UPDATE 1-Tim Hortons pressed by a second hedge fund, shares jump

Tue Jun 18, 2013 4:13pm EDT
 
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(Adds comments from shareholder, analysts; updates stock price, background on Scout Capital)

By Susan Taylor

TORONTO, June 18 (Reuters) - Canada's Tim Hortons Inc is under mounting pressure from activist investors to boost shareholder value a few weeks before a new CEO takes over after a second hedge fund said it had amassed a big stake in the coffee and doughnut chain.

Tim Hortons shares jumped more than 4 percent on Tuesday after New York-based Scout Capital Management said it boosted its investment to 5.5 percent and met with management to discuss issues such as capital structure.

Highfields Capital is already pushing the company, whose brand is as much a Canadian symbol as ice hockey and maple syrup, to take on debt, buy back shares and overhaul or scrap its U.S. expansion plan. The Boston-based activist investor held a 4 percent stake in Tim Hortons as of early May.

Analysts said the stock moved up on expectations that Scout and Highfields can work the same kind of magic as other activist investors.

Bill Ackman's Pershing Square Capital Management recently said it would sell part of its stake in Canadian Pacific Railway Ltd after a tough proxy battle and management overhaul led to a tripling if its share price.

"People are expecting that, perhaps with this investor (Scout) stepping in, changes could be afoot," said Gareth Watson, vice president of investment management and research at Richardson GMP. "It's no slam dunk at all that happens, but certainly speculation picks up."

But any change at Tim Hortons must await the arrival of new Chief Executive Officer Marc Caira, a long-time Nestle executive, who takes over on July 2.   Continued...