Do non-US companies really need an IRO based in the US?
When Deutsche Telekom’s Nils Paellmann came to the US in 1998, he was one of a small number of IROs from overseas companies working in the US. A dozen years later, despite more globalized institutional investors, a worldwide financial crisis and many non-domestic companies having de-listed from US exchanges, that number has swelled to more than 60, around 20-30 of whom are based in the New York area.
According to BNY Mellon, at least five non-US companies have dispatched IROs to the US in the last two years alone. Some, like Anheuser-Busch InBev and Deutsche Post, cater to US investor audiences held over from US acquisitions. Others, like Russian steel producer TMK and airline UTair Aviakompaniya or China’s Agria, a small-cap agricultural company, are targeting a new audience in US investors.
Michael Cole-Fontayn, chief executive of BNY Mellon’s depositary receipts (DR) division, suggests that having an IRO in the US helps non-US companies understand and engage these different audiences. ‘Three areas in particular we see growing are separately managed accounts, exchange-traded funds and US-based hedge funds, which are increasingly active in international investment,’ he explains.
One of the newest arrivals to the US is Markus Zeise, director of IR for German chemicals company BASF. His flight was delayed three times by the volcanic ash cloud over Europe but when he finally touched down, one of his first social engagements was an international IRO roundtable dinner, hosted by NIRI’s New York chapter and sponsored by BNY Mellon.
BASF listed on the NYSE in 2000 and in March 2006 stationed IRO Christoph Beumelburg in its North American headquarters in Florham Park, New Jersey. He helped BASF raise its US ownership from 9 percent to its current 18 percent level, to match the proportion of 2009 North American sales.
‘We wanted to raise our profile among the US investor community and increase our sell-side coverage,’ explains Zeise, Beumelburg’s successor. ‘That’s much easier if you have an actual face here.’
In September 2007 BASF de-listed from the NYSE but, as Zeise’s recent arrival indicates, the company is still committed to keeping an IRO in the US.
According to Pink OTC Markets’ OTCQX, 117 American DRs have moved from exchanges to the over-the-counter market since the beginning of 2007, including 16 to OTCQX. One of the latest to announce a de-listing is Deutsche Telekom. Happily for the New York IR community, however, Deutsche Telekom’s US investor relations office is staying put.
Paellmann is an enthusiastic NIRI supporter, serving a stint as president of NIRI-NY in 2008-2009 and remaining a board member. While a handful of other non-domestic IROs are NIRI members, Paellmann wants more. ‘The rationale behind the roundtable was simply to get more international IROs involved in NIRI-NY while allowing them to meet and exchange ideas,’ he says.
NIRI-NY and BNY Mellon hope to make their international IRO roundtable a regular event. ‘One of the challenges of being an international IRO in New York is that you sometimes feel a little isolated,’ Paellmann points out. ‘When I started Deutsche Telekom’s IR function, I was the only employee here, and it can be hard if you don’t know anybody. NIRI can be very helpful in building a network of professional contacts.’
Portfolio manager’s view
Of the 23 non-US companies with the most votes for the best IR in the US at the IR Magazine US Awards in 2009 and 2010, 14 have US-based IROs. Michael Holbert, who manages a global portfolio for US pension fund TIAA-CREF, came to NIRI-NY’s international IRO roundtable and discussed the benefits of having a US-based IRO.
‘No matter how long we cover a company, and in whatever country, we’re not on the ground and we’re just not as culturally aware,’ he said. ‘There are regulatory issues and disclosure issues. We rely heavily on IR not just for what’s happening with the company, but also for a broader framework of what’s going on locally. Time differences can be brutal.’
Holbert praised companies that put out earnings calls after their own markets have closed but before nightfall in the US. He appreciates European calls held early in East Coast office hours, although he recognizes that it would be impractical for companies whose markets are still open for trading at that time. ‘At least make sure there’s a transcript or replay available for international investors,’ he recommended.
Sony is a good example of overcoming time-zone challenges: it does calls for the press and investors in Tokyo after the Japanese markets close; then, at 10 pm local time (9 am in New York), it does another call for US investors.
Highly rated US-based IROs
ABB (Switzerland) – John Chironna
Anheuser-Busch InBev (Belgium) – Hillary Garris
ArcelorMittal (Luxembourg) – Thomas McCue
BASF (Germany) – Markus Zeise
BHP Billiton (UK/Australia) – Scott Espenshade
BP (UK) – Rachael MacLean
Deutsche Telekom (Germany) – Nils Paellmann
Diageo (UK) – Kelly Padgett
Infosys Technologies (India) – Sandeep Mahindroo
Nokia (Finland) – Matt Shimao
Novartis (Switzerland) – Richard Jarvis, Jill Pozarek, Edwin Valerian
Roche (Switzerland) – Thomas Kudsk Larsen
Royal Dutch Shell (UK/Netherlands) – Jean Young
SAP (Germany) – Martin Cohen, Friederike Edelmann, Stephan Foerster
Sony (Japan) – Sam Levenson
Teva Pharmaceutical Industries (Israel) – Kevin Mannix
Toyota Motor (Japan) – Steven Curtis
Source: IR Magazine Awards, 2009 and 2010
