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A Topps target

Here’s a new angle on activist investing
A Topps targetPublished on December 14, 2022

When activist shareholders go to war with a target company there is usually entertainment to be had (though probably not for the directors of the target) and often money to be made for investors. However, it may be a first when the activist says to the target, 'buy more of our products or else the chairman gets it in the neck'.

In a nutshell – and with just a little caricature – that is what’s happening at tiles retailer Topps Tiles (TPT). It faces a call to sack its chairman, appoint two of the activist’s nominees to the board and, in effect, to buy lots and lots more stuff from a Polish bathroom-equipment maker that the activist just happens to own. The activist is MS Galleon, a Vienna-based investor that seems to focus on Polish companies, and which has built a stake in Topps fractionally short of the 30 per cent threshold that would trigger a mandatory bid.

Galleon began building its stake in Topps in 2020. During 2021 – by which time its holding had risen to 20 per cent – Galleon suggested that the proportion of inventory Topps sourced from Cersanit, the Polish bathrooms specialist, should be about the same as its stake in Topps. That was an interesting – and even challenging – symmetry since, at that time, Topps sourced just 0.5 per cent of its stock from Cersanit, which in the 2020-21 financial year would have had a retail value of about £1mn. Even to raise that proportion to 20 per cent would be the equivalent of buying about £46mnn-worth of goods – great for the Polish end of the deal, not necessarily so good for the UK end.

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