(Bloomberg) -- Cevian Capital AB has a history of goading companies for higher payouts, asset disposals and radical changes at those that fail to deliver. The Swedish activist investor has just disclosed a $1.3 billion stake in UBS Group AG and its approach so far has been nothing but friendly. 

The Stockholm-based fund said it will be an “engaged owner” with plans to hold the shares for the long term, betting the Swiss lending giant’s current strategy following its March takeover of Credit Suisse would help create the world’s biggest wealth manager.  

UBS’s management and board have laid out a clear path for integrating the former rival with a view to becoming the strongest bank three to five years from now, and Cevian supports the process, according to the firm’s Managing Partner Lars Forberg. 

“We are shaping what actions are being made in the bank,” Forberg told Bloomberg Television’s Anna Edwards and Tom Mackenzie in an interview on Tuesday. Cevian has had a “close dialog” with UBS for quite some time and started buying its shares earlier this year after the Credit Suisse takeover, he said. “We are focusing not only on the integration work right now, we are focusing on what is going to come out after that integration work.”

While Cevian threw its weight behind UBS Chief Executive Officer Sergio Ermotti’s strategy, it is known for some aggressive, high-profile campaigns elsewhere in the past. 

It pushed for better stock returns at ABB Ltd., leading to the abrupt exit of the engineering firm’s then chief executive officer Ulrich Spiesshofer in 2019. It sought higher payouts from Aviva Plc, forcing the UK insurer to dispose of non-core businesses. It has also turned up the heat on executive pay at ABB and Ericsson AB, saying they weren’t doing enough to link environmental, social and governance goals to the renumeration of top mangers.

Shareholder Activism

Founded in 2002 by Forberg and partner Christer Gardell, Cevian has a long track record of investing in banks including Danske Bank A/S, Swedbank AB and Nordea Bank Abp. Typically, it invests between €500 million ($549 million) and €1.5 billion per company, though it doesn’t rule out bigger amounts, according to its website. It has a portfolio of 10-15 companies at a time and stays invested for five years or longer.

Cevian says it acquires substantial minority ownership positions in undervalued European listed companies and works with boards and management to “advance initiatives designed to increase their long-term competitiveness, profitability and sustainability.” Pension funds, endowments, foundations and sovereign wealth funds contribute capital. Its current investment fund, launched in 2006, is an “evergreen vehicle,” the website says.

Forberg, who is based in Switzerland, was a private equity investor and is one of the pioneers of shareholder activism in Europe.

The surprise announcement of Cevian’s investment in UBS follows a 50% rally in the Swiss lender’s shares since the government-brokered merger with the failing Credit Suisse in March. Ermotti has signaled that the bank will share more details of its post-integration strategic direction in February. 

Cevian’s stake now adds pressure on Ermotti and Chairman Colm Kelleher to deliver on the potential of the biggest banking sector tie-up since the financial crisis.

The activist is pinning its investment on the expectation that it will make UBS more appreciated among shareholders. Drawing comparisons to Morgan Stanley, Forberg said that the Swiss lender should at least be valued on par with its American peer on the price-to-tangible-book metric, or even surpass it. UBS has “a much better business mix, is more stable” he said.

What Forberg said on Bloomberg TV:

“Management described a landing zone of 15% return on tangible equity in 2026. We’re thinking a lot not only about the landing zone, but also, the cruising altitude thereafter. We think the bank will be able to make more than 20% return on tangible equity.

“The wealth business is 60% of the group. And on top of that, 20% is the bank in Switzerland, which is an amazing bank. And then another 20% is the investment banking. We think those numbers are good at this stage. We think wealth management will grow faster than other areas over time and thereby becoming the largest share of growth.”

UBS is going to be an “incredible business covering basically the entire globe,” Forberg said. “And outside of the US, it’s going to be three times larger than its closest competitor.”

Read More: Cevian Takes Bet on UBS Growth Boost With €1.2 Billion Stake

--With assistance from Rafaela Lindeberg.

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