Swedish investor defends business strategy

The Swedish investor last year pounced on Bradford-based fibres group Chapelthorpe, taking it private in a deal worth just £5.1m. At 25p a share, the price was dubbed “miserly” by one analyst.

Mr Gyllenhammar said he sees value where few others do, typically choosing companies trading on the Alternative Investment Market (AIM) at a deep discount to net asset value.

“I’m a strong believer in the free market and democracy as long as people behave in an appropriate and prudent manner,” he told the Yorkshire Post in a rare interview.

“My favourite target is the company that could potentially become the last blacksmith in town – such as the last provider of high-quality woollen yarn.

“They are typically asset-based mature manufacturing companies and these are mostly based in the north (of England).

“They have suffered from repeated downturns in their business. That has led to the share price coming down to the level that they come up on my radar.”

Mr Gyllenhammar last year bought Chapelthorpe when its second-biggest investor, London-based Hanover Investors, offered him its entire stake.

The deal gave him 54.6 per cent of the 61-year-old firm and resulted in a mandatory takeover offer for the £88m turnover group.

At the time, Hanover partner Tom Russell said the investment firm sold up because it had become “kind of stuck”.

“It’s a rather unusual situation where you get two different shareholders who have individual but substantial stakes,” he said.

“You end up in a situation where you cannot get out of the company because it creates an overhang in the market and moves the price down.”

Chapelthorpe’s independent directors eventually advised remaining shareholders to sell up too, but not before admitting Mr Gyllenhammar’s offer undervalued the group.

Mr Gyllenhammar has been buying companies like this since the late 1990s, and has held stakes in other Yorkshire firms, including machine tool maker 600 Group and medical device group Surgical Innovations. He has big stakes in textile firm Leeds Group and jewellery company Abbeycrest.

“There was controversy but only because some persons raised some views,” he said.

“I bought Hanover out at a price that was a better price than the prevailing price had been for a number of months. What can I do other than make the offer? People started to complain. Should I then offer a higher price? I think I’ve behaved very prudently.”

Mr Gyllenhammar’s latest bust-up is with Somerset-based personal goods firm Swallowfield, where he owns just under 30 per cent. He recently succeeded in removing Swallowfield’s chairman, Shena Winning, from the board.

In 2009, he also ousted Michael Hartley, the chairman of Scottish cashmere firm Dawson International.

Mr Gyllenhammar said he is used to a hostile reception when he tries to trigger change.

“It’s absolutely unbelievable what people can do to defend their business,” he said.

“In situations where a company is underperforming and, as a large shareholder you raise your views and those views are not necessarily comfortable, they mobilise any efforts they can. They do everything they can to miscredit me.

“This boils down to the fact that in English companies, their own directors appoint directors, whereas in Sweden, it’s the major shareholders who appoint directors to the board. This can be misused to protect under-performing boards and management teams in England.”

However, years of activism have made him rather thick-skinned.

“If I deserve to be unpopular, I can live with that,” he said.

“But I’m deeply concerned when I’m miscredited by people who do a bad job themselves.”

Mr Gyllenhammar, who describes himself as a “very small fish in a big pond”, said his investments have generally done “very well”. He admits to losing out badly when textile dye firm Yorkshire Group went into administration in 2004.

But Mr Gyllenhammar said his investment philosophy has “matured”, and rather than looking for new AIM stocks, he is focusing on what he owns already.

“I’ve had such a wide portfolio of investments for some years, I have been focusing on sorting out sour grapes from sweet grapes. I do from time to time see some deep discount situations. I’m now much more focusing on long-term growth in the businesses we’ve invested in.”

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