By Alexander Hübner
FRANKFURT (Reuters) - U.S. activist investor Elliott [ECAL.UL] has urged German classifieds group Scout24 (DE:G24n) to sell its car listings business and ramp up a share buyback program to boost returns to investors.
Elliott, opening a new front in its broader push to shake up corporate Germany, accused Scout24 Chief Executive Tobias Hartmann of showing a lack of ambition and urged his management team to take immediate remedial action.
The $34 billion fund, founded by Paul Singer, has invested in and called for restructuring at firms ranging from software house SAP (DE:SAPG) to conglomerate Thyssenkrupp (DE:TKAG). It has amassed a stake of more than 7% in Scout24.
"Should you take the decisive action needed to remove the impediments holding back Scout24, we believe the share price could rise to in excess of 65 euros per share," Elliott said in a letter published on Monday and dated July 26.
"Unfortunately, recent events have us wondering if the Scout management team shares our optimism for these high-quality businesses."
Responding, Scout24 said it took note of Elliott's letter and would maintain a dialogue with all shareholders. Scout24 had announced steps to strengthen its core businesses and optimize its capital structure, it added in a statement.
The company's shares ended last week at 50.25 euros, giving it a market capitalization of 5.4 billion euros ($6 billion). They traded 0.6% firmer on Monday in a weaker overall market.
ImmobilienScout24 is the real-estate classifieds market leader in Germany, offering a popular smartphone app for rentals and sales. AutoScout24 - present in Germany, Italy, the Netherlands, Belgium and Austria - bills itself as the largest automotive digital marketplace in the European Union.
Group revenue was up 12.5% at 532 million euros last year, while its core profit margin increased to 54.8% from 53.5%.
'LACK OF AMBITION'
A source familiar with the matter said Elliott believed that autos arm AutoScout24 could fetch a sale price of up to 2.5 billion euros while ImmobilienScout24 could command a standalone valuation of 5 billion euros.
In targeting Scout24, where it is one of the largest shareholders, Elliott is focusing on a company that has faced uncertainty since a takeover bid by Blackstone (N:BX) and Hellman & Friedman collapsed this year.
The public tender offer by the two private equity houses, at 46 euros a share, failed to win the support of a majority of shareholders in spite of the company's management recommending acceptance.
In its letter, Elliott accused Hartmann of "a lack of ambition that, for a listed company of Scout24's quality and prospects, is extremely worrying". It was published a little more than a week before Scout24 publishes second-quarter results on Aug. 13.
Elliott also said that a 300 million euro share buyback program announced by Scout24 last month was insufficient and the company could support a far larger return of capital to investors with the use of higher debt.
STRATEGIC INTEREST
Elliott also said that two strategic investors and several sponsors had shown interest in AutoScout24, without naming them.
The source said that German publisher Axel Springer (DE:SPRGn) and used-car platform AUTO1 Group, which is backed by Japan's Softbank (T:9984), had shown interest in AutoScout24.
Separately, Axel Springer said that a friendly offer by U.S. private equity house KKR (N:KKR) to buy out its minority shareholders had reached the necessary minimum 20% threshold to succeed.
Springer's main shareholders, Friede Springer and CEO Mathias Doepfner, are acting in concert with KKR in a move to take the publisher private and pursue growth investments away from the gaze of public equity markets.
A Springer spokeswoman said it was premature to comment on possible acquisitions. AUTO1 also declined to comment.
(Additional reporting and writing by Douglas Busvine; editing by David Goodman)