* 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)
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