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Caffyns targeted as shareholder tries to force sale

An activist shareholder is targeting publicly-listed dealer group Caffyns with the aim of replacing its board and forcing its sale.

Mark Bruce-Smith, head of New Fortress Holdings, which has a 4.65% stake in the 45th-placed AM100 motor retailer, has criticised its performance and believes a new management team is needed to create better returns.

Caffyn family members together hold around 41% of the voting rights through its second preference shares.

Bruce-Smith said these give the family “effective dominance” over the 29-site business, and give them a 6% dividend in priority over the ordinary shareholders.

These leave little value for ordinary shareholders, he said. He wants the second preference shares to be forfeited and dividends waived until the return to ordinary shareholders meets a satisfactory target.

Bruce-Smith sent letters to Caffyns’ 600 shareholders ahead of its AGM on Wednesday, detailing his aims.

In a statement, Caffyns said it did not accept Bruce-Smith’s comments.

“The board has a strategy which involves operational improvements and selective property disposals in order to generate value for shareholders.

The board continues to work hard to execute its strategy in order to deliver value for all shareholders in an increasingly challenging economic environment for consumers,” it added.

Chief executive Simon Caffyn had not returned AM’s call before we went to press.

Bruce-Smith told AM that Caffyns has been in reverse gear in real terms, as its £182 million sales now are little improvement on almost 10 years ago.

It falls far short of the £500 million turnover threshold that the activist believes indicates long-term viability, so he plans to push for the group’s sale to another motor retailer.

He added: “Caffyns has lacked vision and direction, lurching from one so-called exceptional loss, or foreseeable disaster, to another.

The company’s very survival is at stake and for those of us who care about the company’s long-term prospects it is now time to stand up and demand competent performance and stewardship.”

The business has been following a recovery plan since 2005, when it was devastated by the collapse of MG Rover, which occupied one in four of its dealerships.

In 2006, it posted a £1.28 million profit, but that turned to a £197,000 trading loss in 2007, blamed on the tough trading climate.

Industry analysts suggest that with Caffyns’ diverse franchise portfolio – which includes Audi, Volkswagen, Volvo, Jaguar, Land Rover, Ford and Vauxhall – it should be doing better.

Caffyns’ share price held at 545p following New Fortress Holdings’ statement.

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