Coltrane Asset Management: What do we know about the hedge fund ruffling Interserve’s feathers?
Outsourcing giant Interserve has taken a hammering in recent weeks from a very rowdy shareholder: Coltrane Asset Management. The New York hedge fund has done its utmost to derail a rescue deal designed to save the outsourcer from administration, even threatening to sue Interserve’s board last month.
Coltrane may have caused a ruckus, but what do we know about the company? It is headed up by Mandeep Manku, a former trader at Deutsche Bank. Manku worked for the bank until 2007, before heading out to New York to work for hedge fund manager Dan Loeb, who is known for for launching aggressive activist campaigns against corporate boards. He moved on to found Coltrane in 2012.
Read more: Interserve changes rescue plan as losses hit £111m
It appears Manku is keen to follow in Loeb’s footsteps. Interserve is not the only outsourcer Coltrane has had dealings with in recent years, after the hedge fund blocked the outright takeover of the Australian cleaning company, Spotless, in 2017. Then-competitor Downer Group needed 90 per cent of Spotless shares for a compulsory takeover to go ahead, but Coltrane held a 10.6 per cent stake, and refused to let go, causing months of grief for the prospective buyer.
Notably, Coltrane also benefited from the dramatic collapse of the firm many analysts have compared Interserve to: Carillion. In January 2018, Coltrane held a significant short position against Carillion’s stock. Investors short stocks when they believe a company’s share price is likely to fall, borrowing the stock and selling the shares, with the intention of buying them back at a lower price to make profit. When the contractor went bust after succumbing to mammoth debts and being unable to secure funding for a £300m cash black hole, the hedge fund made a cool £4m.
Taken over by current chief executive Jonathan Lewis in late 2017, Capita is in the midst of a much-needed turnaround. Weeks into his new role in early 2018, Lewis said he had arrived at a business that is “far too complex” and has “underinvested in infrastructure and over-relied on acquisitions for growth”. Fast-forward another few months to May last year, Coltrane took out a three per cent stake in the company, worth around £41m.
It is understood Coltrane's investment came weeks after Capita executives took its investor roadshow to the US in the hope of wooing investors from across the Atlantic. “How they might live to regret it,” one source told City A.M..
The fund has a short position against Mitie, a FTSE Small Cap-listed outsourcer headed up by CEO Phil Bentley, whose share value has fallen by one-third in the last year. Coltrane holds 2.6 per cent of the firm’s stock, worth £13.6m, and most recently extended this position – albeit slightly – in January.
Read more: Capita wins over Carillion conqueror after impressing across the Atlantic
Despite his numerous and varied involvements with outsourcers, Manku’s intentions remain unclear. But his actions paint a picture of Coltrane as an influential and disruptive activist shareholder in the outsourcing sector. Whichever way the Interserve saga goes, one thing seems certain: it wont be the last we see of the New York hedge fund.