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Financial Times: The Knight avoiding confrontation

EXTRACT: In 2004, Mr Knight successfully urged Royal Dutch Shell to abandon its dual British-Dutch corporate structure – in spite of owning a stake of just 0.03 per cent. One senior UK-based investor recalls: “Eric was unknown at the time but Shell put him on the map.”

THE ARTICLE

By Sundeep Tucker
Published: April 23 2007 03:00 | Last updated: April 23 2007 03:00

The Eric Knights who wrote Lassie, Come Home and invented low-cost rocket travel are better known – at least according to Google.

But it is the Dutch-born fund manager of the same name who has been the influential one among Europe’s biggest companies.

Born in the Netherlands into a family of Dutch, Italian and British heritage, Mr Knight was educated at Eton and Cambridge before heading to the US and MIT’s Sloan School of Management. He went on to Wall Street before setting up Knight Vinke Asset Management in 2003 – a platform for activist successes at Royal Dutch Shell, VNU and Suez.

However, the 47-year-old, who works from offices in Monaco and New York, cannot easily be pigeonholed as an old-style corporate predator, agitating for a fast buck.

He self-styles his brand of activism as “moral suasion” – an alternative method to seeking corporate change by takeover or through investor campaigns at company meetings.

Unlike some of his activist peers, Mr Knight often seeks to engage, and not confront, management to convince it to restructure operations and create shareholder value.

Knight Vinke typically invests in one large company at a time, disseminating lengthy research in atarget company to fellow activists, board members and financial analysts.

Mr Knight’s success and tactics have attracted the support of a wider array of investors, many of whom entrust him with fronting a public battle.

Many institutional investors and pension funds lack the resources or confidence to take on the corporate establishment, so they have taken to encouraging Mr Knight’s campaigns from behind the scenes. As a result, Knight Vinke – whose flagship fund recently passed $1bn in assets – punches way above its weight.

In 2004, Mr Knight successfully urged Royal Dutch Shell to abandon its dual British-Dutch corporate structure – in spite of owning a stake of just 0.03 per cent.

One senior UK-based investor recalls: “Eric was unknown at the time but Shell put him on the map.”

Knight Vinke also counts on the considerable support of Calpers, the giant activist Californian state pension fund, which isits biggest financial backer.

Emboldened by his success with Shell, Mr Knight turned his attention to VNU, the Dutch market research company, where in July 2005 he led a successful shareholder campaign to oppose its $7bn acquisition of IMS Health.

Another success was persuading Suez, the French utility, to buy out minority shareholders in Electrabel, its Belgian electricity subsidiary.

Mr Knight’s latest battle is with the French state, which wants to merge Suez with Gaz de France.

His strategy appears to have reaped rewards: Calpers data shows that Knight Vinke’s flagship fund has outperformed its benchmark by returning 35.2 per cent on an annualised basis since November 2003.

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

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