employer to begin coverage of high-tech stocks. His timing was not good. Eurovestech was launched into the teeth of the dot.com meltdown which brought many technology firms crashing down.
Eurovestech is among the survivors. His strategy of taking big stakes in half a dozen or so firms, after applying his own analytical tool, has paid off for investors. The shares have tripled over the last decade and in the first six months of 2010 one of his key investments, the online market research group Toluna, has made profits of £6m.
But what makes Eurovestech different is Bernstein and his fellow investors are prepared to dilute their own holdings to give something back to society. Since the company became quoted on AIM in 2000 it has given away £1.5m to some 90 different charities. The method of giving is unusual.
Instead of handing out cash, which companies are often reluctant to do, it does its giving by creating new shares at par value (usually a nominal sum) and handing these over. The charity can then sell them on the open market pocketing the difference.
His 'Share and Share Alike' scheme functions on the basis that the broader body of investors will not even notice the creation of a small number of new shares equivalent to 0.1 perccent of capital. He reckons that if the top FTSE100 companies did the same then it would raise £1.6bn for good causes each year -- a real contribution to David Cameron's 'Big Society.' If the FTSE100 went ever further and offered 0.5 per cent then a glorious £8bn could be created.
Bernstein talks emotionally of what difference even a small and unexpected contribution to charities can make. When he responded to a letter from the Kent MS Therapy Centre and arranged for a gift of £15,000 it was for them as if they had won the lottery. They had expected Bernstein to enclose the usual £100, instead they were able to extend the envelope of their assistance. He is working hard with the government to see if there is some way of making such share give-aways tax deductible - making them even more attractive to corporate Britain. Until Bernstein took on the might of Pinewood the existence of his funds was barely known. But between Pinewood and his charitable ideas the 48-year-old investment entrepreneur is putting himself on the map.
Alex Brummer is City Editor of the Daily Mail