(Adds background, details on Elliott’s plans)
Dec 20 (Reuters) - Activist hedge fund firm Elliott Management has taken a 5.6 percent stake in Swiss duty-free retailer Dufry AG as it anticipates the market will come to recognise the company’s value, sources familiar with the situation told Reuters.
While details about the seller were not disclosed in the filing to Swiss exchange SIX on Wednesday, sources said an investment bank sold the shares as part of a derivatives options trade for China’s HNA Group.
Elliott, which now holds a 426 million Swiss franc ($431.79 million) position in Dufry, believes the retailer’s current price made it a potential target for a deal.
“It could be attractive to the private equity universe,” said the source. “It’s been owned by private equity before.”
Dufry was previously backed by private equity firm Advent International, which sold out of its holding in 2013. (here)
A second source familiar with the situation said the company had further opportunities to consolidate and renegotiate various contracts as well as increased leverage when hammering out concessions with counterparties.
“It is clearly the dominant player with closer to 25 percent market share,” said the source.
“Once it proves that it can grow on a like-for-like organic basis — after (currency) adjustments — there is more opportunity to consolidate and especially more opportunity to consolidate in the Chinese market.”
HNA Group, which is selling properties to reduce debt, held a 21 percent stake in the Swiss company before the sale but the source said the company no longer held any economic interest in Dufry.
HNA Group did not immediately respond to a request for comment.
Dufry shares were up 3.3 percent at 1500 GMT after Elliott disclosed its stake. ($1 = 0.9866 Swiss francs) (Reporting by Maiya Keidan in London, Thyagaraju Adinarayan in Gdynia and Julie Zhu in Hong Kong; editing by Jason Neely and Adrian Croft)