It’s Round 2 for Elliott Management in its Classified Valuation Wars. This time, Scout24 is in its crosshairs.

Elliott, a New York-based investment management company known for activism, today sent a strongly worded letter to Scout24 executives, urging them to break the company up. It said by separating AutoScout24 and ImmobilienScout24 into new companies, Scout24 could raise its share price from the €45 to €50 euro range in which it has been trading to €65 or more. Elliott pointed out it owns more than 7% of Scout 24 shares, and said management has done a bad job building its share price.

It’s the same tactic Elliott took in January with EBay, urging the company to spin off EBay Classifieds Group and StubHub. Elliott eventually won a seat on EBay’s board along with another activist investor, Starboard Value. In the six months-plus since Elliott issued its letter to EBay on Jan. 22, the company’s share price has risen from $31 on Jan. 18 to a high of $41.19 on July 31, or an increase of 33 percent.

“Scout24’s current market valuation does not reflect the quality and value of its assets,” Elliott said in its letter today. “For instance, Scout24 trades materially below 20x EV / Ebitda while three of its closest peers trade far in excess of that level even though their prospects are arguably less bright than those of Scout24. …

 

“The past year was fraught with poor judgment and sub-optimal communication on the part of Scout24. Despite these concerns, we remain upbeat about the Company’s prospects. Given the substantial value of IS24 and AS24, the management board and supervisory board have an opportunity to restore trust with the shareholder base and take Scout24 to another level.”

Elliott’s team met with Scout24 management on July 17; the company issued a news release about its strategic direction two days later and added several people to its advisory board. That seemed to anger Elliott even more.

“Your top shareholders should not be surprised by big strategic announcements and major leadership changes. The lack of clarity in the 19 July press release could have been prevented with stronger shareholder engagement,” it said.

In response, Scout24 issued a tepid letter acknowledging the attack but saying little more.

“We have taken note of the publication of the letter of Elliott Advisors (UK) Limited (“Elliott”). Scout24 welcomes and values an open dialogue with all its shareholders. Over the recent months, Scout24 has engaged actively with our shareholders, including Elliott, ahead of, and following the announcement of our strategic road map on 19 July 2019, where we announced comprehensive steps aimed at strengthening our two core business areas, continuing revenue growth while simultaneously increasing operating efficiency and optimizing our capital structure.

 

“We are looking forward to maintaining a constructive and appropriate engagement with all our shareholders.”

Elliott manages more than $38 billion in assets. Elliott Advisors (UK), the company which published the Scout24 letter, is an affiliate of Elliott Management. Elliott fund investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds and employees of the company. Elliott Associates, L.P., its flagship fund, was founded in 1977 and is one of the oldest funds of its kind under continuous management.

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