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13D MONITOR ACTIVIST MEDIA CENTER
Breaking news and more: Your media center for shareholder activism and corporate governance.

American International Group Inc. (AIG) reportedly is in early talks to sell its business at Lloyd's of London to Canada Pension Plan Investment Board (CPPIB). The insurance giant has been under pressure to boost performance since last fall, when billionaire investors Carl Icahn and John Paulson demanded that the company split up. It has since pledged to return at least $25 billion to shareholders through 2017, as it slowly rids itself of noncore businesses and takes other steps to increase its profit margins. A deal with CPPIB could pull in hundreds of millions of dollars in proceeds for the insurance conglomerate, sources said, but a deal is far from certain. AIG is minority owner of Ascot Underwriting Holdings Ltd., which oversees a Lloyd's syndicate for which AIG provides the capital.

Investor TPG Specialty Lending (TSLX) is calling on shareholders to appoint its nominee to the board of TICC Capital (TICC) at the upcoming shareholder meeting. It blasted TICC for having "consistently underperformed and failed stockholders" and requested that stakeholders vote to end an investment advisory agreement. TPG already has won the support of independent proxy advisory firms ISS and Glass Lewis. TICC, however, claims that TPG's proposals are misleading and that the investor "has not articulated any plan," according to a letter to investors. The shareholder meeting is slated for Sept. 2.

Drilling-services provider Rowan Cos. (RDC) has agreed to appoint Charles Szews to its board, a nominee backed by Blue Harbour Group. The hedge fund is one of Rowan’s largest shareholders with a roughly 8% stake, according to an updated 13D regulatory filing. Greenwich, Connecticut-based Blue Harbour typically agitates for shareholder-rewarding changes behind the scenes, and unlike many activists, it rarely stations its affiliates on boards.

Sandell Asset Management has launched its second campaign in a year against management at fiber-optics technology company Viavi Solutions (VIAV). In a recent open letter, the fund proposed electing new board members, restructuring Viavi's debt, and potentially selling preferred shares. Sandell also urged the firm to sell off its “service enablement” business, calling it a “tremendous drag on the company's overall profitability.” On Monday, Viavi CEO Oleg Khaykin responded that the firm is aligned with Sandell in various aspects to improve shareholder value and is working to improve the financial performance of its service enablement business. Sandell has engaged Viavi once before, issuing an open letter on Sept. 1 calling for a strategic review and threatening a proxy fight. Viavi ultimately came to an agreement with Sandell to place two new members on the board.

The U.K. High Court on Tuesday approved SABMiller's proposal to split the shareholder vote on its deal with Anheuser-Busch InBev.  The SABMiller board agreed to a revised £79bn takeover offer last month, after investors—including Elliott Management—pressured AB InBev to raise its offer.  However, the brewer said it would recommend that its two biggest investors—U.S. tobacco company Altria and BevCo, the family investment vehicle of the Santo Domingo family—be treated as a separate class of shareholder.  The move was intended to sooth investor concerns over the deal's structure and the influence of Altria and BevCo, which own an aggregate 41% stake and back the deal. Now, instead of a single vote requiring the support of 75% of all shareholders, 75% of each group would need to vote in favor of the deal.  This means SABMiller must win a higher level of approval among investors for the takeover to proceed.  

Hedge fund manager Jonathan Litt, who was appointed to the board at Mack-Cali Realty (CLI) in March 2014 after purchasing a 0.5% stake, has stepped down. The New Jersey-based real estate investment trust insisted Monday that Litt's exit “is not related to any disagreement with the company's operations, policies, or practices.” Shortly after Litt became a Mack-Cali director, then-CEO Mitchell Hersh resigned; it was unclear, however, if Litt influenced his departure. Litt, who leads Land and Buildings, has earned the rare reputation of a REIT investor who actively engages companies to try to affect their policies.

Abstract News © Copyright 2016 INFORMATION, INC.

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Dealpolitik: Dissecting Corvex's Novel Approach to Williams Board Fight
" Wall Street Journal (08/24/16) Barusch, Ronald"

Keith Meister's approach at pipeline company Williams (WMB)—nominating 10 employees of his own firm to meet Thursday's director-nomination deadline—is an uncommon one, but it just might let him dodge the company's bylaws.  Corvex Management LP says its employees, if elected, would immediately name “world class board members” to replace themselves and then promptly resign.  If Williams wanted to dispute the validity of Corvex's nominations, it could argue that the placeholder nominees are not consenting to “serve” if they intend to resign soon after being elected.  But Williams' bylaws do not specify that nominees state intent to serve their full term.  Although Corvex's move would likely have little applicability to other companies—which will probably now adjust their bylaws to prevent the tactic—it is probably too late for Williams.  The company may be better off extending the nomination deadline and letting Corvex formally nominate the “world class” nominees, rather than risk adverse shareholder reaction by barring Corvex from making any nominations this year.

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Abenomics' Third Arrow Spurs Dan Loeb and Others to Shake Up Japan
" Institutional Investor (08/22/16) Delaney, Jess"

Foreign shareholder activists have for decades found little success in Japan but, partially due to the corporate governance reforms of Prime Minister Shinzo Abe, they now are experiencing unprecedented success. Third Point founder and CEO Dan Loeb, for example, has been campaigning for greater shareholder returns in Japan since 2013 and has acquired holdings in robot maker Fanuc Corp., Suzuki Motor Corp., IHI Corp., and Sony Corp. “We effectively give them a dare-to-be-great speech that connects them to the principles around governance that their own government has articulated as part of the third arrow strategy,” Loeb says. “It's subtle, but I think it's more palatable because the companies don't have to do something that an outsider wants them to do; they are following the leadership of their own government.” Abe's reforms aim to drive greater corporate discipline and push boards to show more concern for shareholders, and Japan is starting to mend its ways. In October 2015, Loeb announced the hedge fund firm had taken a stake in Seven & i Holdings Co. and ultimately scored a rare victory after invoking the corporate governance code in an open letter to the board. The success was hailed in the Japanese media as the beginning of a new era in corporate governance.

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In Praise of Hedge Funds: Why Short-Term Activists Create Long-Term Value
" City A.M. (08/16/16) Edmans, Alex"

Activist hedge funds often get a bum rap, but academic research examines "all the evidence" and presents a more positive view, writes Alex Edmans, a professor of finance at London Business School. A decade of research led by professors at Duke University and Columbia University shows that activist hedge funds create value in both the short term and in the long run. The pivotal study found that activism boosts company value 7%, with no long-term reversal, while also improving operating performance and payout to investors. CEO turnover also rises. A second paper investigated the source of the increase in operating performance. It found that productivity climbs in plants sold by hedge funds, suggesting that they drive reallocation of assets to buyers that can make better use of them. The professors' newest paper studies innovation, finding that hedge funds do cut R&D. However, despite lower innovation input, it actually improves in terms of both the number and quality of future patents, the authors found. Ultimately, "investment is absolutely critical for the twenty-first century firm," Edmans concludes.

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ValueAct Says ‘More Please’ at Morgan Stanley
" Wall Street Journal (08/16/16) Back, Aaron"

ValueAct Capital Management’s $1.1 billion investment in Morgan Stanley (MS) could imply a wider shift in investor attitudes toward major banks. The investor’s vote of confidence is unusual in a few ways, however: ValueAct is not driving major changes in strategy or management, and has rather stood by CEO James Gorman and his strategy. Activists—especially those investing in embattled financial companies—typically focus on what should be slashed or discontinued. Yet Morgan Stanley already has been through a sweeping restructuring, and the fact that activists are now focusing on what areas could do well marks something of a crossroads. ValueAct singled out advisory and wealth management for praise, and could be seen to be encouraging more investment in those business lines. That is consistent with Gorman’s current strategy, because these are less risky than trading to market activity and gives the bank more control. Gorman's plan to reach a return on equity of around 10% by next year is largely on schedule, and ValueAct's investment suggests that it believes Morgan Stanley can hit its target. If so, this will be a very positive sign for the bank and its peers.

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Activist Investors Are Buying Into Old Media Companies
" CNBC (08/15/16) Marino, Jon"

Jana Partners announced a new holding in Time Inc. (TIME), sending the media company's stock up 5% in early trading on Monday. Activist investors may take a greater interest in media companies going forward, according to some observers. "Undervalued and out-of-favor media stocks where the underlying assets have intrinsic value are becoming more attractive candidates for activists," explains Steven Wolosky, a partner at Olshan Frome Wolosky in New York. In June, HG Vora Capital Management purchased 2 million shares in Tribune Publishing, or Tronc (TRNC). In 2014, Carl Icahn engaged Gannett Publishing (GCI), which split its print and television businesses soon after the investor took his stake. One observer predicts activist hedge fund investors may engage related businesses, such as television network operators.

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Brexit Vote Creates Buying Opportunity for Activist Investors
" Bloomberg (08/16/16) Hellier, David"

The United Kingdom may become a magnet for activist investors following its June vote to withdraw from the European Union. Since the referendum, funds that push for changes in corporate strategy or seek board seats have stepped up their presence at an increasing number of London-listed companies, including brewer SABMiller Plc, bookmaker William Hill Plc, and TV and film distributor Entertainment One Ltd. Funds such as Livermore Partners Inc. and Crystal Amber Fund Ltd. say the Brexit vote has opened up opportunities by driving down the pound and the share prices of some companies. “We like U.K. assets,” said David Neuhauser, managing director of Livermore Partners. He noted that the depreciation of sterling has made U.K. valuations look “extremely compelling.” Research firm Activist Insight counted six new campaigns involving U.K. companies since June 30, bringing the total for the year to 30—four more than in all of 2015. Jan Weber, who oversees shareholder activism in Europe at Morgan Stanley, said the rise in investor campaigns began before the Brexit vote; but the referendum appears to have given it a boost. “We feared we might see a halt to this growth in the U.K., but that doesn't seem to be the case,” he said. “U.S. activists are looking through Brexit.”

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Icahn Could Pull Some Levers With Delek
" Bloomberg (08/12/16) Denning, Liam"

Shares in Delek US Holdings (DK) spiked on Friday after a New York Post report speculated that competitor CVR Energy (CVI) is considering a bid.  Carl Icahn owns about 80% of CVR and reportedly is also acquiring a stake in Delek, a Midwestern independent refining and marketing firm.  Times are tough in the oil-refining business, and Delek's stock price is less than half where it was just a year ago.  Delek could benefit from just consolidating itself, and for CVR, it would represent not only a bet on refining margins rebounding, but also a set of levers to be pulled by cleaning up the current structure and combing the two companies to help deal with the downturn.  Icahn took a majority stake in CVR through a hostile deal in 2012.  For the billionaire investor, it could be a way to win back some lost value; although he has reportedly received more than $1.5 billion in dividends from CVR since the deal, Icahn—like other investors in the refining sector—has seen huge paper gains disappear in seconds.

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Abstract News © Copyright 2016 INFORMATION, INC.

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Activist Profile View a detailed analysis of the activist histories of the 40+ top activists – updated and expanded on a continuous basis. Get detailed analysis on: (i) the returns for each activist investor, including: (A) which activists have outperformed the S&P500 on their individual and aggregated 13D filings, (B) how their returns on live filings compare to their returns on exited filings, and (C) how their returns on filings change when they take significant activist measures; (ii) the average holding periods for each activist investor on all filings, exited filings, live filings and filings where they have taken significant activist measures; and (iii) what activist measures were taken, when they were taken and how the underlying stock reacted to the filing.

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