Euro2day – In early 2005 Chris Hohn was the toast of the City of London. His hedge fund, TCI, led the successful revolt against Werner Seifert, the former Deutsche Börse boss with a penchant for shouting at shareholders. Today, TCI faces two criticisms. First, that Mr Seifert’s plan to buy the London Stock Exchange was, in retrospect, correct. Second, that its fight to get Euronext to merge with Deutsche Börse, not the New York Stock Exchange, is compromised by a conflict of interest.
Was Mr Seifert right? TCI said the LSE was expensive at 580p a share, compared with £12.10 today. The rise in the LSE’s enterprise value, adjusted for capital returns, has been €2.1bn. That missed opportunity equates to around a fifth of Deutsche Börse’s current share price. Against this, Mr Hohn has two strong defences. One is that the LSE’s price reflects bid expectations, not fundamental value. Second, there were better alternatives available. TCI supported the repurchase of Deutsche Börse’s shares, which have produced a total return of 260 per cent since 2004, compared with the LSE’s 215 per cent.
