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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
An activist appearing on a shareholder register is no longer unusual. There are nearly 1,000 activist campaigns a year, largely in the US. But disputes between company boards and their biggest shareholders are less common — and can be harder to handle.
Two UK companies, tiling retailer Topps Tiles and fast fashion group Boohoo, are in precisely that predicament. This week, Austrian investment group MS Galleon — the biggest investor in Topps Tiles with a near-30 per cent stake — accused the retailer’s leadership of a “complete failure to adapt to an evolving retail landscape”.
Boohoo, meanwhile, faces a shareholder vote on December 20 on demands by its biggest investor — Mike Ashley’s Frasers Group with a 28 per cent stake — to install Ashley as a director following a lengthy period of poor performance.
This should be a red flag. History proves that when relations break down, such disputes, even if relatively rare, can drag on and on. Take the battle between easyJet and its founder Stelios Haji-Ioannou last decade, which involved frequent clashes over issues such as aircraft orders and executive pay.
The row between Topps Tiles and MS Galleon is not entirely new. In 2022, MS Galleon initiated a campaign to oust the retailer’s former chair, Darren Shapland. That failed, although Shapland retired shortly afterwards.
Such rows are associated with poor performance — not least because they tend to occur at challenged companies and absorb management time. Since the start of 2020, when MS Galleon became a shareholder in Topps Tiles, the stock has lost more than 45 per cent versus an 8 per cent rise in the FTSE All-Share index, although the retailer insists it has been gaining share in a tough market.
Where relations break down, a change in leadership can often help — or at least a change in the person fronting that relationship. A good senior independent director might usefully act as go-between.
That does not help Boohoo. It has already changed both its chair and chief executive this year. Its appointment of an insider to the latter role appeared to be a snub to Ashley, who had also demanded to be installed as CEO.
The best defence is, of course, an improvement in performance. That is easier said that done. In the case of Topps Tiles, homeowners are reluctant to spend on renovating and fixing their homes while their finances remain under pressure. Boohoo faces steep competition from the likes of Shein.
There may be compromises: Boohoo could perhaps offer to appoint someone to the board from Frasers but not necessarily Ashley. Ultimately, a decades-long stand-off would not be in anyone’s interests.
