JOHN Menzies is facing an activist shareholder campaign to consider breaking up the 182-year-old Edinburgh-based company.
Lakestreet Capital Partners, a Swiss-based investment vehicle founded only 12 months ago, has revealed that it was behind a declaration on March 27 of a 3per cent stake held in the names of 12 investors.
It has now broken cover, claiming that if Menzies' aviation and distribution businesses were valued on a standalone basis, the company would be worth £525m, almost £300m more than the current market value.
Lakestreet's statement "to Menzies shareholders" said it had met the company and "raised concerns whether keeping two non-synergistic businesses in one group is still in the best interests of John Menzies' shareholders".
The Zurich-based activist's move on one of Scotland's stalwart plcs coms hard on the heels of the challenge on the venerable Alliance Trust by the far more powerful Elliott hedge fund based in New York.
The hitherto unknown Lakestreet says it has "committed itself to unlocking the intrinsic value of John Menzies in the interest of all shareholders and has constructively engaged in discussions" with the chairman Iain Napier, chief executive Jeremy Stafford, and finance director Paula Bell.
It has "suggested established methods that - if successfully implemented by the management - are expected to increase revenue growth, improve profit margins and enhance the company's position in the competitive landscape".
Menzies shares the UK newspaper and magazine distribution market with WH Smith, and is the second biggest global aviation services groups behind Swissport.
In March it said it was considering moving into parcel delivery to squeeze more out of its distribution network.
Lakestreet claims Menzies, which has seen its shares crash from 825p in October 2013 to 362p on Tuesday, is worth 675p a share or £415m.
The shares rose 27.5p to 390p, valuing the group at around £237m.
Menzies shocked investors last year with profit warnings followed by the sudden departure in November of aviation head Craig Smyth, which saw the shares crash by almost 30per cent overnight.
The company had been without a chief executive since 2007, and Mr Smyth's long-standing executive colleagues Paul Dollman and David McIntosh had stepped down in 2013 and 2014 respectively. Jeremy Stafford was installed as chief executive last October, shortly before Mr Smyth's departure.
Lakestreet was founded in April 2014 by German financiers Christian Kappelhoff-Wulff and Valentin Pierburg and is based near Zurich. Mr Wulff claims "considerable experience in shareholder activism from working as the right hand man of leading German shareholder activist Clemens J. Vedder for over four years". He has homed in on Menzies as the fund's first investment.
It says it first bought shares in Menzies in the third quarter of 2014 and increased its stake significantly after the sell-off in November.
Lakestreet says Menzies shares halved last year and "shareholders had to suffer another blow" when the company announced in March that the total dividend would be cut by nearly 40 per cent to 16.2p. The company is "dramatically undervalued, especially when taking into consideration the sum of its parts", Lakestreet says, with an implied upside of 86per cent on Tuesday's share price.
But Panmure Gordon, in a note issued yesterday, cast doubt on Lakestreet's estimates.
It said Lakestreet's implied valuation for the aviation business was "overly aggressive". It said margin recovery plans in the ground-handling business - hit by restructuring at Heathrow and fiercer competition on pricing elsewhere - were still at an early stage, and the business was highly exposed to more cyclical and lower-value areas.
The note went on: "Given Distribution's predictable cash flow, we feel the valuation range for this division is limited, with the valuation of Aviation more debatable due to the growth and margin recovery potential."
Panmure says its own sum-of-parts analysis gives a fair value for the shares of 401p, 11p above last night's closing price.
Lakestreet said: "Discussions are expected to continue ahead of the annual general meeting."
John Menzies said it would not be making any comment.
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