Phoenix Asset Management Partners, Barratt Redrow's third-largest investor with about 5% ownership, is pressuring the company to implement an "aggressive" share buyback program. Phoenix has published a 430-page document arguing for the buyback of as much as £1 billion of shares annually, stating that Barratt Redrow's shares are "absurdly cheap" and undervalued by 40% compared to its tangible net assets. Phoenix believes this undervaluation makes the company susceptible to a takeover.
The investment firm emphasizes that persistent share buybacks would be a crucial capital allocation strategy to translate the current depressed valuation into enduring value for long-term shareholders. Gary Channon, Phoenix's chief investment officer, stated that buying back shares at the current valuation presents an "exceptional opportunity" that can be pursued aggressively while still allowing the company to grow output. He also indicated that Phoenix is prepared to "escalate" action if the board does not respond, though he prefers not to pursue shareholder votes.
Barratt Redrow's shares closed up 6.6% at 281.00 pence each in London following Phoenix's announcement. The company had previously completed the second tranche of a £100 million share buyback program in May, purchasing 16,106,329 shares for £50 million. Barratt Redrow's share price had fallen from 400p in early February to 286p prior to Phoenix's call. A Barratt Redrow spokesperson noted that the board is committed to acting in the best interests of stakeholders and shareholders and will continue to review its capital allocation policy while welcoming dialogue with investors.
