Activist Cevian takes aim at Ericsson board and Wallenbergs

One of Europe’s largest activist investors has spent $1bn on a 5.6 per cent stake in Ericsson

Ericsson employees stand inside their booth at Mobile World Congress.

Ericsson employees stand inside their booth at Mobile World Congress.

 

Ericsson’s new activist shareholder has hit out at the board of the struggling Swedish telecoms equipment maker as well as the influential Wallenberg family, blaming them partly for the mess in which the company finds itself.

Cevian Capital, one of Europe’s largest activist investors, has spent $1 billion on a 5.6 per cent stake in Ericsson. The group is seen as likely to raise its position further to become the biggest shareholder in terms of capital, although it is only the third-largest in terms of votes at approximately 3 per cent.

The board has done a very poor job

“Just having lots of nice names on the board, you can’t think like that in Ericsson . . . It’s part of the problem we are facing, because the board has done a very poor job,” Christer Gardell, Cevian’s cofounder, said in an interview.

Allies say that the position of Leif Johansson as Ericsson’s chairman is under threat as Mr Gardell, who will join the company’s nomination committee that proposes board directors, looks for people with more industry experience.

Ericsson’s shares rose 5.1 per cent by late afternoon Wednesday to SKr63.75 on the news of Cevian’s stakebuilding, their highest level in almost a year.

Ericsson has been mired in trouble for some time as competition has increased from China’s Huawei and a revitalised Nokia. It has issued several profit warnings, had its credit rating cut to junk status, and fired its chief executive last year.

One peculiarity of Ericsson is the presence of Sweden’s two largest investment companies – Industrivärden and Investor, the vehicle of the Wallenberg family – on the shareholder register.

Mr Gardell said: “The action from the main investors has been too late and completely insufficient.”

Cevian is known for taking a more supportive approach than other activist investors. It has also held on to its positions for an average of about five years, longer than most activists. However, it has been unafraid to push for radical change in companies such as Volvo Group, Danske Bank and ThyssenKrupp.

- (Copyright The Financial Times Limited 2017)