RHJ International: The Value Investment CaseVW Staff
In the coming months, we should see some action at RHJ International [Brussels: RHJI], which is a multi-year transformation story nearing its end. The activist investors didn’t succeed in breaking up the company. But they did manage to persuade RHJI management that if the proposed takeover of German private bank BHF-Bank isn’t finalized by the end of the summer, RHJI would give up and distribute the cash to the shareholders.
So, in a few months, we could either have a takeover of BHF-Bank that would complete RHJI’s transformation: we might then see RHJI change its name into Kleinwort Benson, which is its existing core business, and look for a listing in London, for example, instead of Brussels (management has already hinted about this in the past). Or, if the takeover fails, RHJI will distribute the cash to shareholders, which would still finalize the transformation, only into a smaller financial services group. When the transformation is completed, the focus of the group will be clear and this should help reduce the large discount to book value. At the recent share price of about €3.70, we think there is a large margin of safety and a lot of upside for investors who are willing to wait a few months until the takeover saga ends.
RHJ (Ripplewood Holdings Japan) International made its IPO on the Brussels Stock Exchange (now Euronext Brussels) in 2005. It was the publicly traded successor to a private equity fund of Ripplewood Holdings, with positions in a limited number of Japanese companies. The CEO at the time of the IPO was Timothy Collins, head of Ripplewood Holdings, the largest shareholder. The idea was to build the value of those Japanese businesses, most of which were undermanaged but had growth potential. This strategy didn’t work so well in the first few years and the results were not good.
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