INTERVIEW-Pioneer activist Wyser-Pratte back on offense

* Looking at new targets, mostly conglomerates

* Wyser-Pratte had been hunkering down, joined Kuka board

* Seeks tougher U.S. governance rules, better proxy access

By Joseph A. Giannone

NEW YORK, Oct 12 (Reuters) - Guy Wyser-Pratte, the founding father of activist investing, is going back on offense after "hunkering down" through tough times for corporate coups.

The credit crunch and last fall's market meltdown forced many activists to the sidelines, said Wyser-Pratte, who literally wrote the book on risk arbitrage 38 years ago and waged some of the first campaigns to take on stubborn boards.

As markets recover, he said, his New York-based firm is shifting from defense -- buying and holding stocks that can generate good long-term gains -- to targeting companies where activism can prompt change and drive up the stock price.

"We are now leaving the 'hunker down' phase and are looking at new targets, mostly conglomerates," he told Reuters in an interview. Beyond that, "we are looking at companies with large discounts to their restructured potential value."

Rabble-rousing investors who place bets on companies and then loudly lobby for change have been quieter than usual. A year after markets melted down, shareholders remain wary of joining campaigns against laggard companies, he said.

"The markets aren't yet back to where people are stepping out on the risk spectrum, which allows them to piggyback onto activist initiatives," Wyser-Pratte said. "What we've done in the last year is just hunker down. We haven't sold anything."

The 69-year-old head of Wyser-Pratte Management Co, which has $250 mln of assets under management, took an unusual path last month when he joined the board of German robotics group Kuka, concluding a long proxy fight.

"After battling for six years, I've decided to go on the board," he said. "I don't often get involved with boards, but it's time for everyone to pull up their socks. It is time for me to go on board."

KUKA

Last month Kuka management lost a power struggle with Grenzebach, a German company holding 29 percent in Kuka, and Wyser-Pratte Management, which holds 10 percent. Among other changes, Kuka named a CEO and added Wyser-Pratte to the board.

"They got into difficulty because they did not diversify away enough from the auto industry," Wyser-Pratte said. Under new management, he says Kuka will expand its reach in medical, defense, aerospace and personal service robots.

Depending on where you sit, investors like Wyser-Pratte are either activists who motivate companies to generate the best possible returns for shareholders, or pirates who distract companies for their own personal gain.

"In France, they call me Schwarzkopf," he said, a reference to retired U.S. Gen. Norman Schwarzkopf, who led the 1991 allied invasion of Iraq. "In Germany, they call me Rambo."

Wyser-Pratte notes that two-thirds of the roughly 70 initiatives he has pursued since 1991 were resolved on friendly terms. Of course, if negotiations fail, "we take the gloves off," waging battles that make headlines and move stocks.

Kuka is the latest chapter in a career stretching back to when Wyser-Pratte left the U.S. Marine Corps and joined his father's trading business in 1967.

That firm was sold to Bache, later Prudential-Bache, where for more than 20 years Wyser-Pratte engaged in merger arbitrage -- placing bets on acquirers and sellers. His 1971 book "Risk Arbitrage" remains a standard text in business schools.

NO RIGHTS

Wyser-Pratte, a French-born U.S. citizen, split his firm from Prudential in 1991 and began pursuing "active arbitrage": lobbying companies he owned to pursue the steps he wanted.

Like the many activists who followed him, Wyser-Pratte identified companies that are "diffuse" or "mismanaged." He then used filings, interviews and letters challenging managers to pursue changes and deals, even if it cost them their jobs.

"We wanted to find stock that was undervalued, to understand the valuations and then attack various companies where there was disregard for shareholders," he said.

Wyser-Pratte says his adopted U.S. home and hub of capitalism is no bastion of shareholder rights. Boards and executives are insulated by restrictive proxy rules, poison pills and by-laws making it difficult to force sales, he said.

Pending proxy access rules will help shareholders elect better boards and demand more accountability from managers, he said. Until then, he said, investors need activists.

"There is no unfettered market for corporate control," Wyser-Pratte said. "The authorities are fast asleep and more concerned about protecting management. Governance codes are not enforceable. Who is going to take care of the shareholder? Only vigilantes like us." (Reporting by Joseph Giannone; editing by John Wallace)