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13D Monitor Real-time Activist Newsfeed


Immunomedics Inc. (IMMU) has filed a federal lawsuit and a motion seeking injunctive relief against venBio Select Advisor LLC and venBio's four director candidates. The lawsuit is related to allegations of venBio's continuing material violations of federal securities laws in connection with Immunomedics' upcoming 2016 Annual Meeting of Stockholders, scheduled for March 3. The company accuses venBio of violating and continuing to violate federal securities laws and proxy rules by intentionally delaying the filing of its Schedule 13D in respect of its greater than 5% ownership of the company by over five months in order to conceal its intent to try to take control of the company's board; failing to disclose all of the members of its Schedule 13D and proxy soliciting group who, together with venBio, hold as much as 19% of the company's stock; making false and misleading statements about Immunomedics and its board and management; failing to file solicitation materials in a timely manner with the U.S. Securities and Exchange Commission; and unlawfully announcing purported preliminary proxy voting results. The lawsuit seeks to enjoin venBio from further violations and mandate that it make full disclosures promptly to all stockholders in sufficient time prior to the 2016 Annual Meeting.

Macy's Inc. (M) reported profits of $2.02 a share for the fourth quarter of 2016, beating analysts' expectations of $1.96 on average. The increase in earnings comes as the company closes stores and cuts costs in an effort to navigate an industrywide slump and offers hope that the Cincinnati-based company can pull out of the downturn. However, Macy's continues to face pressure from investor Starboard Value LP, and sources say the company has held early-stage talks with rival Hudson's Bay Co. (HBC) about a possible takeover. Meanwhile, Macy's is facing a transition in upper management, as President Jeff Gennette takes over as CEO from Terry Lundgren on March 23. "While 2016 was not the year we expected, we made significant progress on key initiatives that are starting to bear fruit," Lundgren said.

Verizon Communications Inc. (VZ) will acquire Yahoo! Inc.'s (YHOO) Internet properties in a deal valued at $4.48 billion in cash, marking a discount of $350 million following the disclosure of security breaches at Yahoo. Verizon and the entity that remains of Yahoo following the deal, to be renamed Altaba Inc., will share any ongoing legal responsibilities related to the breaches. The revised terms provide a "fair and favorable outcome" for shareholders, said Marni Walden, executive vice president and president of product innovation and new businesses at Verizon. "It provides protections for both sides and delivers a clear path to close the transaction in the second quarter."

Tiffany & Co. (TIF) has reached a deal with Jana Partners LLC to add three new members to its board, including former Bulgari Group chief Francesco Trapani. As part of the deal, Trapani will help oversee the jewelry company's search for a new CEO; and the size of the board will increase from 10 to 13 members. Three other directors will step down in the next two years, however. Jana and Trapani together own about 5.1% of outstanding shares in Tiffany's, which has suffered declining same-store sales for several quarters.

Bristol-Myers Squibb Co. (BMY) announced Tuesday it would add three new board members and accelerate share repurchases, nodding to pressure from Jana Partners LLC. Former senior executives from Bausch & Lomb and Vertex Pharmaceuticals Inc. (VRTX), Robert Bertolini and Matthew Emmens, will join the board effective immediately, along with Theodore Samuels, currently a director at Perrigo Company plc (PRGO) and (STMP). Bristol-Myers said the board appointments reflect communications with Jana. The board will temporarily expand to 14 seats, but only 11 directors will stand for election at the company's annual meeting in May. Jana owned 3.9 million shares in the company late last year, according to a filing last week.

CSX Corp. (CSX) announced Tuesday that Chairman and CEO Michael Ward will retire this May. In addition, Fredrik Eliasson—currently chief sales and marketing officer—will step up as president to replace Clarence Gooden, who also is retiring later this year. The moves come as railroad veteran Hunter Harrison, with backing from hedge fund partner Paul Hilal, seeks to claim the top spot. However, CSX said it has been considering the changes for more than a year, and that the appointment of Eliasson is not meant to "pre-empt or otherwise affect" talks with Harrison. CSX reportedly offered Harrison the position of CEO in private last week, but talks collapsed as Hilal refused to back down from some compensation and governance demands.

Natarajan Chandrasekaran took over as chairman of India's Tata Sons on Tuesday, months after the firm fired predecessor Cyrus Mistry in a contentious boardroom battle. Chandra, as he is better known, said Tata Sons, the holding company of the $100 billion Tata group, will focus on improving shareholder returns and tightening capital allocation rules. He also said he plans to bring the group closer together to take advantage of its collective strength. Chandra has stepped up at a time when several companies in the conglomerate are facing faltering profits. Mistry, engaged in a legal battle with Tata Sons since his removal in October, has warned of big writedowns and called for governance reforms at Tata Sons. The company has denied his allegations. Chandra, the former CEO of IT outsourcing giant Tata Consultancy Services, has also been named chairman of several group operating companies including Tata Motors, TCS, Tata Steel, and Tata Power.

Tata Consultancy Services Ltd. approved a 160 billion rupee ($2.4 billion) share repurchase to boost returns for shareholders. The board of Asia's largest software services provider by market value voted to repurchase as many as 56.1 million shares at 2,850 rupees each at a Feb. 20 meeting in Mumbai. This marks Tata Consultancy Services' first buyback, as cash and investments rose to about 432 billion rupees at the end of December from 277.5 billion rupees a year earlier. After the announcement, the company's shares jumped 3.9% to 2,502.2 rupees, its highest closing price in five months. Earlier this month, pressure from Elliott Management Corp. prompted Cognizant Technology Solutions Corp. (CTSH) to agree to buy back about $3.4 billion of shares. A large cash balance makes the case for large software developers to pursue a consistent share buyback program, as it is a tax-efficient way to return excess cash to shareholders and provides a "good long-term boost" to earnings per share, said Kotak Securities Ltd.

T.V. Mohandas Pai, former CFO of Infosys (INFY), is calling on institutional investors to raise questions about the huge cash pile on the company's books and governance issues. "Capital allocation is very important. Institutional investors should raise those questions. They have a duty ... institutional investors should raise questions on governance because it concerns the company's reputation," Pai said in an interview. At the end of December, Infosys had liquid assets, including cash and cash equivalents, and investments worth Rs 35,697 crore (US$5.25 billion) on its books. He said the company's founders, who hold a 13% stake in the Bengaluru-based company, had raised these questions like any other investor would. "They have every right to question the Board," Pai said. "Since the largest shareholder has sought clarification, they must also seek detailed clarification." Pai and former colleague V. Balakrishnan, had sought a US$1.8 billion buyback in 2014 just as CEO Vishal Sikka was taking over. "We had raised the issue. We hope that other institutional investors will also raise their voice because the institutional investors have an obligation to protect their investment," he said. "All over the world, for listed companies when growth slows down and there is too much cash, shareholders will ask what are they doing with the cash ... about capital allocations. Most Boards around the world will respond with a buyback to show confidence in the company and stabilize the stock price." Infosys recently has come under fire from founders, like N.R. Narayana Murthy, who have publicly raised concerns about alleged corporate governance lapses.

Oasis Management Co. is stepping up the pressure on Panasonic Corp. to improve its offer for PanaHome Corp.  The Hong Kong-based fund will ask the courts to rule on whether the price is fair if shareholders approve the deal on current terms, said Seth Fischer, Oasis's chief investment officer.  Oasis argues the offer undervalues the company by more than 50%, and is demanding a larger share-exchange ratio or for PanaHome to pay out its cash as a special dividend.  Oasis will petition the courts if Panasonic gets the votes it needs to make PanaHome a fully owned subsidiary, Fischer said.  He expects the share-swap proposal, which was announced in December and faces a vote in June, to be approved because Panasonic owns 54% of PanaHome.  Fischer is hoping most minority shareholders will reject the deal, which would boost a case in the courts.  Oasis, PanaHome's second-largest shareholder after Panasonic, launched a website last week to inform other shareholders about the problems with the takeover.  Oasis delivered letters to Panasonic and PanaHome in September about the use of cash, Fischer says; then in December, Panasonic announced it would buy all of PanaHome.  Fischer calls the transaction a test case of whether Japan's corporate governance overhaul is working.

The Securities and Exchange Commission has wrapped up its investigation of CVR Energy Inc. (CVI), the fuel refiner Carl Icahn acquired in a hostile tender offer in 2012, by concluding that CVR failed to give investors enough information about its fee agreement with the two investment banks it hired to help the company fend off Icahn’s takeover. CVR, according to the SEC, should have said in its SEC filings that the banks, Goldman Sachs (GS) and Deutsche Bank (DB), would be due a lavish success fee even if Icahn won control of the company. If the decision holds up, CVR’s lawyer, longtime Icahn counsel Herbert Beigel, intends to argue the state court decision requires the restoration of CVR’s federal court suit as well. In that case, CVR amended its complaint in 2015 to accuse Wachtell of giving CVR bad advice on its SEC disclosures during the takeover battle.

Sevcon (SEV) announced last week that it won a battle against its shareholder, San Francisco-based Meson Capital, for control of the board. In July 2016, Meson Capital increased its stake in Sevcon to 19%, and the company appointed Meson CEO Ryan Morris as its executive chairman in August. However, Sevcon replaced Morris with an independent director on Dec. 9, saying Morris would stay on as a director. On Dec. 21 Meson announced a proposal to declassify Sevcon's board, which would make it possible to replace many of its directors. Meson also nominated six candidates for election to Sevcon's board at the 2017 annual meeting. Sevcon announced last week that it had defeated Meson at its Feb. 7 annual meeting. Since the proposal failed, Sevcon's board remains unchanged, and Morris will stay on the board until the company's 2018 annual meeting.

German drugmaker Stada has received a new takeover approach from buyout group Bain Capital, sources said Friday, valued at 3.6 billion euros ($3.8 billion). The entrance of a third bidder comes after Stada revealed late Thursday a proposed price of 58 euros per share from an unnamed suitor. Stada's supervisory board hastily arranged a meeting for Friday, a source said, where they are likely to discuss the bidding process. The company announced earlier this week that buyout group Cinven had offered 56 euros per share, valuing it at about 100 million euros less than the latest offer. Advent International also surfaced as the second prospective bidder; the private equity firm is expected to submit a bid next week. Stada shares gained 1.9% to 57.29 euros at 1250 GMT, headed to close at a record high, having risen 15% so far this week. Active Ownership Capital (AOC) acquired a roughly 7% stake in shares and options before May last year when the shares were trading at about 30 euros each. At the time, the investor called for a management shakeup, seeking non-executive directors with more international experience.

Whole Foods Market Inc.'s (WFM) annual shareholders meeting will convene Friday amid investor discontent about declines in sales growth and reductions in its share value.  Some shareholders say the company needs to boost its performance in the increasingly competitive grocery industry, or potentially face a challenge to the board in about six months, according to sources.  Protest votes against directors without a competing slate of nominees are unlikely to remove current board members but can encourage activists to try to campaign next year, especially if performance has not improved.  Some shareholders believe the company has a long way to go to turn around its bottom line and expect pressure on leadership to grow.  Neuberger Berman, a top-10 investor with a roughly 2.4% stake, has been privately pushing for faster change at the company, sources said.  It reportedly believes Whole Foods resonates better with millennials and sells more prepared foods than rivals, but that management has not kept up with the chain's growth.  Proxy advisers, meanwhile, are adding to the pressure with concerns about Whole Foods' board attendance, executive compensation, and the closeness of its board, reports Glass Lewis & Co.

Ashford Hospitality Prime Inc. (AHP) struck a settlement deal with Sessa Capital on Thursday, ending a nearly year-long feud.  Last spring, Sessa launched a proxy fight at the real estate investment trust, nominating five directors to its board.  A legal issue arose that caused Sessa to bring a lawsuit against the company, which it ultimately lost; as a result, the hedge fund was unable to put its directors up for a shareholder vote.  Other Ashford Prime shareholders, however, demonstrated their frustration with the board.  The company said after the annual meeting last June that "withheld" votes exceeded the "for" votes for each of its director nominees.  Sessa reportedly prepared to launch another proxy contest this year, but the two sides began talks last month to avoid further infighting.  According to the settlement, two of Sessa's previous director nominees will be appointed to Ashford Prime's board.  The deal also allows the REIT and the hedge fund to jointly select an additional director. Two current directors will step down.  The two sides have also come to a two-year truce, agreeing to dismiss all pending litigation and to various provisions until before its 2019 annual meeting.

Paul Hilal wrote to the board of CSX Corp. (CSX) on Thursday, expressing his willingness to compromise on certain leadership demands as long as Hunter Harrison is granted a four-year contract as CEO.  The letter comes two days after CSX called for a special shareholder meeting next month to vote on the demands Hilal spelled out in private negotiations.  His fund, Mantle Ridge LP, owns roughly 4.9% of CSX stock.  The U.S. railroad operator on Tuesday estimated Harrison's proposed pay package at $300 million and said Mantle Ridge was seeking considerable representation on the company's board.  On Thursday, Mantle Ridge countered that it was only seeking director seats for Hilal and Harrison and that the other four candidates were independent professionals from a list vetted by a CSX board member.  Hilal insisted CSX overstated Harrison's compensation figure and said his major concern is that the board was only willing to consider Harrison for a two-year deal as CEO.  Hilal said he would consider removing one independent director candidate from his proposal if CSX's board could promise Harrison a four-year stint.  CSX said Thursday that its board would review Mantle Ridge's letter.

Yum! Brands Inc. (YUM) said Thursday that Keith Meister, managing partner of Corvex Management LP, will be stepping down from his director post immediately.  Meister joined the board after successfully campaigning for the Louisville, Kentucky-based fast-food giant to spin off its Chinese operations in mid-2015.  He argued that the business would deliver greater value for shareholders as an independent entity.  The plan materialized last October, when Yum China Holdings Inc. became a separate business.  "With the China spinoff successfully executed, and Yum's capital structure, management team, and transformation plans in place, the company is set up for great success," Meister said in a statement Thursday.  As of the end of 2016, Corvex owned a 5.7% stake in Yum and a 3.8% interest in Yum China, according to Bloomberg data.

The Alliance Trust Shareholder Action Group (ATSAG) is asking shareholders to vote in favor of all resolutions at the trust's general meeting on Feb. 28 despite opposition from two institutional advisory groups, which have recommended abstaining on some of the proposals.  Multiple proposals will be made centering on the change of investment approach that was outlined in December 2016 and a proposed repurchase of all the shares held by Elliott Advisors, which was announced in January.  Elliott has more than a 20% stake.  The institutional advisory services are concerned about a potential conflict of interest, because consultant Willis Towers Watson was hired to give advice on the future direction of the trust but was then appointed to supervise the multi-manager structure.  They are also concerned that Elliott is getting an overly generous exit price.  The exit offer of 4.75% to net asset value is only slightly narrower than the current discount of 4.9%.  ATSAG says a repurchase of Elliott shares would help fend off future pressure from the investor.

Richard Bernstein, head of the Crystal Amber fund, has voiced doubt about Ashley Highfield's leadership of Johnston Press.  The investor's comments are its first public rebuke of the newspaper group's CEO since becoming its biggest shareholder, with a more than 21% interest.  Earlier this month, Highfield said that he and the company's CFO would arrange a meeting with Crystal Amber shortly.  However, Bernstein says Highfield has not met with the fund or offered a meeting.  "We're most concerned that there must be no repeat of the negotiations in 2014, which Ashley oversaw and was 'rewarded' by his board with a substantial bonus," Bernstein said.  "…We have neither the evidence nor the confidence in his ability to secure a better outcome for shareholders in the forthcoming inevitable restructure in 2019."  Johnston Press' share price is down more than 50% in the last 12 months, following a difficult year for newspaper publishers.

On Feb. 16, hedge fund operator TCI Fund Management said it had garnered the support of several other investment firms in its protest against Safran's agreed bid for Zodiac Aerospace. "We have received support from several American and European funds. But we are not looking to act in concert with them," said TCI partner Jonathan Amouyal. "We are in contact with a lot of shareholders. There aren't that many who disagree with us." TCI recently wrote to France's AMF market regulator to protest the $9 billion Safran-Zodiac deal, arguing that Safran is paying too much for Zodiac and that minority shareholders should have more information on the deal and more room to express their views on it. The deal has been agreed upon by the two companies and has the backing of several major investors in both groups. The French government also has backed the deal, with France owning around 14% of Safran. Safran management and other employees hold around 12% of Safran's share capital, while the French state and Safran employees together account for around 40% of the voting rights of Safran shareholders. TCI Fund owns about 3.87% of Safran's capital.

Lion Point Capital, a small hedge fund founded by Didric Cederholm, a protégé of Elliott Management's Paul Singer, is encouraging one of Singer's targets to listen to him. Earlier this year, Elliott called for Arconic (ARNC) Chairman Klaus Kleinfeld to be replaced and to nominate five board members. Lion Point, which had a 0.22% stake in Arconic at the end of last year, is voicing support for Elliott's push. "Lion Point believes that the intrinsic value of Arconic materially exceeds the Company's current stock price, and we welcome and support Elliott Management Corporation's plan to unlock this value," Cederholm and head of research Jim Freeman wrote in a Feb. 15 letter to Arconic's board. They recommended that the Arconic board "promptly engage with Elliott in discussions to implement a plan to enhance shareholder value." Earlier this month, First Pacific Advisors, one of Arconic's largest shareholders, also announced its support for Elliott.

Following pressure from Caerus Investors, Kate Spade & Co. (KATE) announced it would explore strategic alternatives.  Caerus has urged the company to explore a sale, saying it would make a "great acquisition target" —leading to reports that companies such as Michael Kors Holdings Ltd. (KORS) and Coach Inc. (COH) could seek to acquire the handbag and accessories maker. Kate Spade said it will explore strategic alternatives with Perella Weinberg Partners as its financial adviser.  Shares of the company shot up more than 10% to $21.75 in premarket trading on Thursday.

VenBio Select Advisor has filed an injunction to prevent Immunomedics (IMMU) from closing a deal that would give Seattle Genetics (SGEN) global rights to Immunomedics' cancer drug candidate IMMU-132. VenBio also wants to prevent further delays of an upcoming shareholder vote at the company's annual meeting. Immunomedics' largest shareholder is accusing the company's directors and management of undervaluing IMMU-132, which it calls the company's "crown jewel," in an attempt to retain shareholder support ahead of the upcoming vote. However, in a letter to shareholders, Immunomedics said, "This lawsuit appears to be a desperate act designed to prop up VenBio's attempt to take control of Immunomedics and implement its own self-serving agenda, at the expense of other stockholders." VenBio said that more than half of the 80% of Immunomedics outstanding shares already submitted for the vote are in favor of VenBio's board nominees, and with the vote now scheduled to take place after the deal with Seattle Genetics would close, any newly elected board nominees would not have a chance to review the terms of the deal. "We believe the deal Immunomedics' current Board and management announced only four business days before the Annual Meeting vote was motivated by a desire to entrench themselves and rush to announce an agreement before they lost the vote and their Board seats," said Behzad Aghazadeh, managing partner and portfolio manager at VenBio.

Hunter Harrison is frustrated that negotiations fell through between his partner Paul Hilal and directors of CSX Corp. (CSX), where he sought the head role, according to an interview with The Wall Street Journal.  "I wish the two sides would get together and allow for this value creation for the shareholders instead of going through these games which create nothing but further anxiety for the shareholders," Harrison said.  He added that while he is "disappointed" that Hilal could not reach an agreement with CSX in their talks over the last month, "I am not trying to abandon anyone."  Hilal of Mantle Ridge LP is seeking to add six directors to a 12-member board, and has also asked the railroad to approve a compensation plan for Harrison that CSX estimated could cost $300 million.  CSX said its board has concerns about giving so many board seats to a shareholder with less than a 5% stake and that the cost of the proposed compensation package is extraordinary.  Roughly 50 CSX investors met with Hilal at a Manhattan restaurant Wednesday night, where he reportedly defended his need for six board seats so that the expected new CSX chief can successfully execute his plan.  CSX, meanwhile, took the rare step Tuesday of calling for a special shareholder vote on Mantle Ridge's demands.

The United Kingdom's Financial Reporting Council (FRC) currently has the authority to fine and ban only boardroom directors who are members of professional bodies when they break financial reporting rules. However, under proposals being submitted to the government, the FRC said it will undertake a "fundamental review" of the U.K. corporate governance code and issue a consultation in the summer. The code is voluntary and used by shareholders to hold companies to account. Under the proposals, boardroom directors would face tougher punishments when they violate financial reporting rules. FRC Chairman Sir Win Bischoff said, "The prime minister has a vision of an economy that, in her words, 'works for everyone'. This needs U.K. businesses to thrive so that all stakeholders including workers, customers, suppliers, and society itself benefit through jobs growth and prosperity."

The U.S. Securities and Exchange Commission (SEC) recently settled enforcement actions involving violations of beneficial reporting requirements under Section 13(d) of the Securities Exchange Act. In one action, certain shareholder activists and their affiliates failed to properly disclose beneficial ownership information during a series of campaigns to influence or exert control over certain microcap companies. Without admitting or denying the findings, the activist group consented to the SEC's order and agreed to penalties ranging from $30,000 to $180,000. The announcement of the settlements is a clear sign that the SEC is taking a closer look at Section 13(d) reporting in the context of proxy battles where omission of information about the parties involved could have a significant result, writes Bryan Pitko of Stinson Leonard Street. The recent cases "should serve as a warning to all participants in proxy fights that they need to actively comply with all beneficial ownership reporting requirements," concludes Pitko.

Arconic Inc. (ARNC) confirms that it has sold nearly two-thirds of its 20% ownership interest in Alcoa Corp. The deal gives the manufacturer of aerospace components a cash infusion as it battles disgruntled shareholders jockeying for board seats. Arconic plans to use the almost $900 million from the sale of more than 23 million Alcoa shares to pay off debt or buy Arconic shares. The moves are expected to help Arconic improve profits by bolstering its balance sheet and shoring up its stock price with buybacks at a time when activist investors led by Elliott Management Corp. pursue a boardroom shake-up that includes bids for five board seats and replacing Chairman and Chief Executive Klaus Kleinfeld. Elliott says Arconic's stock has been restrained by Kleinfield’s inability to cut expenses and increase margins for Arconic's business lines in automotive and aerospace components.

The board of Edinburgh-based oil and gas company Bowleven has unanimously urged shareholders to vote against all resolutions proposed by Crown Ocean Capital P1 at a general meeting next month.  In a statement to the stock market, AIM-listed Bowleven argued that Crown Ocean had not offered a “credible strategy” to unlock long-term value for Bowleven's assets and that the company would be badly hurt if shareholders supported the removal of the majority of its board.  Crown Ocean, whose 16% interest makes it the single largest shareholder in Bowleven, responded by saying the board had “once more failed to own up to the fundamental issues” shareholders have raised.  It blasted the board for overseeing a “catastrophic financial performance” in the last 10 years and criticized Bowleven for lacking a strategy to maximize shareholder value.  Crown Ocean has called for a boardroom shakeup that would include the exit of all directors except for one.

Germany's corporate governance code is being amended to emphasize that institutional investors have a responsibility to exercise their ownership rights. The amendments come after the conclusion of a consultation period that generated a strong response, both positive and critical. A government-appointed commission decided on changes to the code itself and the preamble, which delineates the spirit behind the code. Indeed, the preamble has been extended to assert that good corporate governance requires firms and their board members to conduct business ethically and take responsibility for their behavior. Manfred Gertz, the outgoing chairman of the commission, says the responses to the consultation period highlight "the vast interest on questions regarding good corporate governance that exists within German listed companies. The focus is on strengthening self-responsible conduct by corporate bodies and committees complimented by a sensible level of transparency, allowing stakeholders to better assess how corporate governance is being put into practice."

On Feb. 15, Voce Capital Management LLC nominated four candidates, including its founder and managing partner, for election to Air Methods Corp.'s (AIRM) board in an effort to turn around the medical helicopter company. The hedge fund—which has a 3.1% stake in the company—has long pushed for Air Methods to sell itself. Voce backed off a threat to start a proxy war in March 2016 after the company agreed to board changes and to address shareholder concerns, but it reiterated its call for a proxy war on Jan. 30. Although Air Methods has added one Voce nominee to its board, the hedge fund says the company has not fulfilled its obligation to amend its bylaws so all directors could be elected annually. "The situation at Air Methods has unraveled since we entered the cooperation agreement with the board almost a year ago," Voce said.

Crown Ocean Capital (COC) has called for a general meeting on March 14 to oust six of Bowleven's directors from the board, including CEO Kevin Hart, and appoint two directors of its choosing. COC also wants the Edinburgh-based oil exploration firm to cease investment in the Bomono license, onshore Cameroon, contending that it has failed to show any "convincing economic prospects." Bowleven officials accuse COC of attempting to turn the firm into a holding company with the intention of stripping cash from its balance sheet, and it is pleading with shareholders to vote against the resolutions proposed by the Monaco-based offshore private investment vehicle, which holds 15.56% of Bowleven. According to Bowleven Chairman Billy Allan, "After full consideration, the board has concluded that Crown Ocean's proposal is without merit. Their approach lacks any strategy to maximize the value of Bowleven's assets and disregards the vital need for a board to serve all shareholders. Crown Ocean proposes a board structure that is entirely self-serving and a model of bad governance."

Gamco Investors Inc. (GBL) is the latest investor to oppose French dairy giant Lactalis Group's bid to purchase Italy's Parmalat SpA. Lactalis launched its initial takeover offer for the whole company six years ago, causing turbulence in Europe as Italy sought to prevent the loss of a national champion to foreign buyers. Since then, Lactalis has increased its 83.3% stake to 87.7%. Gamco argues that the current offer to buy out remaining minority shareholders is too low, echoing concerns from Amber Capital LLP, the most vocal critic of the offer. In December, Lactalis announced a voluntary tender offer to buy out minority shareholders for €636.7 million, or €2.80 a share. Yet Parmalat's stock was at €2.98 on the Milan Stock Exchange on Wednesday morning, signaling Lactalis' bid could fail unless it is raised. The tender offer expires March 10. "We're 99% sure we are not tendering our shares" held in the firm's merger arbitrage mutual funds, said Gian Maria Magrini, who helps oversee the holding at Gamco. The U.S. money manager owns roughly 1% of total Parmalat shares outstanding, making Gamco the second-largest minority shareholder after Amber Capital. "We would like to see the tender offer increased substantially," added Arturo Albano, a corporate governance specialist at Amber Capital. The London-based money manager owns more than 3% of Parmalat stock, Albano said.

Brookdale Senior Living (BKD) is "exploring options" to improve shareholder value, executive chairman Dan Decker told analysts and investors on the company's fourth-quarter earnings call.  The remarks come a month after reports that Blackstone Group LP was in talks to buy the struggling senior-living giant.  Both Decker and Brookdale CEO Andy Smith said there is no guarantee a deal will result from the review, and Smith would not comment specifically on whether a sale of the entire company was in the cards.  Since Brookdale merged with Seattle-based Emeritus Corp. in 2014, analysts have frequently asked if it might sell its real estate—a move two activist investor groups have called for over the past three years.  Brookdale settled with one of those groups, Sandell Asset Management, in 2015, but still opted not to sell its real estate.  Brookdale is, however, selling communities and restructuring leases as part of a "portfolio optimization" effort, which Smith said the company made key progress on during the fourth quarter.

Trian Fund Management LP on Tuesday disclosed a $3.5 billion stake in Procter & Gamble Co. (PG), taking aim at the maker of Pampers diapers, Tide detergent, and Gillette razors as it moves to shed unprofitable brands and bolster sales. This marks the investor's biggest ever ownership interest in a company. It also comes at a time when P&G's efforts to slim down have struggled to boost its stock much beyond where it traded in early 2015. Moving to focus more on core products, the Ohio-based company sold more than 40 of its brands last year. However, given its market value of $225 billion, P&G remains an industry giant that Trian will likely want to shrink even further. "[Trian] could argue that the brand sales ... did not go far enough to create a faster growing company," says CLSA analyst Caroline Levy, noting that the company's beauty operation could perform better as a standalone company. "Continued share losses in many categories, especially skin care, point to a need for faster change." Pershing Square Capital Management purchased a stake in P&G in 2012, calling for the firing of its then CEO, Robert McDonald. A new CEO was hired a year later, and in May 2014, Pershing sold its stake.

CSX Corp. (CSX) took the unusual step of disclosing a hedge fund's demands and asking shareholders to vote on the matter.  The railroad operator said it offered last week to install railroad veteran Hunter Harrison as CEO and let Paul Hilal nominate five directors.  But the company said talks disintegrated over Hilal's requirement that CSX pay back his fund, Mantle Ridge LP, for compensation benefits for Harrison.  CSX said Mantle Ridge agreed to compensate Harrison for benefits he sacrificed when he resigned as CEO of Canadian Pacific Railway Ltd. (CP) last month.  Mantle Ridge now wants CSX to absorb those costs as part of a total compensation package that could surpass $300 million, the company said.  CSX said it would ask shareholders to vote on Harrison's employment terms and Mantle Ridge's reimbursement request at a special meeting.  They will also vote on the pair's proposed governance arrangements.  CSX's move on Tuesday to appeal directly to shareholders and disclose the hedge fund's demands in detail is a rare show of resistance and a role reversal of sorts.  In a letter to Hilal last week, CSX argued Harrison's proposed benefit package would benefit Mantle Ridge "at the expense of all other CSX shareholders."

Scott Ferguson, head of Sachem Head Capital Management, intends to leave the board of Autodesk (ADSK) as soon as a new CEO is found. He told his investors in a letter Tuesday that Sachem Head returned 4.6% in January, exceeding the S&P 500's 1.9% gain.  Its investment in Autodesk had almost doubled.  Ferguson has been a director on the board for nearly a year, after the company settled with Sachem Head and Ricky Sandler's Eminence Capital.  The investors had been demanding cost cuts, and Autodesk agreed to buy back $2 billion worth of shares.  Last week, Autodesk announced that longtime CEO Carl Bass was stepping down; and the company is looking at internal and external candidates to replace him.  Ferguson told his investors that the Autodesk bet has gained more than 90% since the fund acquired its first shares in October 2015.  "We believe the stock continues to offer an attractive return, particularly in light of recent events," the letter noted.  Ferguson, like other hedge fund managers, is optimistic for 2017, citing expected tax reform, the potential for a regulatory rollback, and higher interest rates.

The Securities and Exchange Commission (SEC) has resolved its investigation into CVR Energy Inc. (CVI) over allegations that it made insufficient disclosures to shareholders during an unsuccessful defense against Carl Icahn's 2012 hostile takeover.  Because of the corrective steps it has taken and its cooperation with the probe, the SEC said Tuesday that the Texas-based oil refinery company will not have to pay a penalty. CVR agreed to settle the case without admitting or denying wrongdoing.  Two years ago, it revealed that regulators were investigating whether it made inadequate disclosures in SEC filings about "success fee" arrangements it reached with Goldman Sachs and Deutsche Bank to fend off Icahn's tender offer.  Investors consequently were unaware of the potential conflict of interest that the banks could still earn success fees even if Icahn won control of the company, the SEC said.  Most CVR shareholders ultimately accepted Icahn's $30-per-share tender offer.  Icahn held an 82% stake in the company as of September, according to a regulatory filing.

The Korea Exchange (KRX) announced this week that it will seek measures to enhance transparency in corporate governance for Korean listed companies this year, as part of ongoing efforts to increase foreign investment. Poor governance has been blamed for both the low credibility of Korean companies in the capital market and for "sell" or "underweight" ratings by global investors. The KRX plans to recommend all listed companies in Korea disclose their environmental, social, and governance (ESG) performance, enabling the market to monitor their progress. The disclosure would not be binding.

Engaged Capital LLC has sent a letter to the board of Rent-A-Center Inc. (RCII) requesting that it begin evaluating strategic alternatives, including a potential sale of the company. The fund said the company's shares have fallen 75% over two years under the current board, and it is prepared to nominate independent directors at the company's annual shareholder meeting. According to the letter, Engaged Capital has a 12.9% stake in Rent-A-Center.

The Children's Investment Fund (TCI) has initiated a campaign to block Safran's €8.5 billion takeover of its competitor Zodiac. The fund has written to French market regulator AMF requesting that Safran shareholders be allowed to vote on the takeover before the company begins purchasing Zodiac shares. The move could launch TCI against the French government, which is Safran's biggest shareholder with a 14% stake and is seeking to create a national aerospace champion. TCI, meanwhile, owns 4.1% of Safran's shares. Sir Chris Hohn, who leads TCI, said that the fund would consider suing the Safran board if it continues to refuse a shareholder vote on the deal. Last month Safran, which makes jet engines, agreed to purchase Zodiac, the maker of aircraft seats and cabin interiors. Among other concerns about the deal, TCI argues Safran is "massively overpaying" for Zodiac and that the deal has "no strategic rationale."

Bilfinger says a break-up of the company is no longer on the table. However, the German industrial services group has identified 500 million euros' worth of operations it is prepared to or actively wants to sell. "A break-up was never an issue for me. I never spoke to the supervisory board about it," says Bilfinger CEO Thomas Blades. Bilfinger also announced a share buyback and a surprisingly high dividend, boosting its shares over 5% on Feb. 14. The investor Cevian owns 20% of Bilfinger.

Stada announced Monday it has begun discussions with potential buyers Cinven Partners and Advent International after months of pursuit.  Stada shares rose 13.7% to 56.5 euros on Monday, on track to close at a record peak, after the German drugmaker revealed it was considering the two takeover bids.  It confirmed that Cinven was offering 56 euros per share, a deal it valued at nearly 3.5 billion euros ($3.7 billion), but did not disclose Advent's terms.  Cash-rich buyout firms pursuing holdings in stable healthcare businesses have been working on offers for months and also have approached Stada, sources said.  Previous barriers to a deal reportedly included opposition from the supervisory board and Stada's share price, boosted by continuous takeover speculation.  A sale would mark a win for Active Ownership Capital (AOC), which built a roughly 7% stake in shares and options before May last year when the shares were trading at about 30 euros each.  Stada was the firm's first major investment.  Stada had previously avoided big merger deals when the generic drug industry began consolidating to cut costs.  One source said the supervisory board has become more receptive to bids, although this will likely result in a breakup of Stada.

Mick McGuire, founder of Marcato Capital Management, is criticizing Deckers Outdoor Corp. (DECK) for its significant investment in physical retail stores, calling it the company's "principal capital allocation error."  McGuire told CNBC on Monday that, in contrast to other retailers, the company invested hundreds of millions of dollars over the last five years to expand physical retail locations—but that the strategy has produced "no physical return on investment of any kind."  He also noted that Deckers' UGG brand was "very valuable" and still had huge growth opportunity but that the brand needed to be managed more effectively.  When asked if Marcato would pursue a proxy fight against Deckers, McGuire said: "We will have to see how our conversations progress."  He added that Marcato had communicated with Deckers management before purchasing shares in the past week.  Marcato disclosed a 6% stake in Deckers on Feb. 8.

Tour operator TUI AG's executive pay has come under sharp criticism by shareholder advisory group ISS, as U.K. investors continue to target excessive compensation packages.  TUI's corporate governance arrangements "fall short of U.K. investor expectations," ISS stated in a report to shareholders ahead of the company's annual meeting this week.  While it's based in Germany, TUI is a member of the premium segment of the London Stock Exchange's main market.  Roughly 30% of the company's shareholders are from the United Kingdom.  Hazel Newell, TUI's investor relations manager, says, "Our intention is to adhere" to the regulations in Germany and the United Kingdom.  However, she notes, the company is not required to have shareholders vote on remuneration under German disclosure rules.  Governance groups have led successful campaigns to revise executive compensation packages at such British companies as Imperial Brands and Thomas Cook Group PLC.

Hermes Investment Management, a British fund manager, on Feb. 13 called for improvements to the corporate governance code for private infrastructure assets, to ensure better outcomes for investors and other stakeholders. Among Hermes' suggestions were periodic board "effectiveness reviews," along with an independent chairman and a minimum number of independent directors. In addition, Hermes recommended an array of solutions aimed at ensuring the long-term interests of all stakeholders are safeguarded, most notably the creation of a stakeholder committee. "Pay should also be more closely aligned to 'non-financial' issues such as health and safety," it said.

Elliott Management Corp., which manages funds that collectively beneficially own a greater than 12% economic interest in Arconic Inc. (ARNC) on Feb. 13 sent a letter to the Arconic board renewing Elliott's call for board action in light of shareholders' overwhelming support for new leadership. Two weeks ago, Elliott announced its nomination of five new directors and suggested the board consider Larry Lawson as chief executive officer. Since then, the letter states, Arconic's equity value has increased by more than 35%. Four of Arconic's top fifteen shareholders, including Elliott, have now come out publicly in support of management change. Multiple sell-side analysts have published notes validating the opportunity for significant operational improvement and illustrating substantial upside to Arconic's shares, consistent with Elliott's own analysis, in the event a change in management is effectuated. Elliott's conversations with a broad spectrum of investors reveal a widespread and overwhelming desire for new leadership. "A stubborn defense of the status quo when the owners for whom the Board serves as fiduciaries clearly prefer change is inappropriate and counterproductive," the letter states. The board should "do the right thing and begin a constructive dialogue to put in place new leadership."

NRG Energy Inc. (NRG) said on Feb. 13 that it would appoint two directors —Bluescape Energy Partners Executive Chairman John Wilder and former Public Utility Commission of Texas Chairman Barry Smitherman—in a deal with Elliott Management and Bluescape. Directors Howard Cosgrove and Edward Muller will step down. Furthermore, NRG said it would create a five-member committee chaired by Wilder to examine cost-cutting, asset sales, capital allocation, and broader strategic initiatives. Elliott and Bluescape are targeting significant cost cuts at NRG. The company's shares have increased more than 10% since Elliott and Bluescape announced their joint investment on Jan. 17, with their combined holdings amounting to about 10% of NRG.

Deckers Outdoor Corp. (DECK) has made capital allocation blunders and demonstrated a lack of discipline around costs, according to Mick McGuire, founder of Marcato Capital Management. "Deckers is...a business with a great brand, generates a lot of cash flow, and actually trades at one of its lowest valuations in its history, but they've made some very critical missteps around capital allocation and really a lack of discipline around costs and returns on capital," McGuire told CNBC on Monday.

German drugmaker Stada revealed it has received two takeover bids for the entire company, including a €3.5 billion offer from private equity group Cinven and another overture from a company it did not name. A successful sale would mark a victory in Active Ownership Capital's (AOC) prolonged campaign to boost Stada's governance and profitability. The possibility is now on the table after AOC pressed last year to remove the company's chairman, which also resulted in the investor replacing five members of the company's supervisory board at the annual meeting. Ahead of that vote, Stada management accused AOC of seeking to mastermind a sale of the company, which the hedge fund denied at the time. Stada has long been considered a takeover target because of it is one of the last independent manufacturers of generics and non-prescriptive medicines. Various firms are closely monitoring the situation and could make an offer, sources said, noting that private equity bidders believed there were major costs that could be cut from the business. Cinven's offer of €56 per share—a 15% premium to Stada's closing price of €49.69 on Friday—would mark a near doubling of Stada's value in just 12 months.

Parvus Asset Management—an affiliate of Sir Chris Hohn's Children's Investment Fund—has been pursuing a sale of William Hill for the past four months, sources say. Parvus is the gambling behemoth's largest shareholder, with a roughly 14% stake that it has acquired through derivatives. Parvus last fall resisted the company's efforts to merge with Amaya, the owner of the PokerStars website, claiming the deal would wipe out shareholder value. Hohn previously has waged campaigns against Volkswagen and Deutsche Börse.

Richard Bernstein, head of the Crystal Amber fund, continues to oppose Johnston Press management. He believes the embattled publisher is headed for a confrontation with its bondholders and argues that because CEO Ashley Highfield and CFO David King led the company's deeply discounted rights issue in 2014, they should not lead the business in negotiations with debt investors. "…I think the outcome is likely to be the same, where shareholders suffer greatly," Bernstein said. "And as a shareholder that's not acceptable, so something has to change." Bernstein's complaints against management come even after interim chairman Camilla Rhodes publicly expressed support for Highfield and his strategy earlier this month. Crystal Amber raised its stake to just over 20% last month, making it the top shareholder.

On Feb. 10, CSX Corp. (CSX) extended the deadline for board nominations until Feb. 24, buying the company more time to reach an agreement to install railroad veteran Hunter Harrison as CEO. Harrison and his partner, investor Paul Hilal of Mantle Ridge LP, have until that date to nominate directors as they negotiate a deal to secure board seats and replace Chairman and CEO Michael Ward. Harrison and CSX have discussed a three-year contract, but sources say Hilal's request for up to six board seats has become a sticking point in the talks. The sources say Harrison and Hilal are viewed as a package deal, and a deal is not a sure thing. Hilal told CSX directors last week that he wants to avoid a board fight.

Shareholder pressure has prompted Thomas Cook to reduce the maximum payout for its CEO under a new long-term bonus plan. The plan to pay CEO Peter Fankhauser a long-term bonus of up to 225% of his base salary of £703,000, worth about £1.6 million a year, was opposed by 32.7% of the travel company's shareholders, amounting to its biggest revolt. In response, Thomas Cook cut the maximum potential payout to 200% under the strategic share incentive plan (SSIP) but said it would not use it this year. If used, it would replace the current performance share plan (PSP), which can pay out 200% in exceptional circumstances. This year, under the PSP, Fankhauser has been awarded a long-term bonus of 165% of his base salary, which would pay out in three years if the company's targets are achieved. Thomas Cook also said it would consult major shareholders before the SSIP is used and on its performance targets. Meanwhile, almost 22% of shareholders voted against the company's future remuneration policy, and 22.5% opposed the remuneration report. Standard Life, the second-biggest shareholder with 13% of the shares, said, "We disagreed with the introduction of a potential payment to executives above the remuneration policy's normal upper limit. In addition, we opposed the introduction of new elements to the remuneration plan as we strongly believe these should be dealt with in the existing policy."

In the European Union (EU), revisions to the Shareholder Rights Directive (2007/36/EC) have been proposed to address corporate governance failings and to further promote transparency and shareholder activism. The revised directive includes introducing say on pay and the mandate to publicly disclose the remuneration policy of directors. It also proposes measures to help companies with identifying their shareholders; new requirements for intermediaries to simplify the exercise of rights by shareholders; and transparency requirements for institutional investors, asset managers, and proxy advisors. Finally, the revised directive would include a requirement for material-related party transactions to receive approval by shareholders and to be announced publicly. The proposal to revise the existing directive has been agreed to at the EU level, and the new directive will be formally adopted by the European Parliament and Council in the near future. It will then be published in the Official Journal of the European Union, after which member states will have two years to apply the provisions to domestic law.

Analysts believe a shareholder campaign to install Hunter Harrison as chief executive at CSX Corp. (CSX) could come to fruition. Harrison, who has spearheaded turnarounds at three railroads, joined forces with Mantle Ridge's Paul Hilal in a bid to replace CSX head Mike Ward. The shares have jumped 29% since Harrison's pursuit of CSX was confirmed on Jan. 19; but talks between the two sides have been muted since. "We haven't heard a peep,” said John Larkin, an analyst at Stifel Nicolaus & Co. "I would presume they are still negotiating. That increases the probability of a friendly deal." Meanwhile, Hilal and Harrison have until the end of Friday to nominate dissident directors for the board, which would be decided by shareholders at the annual meeting this spring. Harrison in 2012 worked with billionaire investor Bill Ackman to take over Canadian Pacific Railway Ltd. (CP), and he now wants to accomplish the same with Hilal and CSX. If a dissident slate is nominated, that could signal a hostile campaign similar to Ackman's for Canadian Pacific. Negotiations might continue even if the board candidates are submitted, however.

Sampo, the Finnish financial holding company, wants to increase its number of directors at Danish insurer Topdanmark from one to three. It noted that Torbjorn Magnusson, Sampo's current board representative there, will become chairman after the annual general meeting on April 4; and another current board member does not plan to seek reelection. Sampo also suggested that Topdanmark investors eliminate share repurchases and bring back dividend payouts. The company owns roughly 42% of Topdanmark and is expected to eventually acquire the remaining shares. Sampo initiated a mandatory takeover offer for Topdanmark last year but offered no premium.

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Amber Warning – the Investor Whose Interest Signals Danger
" (02/19/17) Martin, Ben"

Crystal Amber is one of Britain's most feared investment funds. Run by Richard Bernstein, Crystal Amber has a record of spurring seismic changes at the small and mid-cap companies where it builds stakes, and many of its targets eventually are taken over. "The correlation between companies we invest in which are subsequently taken over is very high," says Bernstein. "One of my shareholders has said to me, 'Richard, you're not really a fund manager, you're a businessman,' and I look at businesses as the same way as a businessman does. I look at our portfolio now and I can see why a lot of these businesses are attractive." Bernstein notes that he does not pursue the type of aggressive activist campaigns favored by U.S. funds, including Elliott Management and Bill Ackman's Pershing Square, which are not averse to publicly criticising companies where they hold stakes. "We're not the U.S. brand of activism. Our default position is not to be antagonistic towards management teams. In nine years of our existence we've called one EGM and that was a company where most of the board resigned that morning after we called it," Bernstein says. "Our style is contrarian, patient, supportive. But when management teams are deliberately obstructive and acting in their own interest rather than the stakeholders, then that is unacceptable and we act." Bernstein currently is focused on the troubled newspaper publisher Johnston Press, which is struggling with £137.7 million of net debts. He has publicly questioned whether Johnston Press CEO Ashley Highfield is the right man to lead the company through what investors believe is an inevitable restructuring.

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Bass Pro Shops' Acquisition of Cabela's Now Looking Shaky
" CNBC (02/19/17) Manessis, George; Picker, Leslie"

Some in the hedge fund community appear to be growing pessimistic about Bass Pro Shops' $5.5 billion acquisition of Cabela's (CAB), after road bumps emerged surrounding the deal.  Hedge funds that bet on merger-arbitrage are trading the deal at prices that would suggest a 40% chance of it going through.  One setback is the antitrust situation.  Many outdoor retailers stocked up on guns, assuming that Hillary Clinton would become president in November.  But with President Donald Trump's surprise victory, consumers have not been buying guns as much as retailers expected.  That has damaged revenue numbers, with Cabela's showing a 4.9% decline in its fourth-quarter earnings Thursday.  Along with Cabela's agreement to sell its retail business to Bass Pro Shops is its deal with Capital One (COF), which acquired Cabela's credit-card business.  That deal depends on the Office of the Comptroller of the Currency, which has not yet agreed to grant approval due to a separate issue with Capital One.  Elliott Management, which had pushed for a sale of the company, showed in a filing Tuesday that it had sold its 6.3 million shares in Cabela's during the fourth quarter.  That would have been before the stock spiraled in early January.  On Friday, the stock was trading around $45 a share, below the $65.50 per share in cash that Bass Pro Shops offered to pay in October 2016.  Analysts say if no deal is reached, Cabela's could fall even further below its pre-deal price.

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Will Nelson Peltz Break Up P&G?
" Fortune (02/18/17) Tully, Shawn"

Observers are speculating whether or not Nelson Peltz will seek to further reinvent Procter & Gamble (PG) by demanding the breakup of the world's consumer-goods colossus. On Feb. 14, press reports revealed that Trian had taken a $3.5 billion stake in P&G, the largest investment in its history. P&G's stock jumped 3.4% on the news. However, its longer-term performance is underwhelming. Since the start of 2014, P&G shares have risen just 16%, half the increase in the S&P 500. P&G suffers from weak growth and declining profitability. Peltz has not commented on his plans for P&G. Analysts say Peltz may argue that splitting P&G into separate businesses, each specializing in a single category, could be the key to unlocking value. Others note Peltz may well decide to endorse P&G's current course, simply improving its prospects with his formidable guidance.

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How Peltz Can Turn P&G's Tide
" Bloomberg (02/15/17) Banjo, Shelly"

Nelson Peltz, whose Trian Fund Management LP has acquired a holding of more than $3 billion in The Procter & Gamble Co. (PG), should be able to help revitalize the company.  Trian does not appear to have held talks with the company yet, but P&G said it "welcomed the investment."  P&G's shares have been stagnant the past two years; and as the company sold off more than 100 brands to focus on 10 core categories, it has seen a fifth of its annual sales evaporate since 2012.  CEO David Taylor has successfully removed less successful brands such as Covergirl and Duracell and slashed costs—but he has not been able to push the company far enough, fast enough.  Peltz is a natural deal-maker and should have a positive impact.  The company is long overdue for acquisitions that could help jump-start its growth; it has not bought a company since 2012, and its last mega-deal was a $57 billion acquisition of Gillette in 2005.  Peltz also might encourage P&G to break up, separating its household-products business from its personal-care unit.

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Shareholders Seeking Books and Records Must Demonstrate Credible Basis to Infer Wrongdoing
" JDSupra (02/14/17) Fine, Adam; Hefter, Michael; Philp, Ryan"

In a case involving Tesla Motors Inc. (TSLA), the Delaware Court of Chancery recently reaffirmed that shareholders seeking to inspect the books and records of Delaware corporations must demonstrate a credible basis to infer corporate wrongdoing, because accusations based on mere "suspicion and curiosity" are insufficient. Under Section 220 of the Delaware General Corporation Law, shareholders of a Delaware corporation can, in certain circumstances, gain access to records after demonstrating, by a preponderance of the evidence, that there is a credible basis to infer mismanagement or wrongdoing by the corporation's agents. The court stressed that the credible basis test strikes "an appropriate balance between encouraging productive Section 220 actions where there is a reasonable likelihood of wrongdoing while preventing inspections without a factual basis from draining corporate resources." The decision emphasizes the Court of Chancery's gatekeeping function in assessing Section 220 records requests based on alleged corporate wrongdoing. Although shareholders "need not actually prove the wrongdoing itself by a preponderance of the evidence," they must show "a credible basis from which the Court of Chancery can infer there is possible mismanagement that would warrant further investigation." The decision offers corporate defendants a powerful tool in resisting records requests that amount to what the court calls "fishing expedition[s]."

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FTI Consulting's Global Shareholder Activism Map Illustrates the Growth of Activist Investing Across the World
" Mondo Visione (02/15/17)"

In a recently published update to its interactive Global Shareholder Activism Map, FTI Consulting Inc. (FCN) reveals that shareholder activism gained momentum and geographic breadth in the last year. FTI's analysis shows that 342 activism campaigns occurred outside the United States in 2010, compared with 70 in 2010. According to the research, the highest risk for an increase in activism outside the United States was seen in Canada, Australia, and the United Kingdom, which have experienced changing economic factors, including increased global scrutiny of corporate governance standards. Meanwhile, landmark shareholder activism campaigns were seen in South Korea and Japan. "The success of shareholder activism in North America continues to fuel its spread across the globe," said Steven Balet, a managing director and head of corporate governance and activist engagement at FTI Consulting. "These global shareholder activists are not necessarily U.S.-based nor do they necessarily conduct their activism in the U.S. style. They have, however, been increasingly successful in many jurisdictions across Europe, the U.K., and Asia."

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Executive Pay Rebellions Loom
" Financial Times (02/13/17) Marriage, Madison"

At WPP's annual meeting last year, shareholders were not pleased as executives prepared to defend the £70 million payout for CEO Martin Sorrell—the highest award given to any FTSE 100 boss last year.  The shareholder rebellion that followed, which saw more than one-third of shareholders rebuff pay plans, was just one example among the wave of shareholder unrest over rising executive wages around the globe last year. Some of the world's biggest asset managers believe the events of 2016 will be the beginning, rather than the end, of the so-called "shareholder spring" as companies face growing pressure to curb pay plans in the United States and United Kingdom in particular.  According to Manifest data, last year saw the highest number of companies undergo shareholder revolts in the United States and United Kingdom since 2012. BP, Shire, Oracle, and FMC were among the high-profile companies. Things appear to be continuing in the same vein this year: one-third of shareholders at travel group Thomas Cook recently refused to back pay plans, and cigarette maker Imperial Brands has also been forced to amend remuneration plans to avoid upsetting shareholders. Barclays, meanwhile, is proposing to freeze CEO Jes Staley's maximum pay package for the next three years.

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Why Stop at Dodd-Frank? Some Want Trump's Regulatory Overhaul to Go Further
" Wall Street Journal (02/14/17) Rapoport, Michael"

President Donald Trump wants to dismantle the Dodd-Frank regulatory overhaul implemented after the financial crisis, and many companies also want him to take aim at a long-contested provision of the Sarbanes-Oxley Act. Implemented in the wake of the dot-com bust, the provision requires companies to have auditors weigh in on their "internal controls," or the policies and procedures intended to prevent errors or fraud on their financial statements. Companies are required by the rule, Section 404(b), to evaluate whether these controls are effective and have their auditor pass judgment on that assessment. According to shareholder advocates, the rule helps ensure companies are giving accurate numbers to investors. However, critics, including the U.S. Chamber of Commerce, contend that the rule is too costly and burdensome for small companies. John Berlau, a senior fellow at the Competitive Enterprise Institute, says, "I think with the general sort of regulatory skepticism that goes along with the new administration, you're seeing more of a direct focus on 404." Under a coming version of the Financial Choice Act—Republicans' proposed replacement for Dodd-Frank—the Sarbanes-Oxley provision would be relaxed by exempting even more companies from it than had been planned under previous versions of the legislation. The most recent version of the legislation called for raising the threshold under which companies are exempt from the rule to a market capitalization of $250 million, but the coming version of the legislation will boost that threshold to $500 million, according to a memo from U.S. House Financial Services Committee Chairman Jeb Hensarling (R-Texas). The current threshold imposed by Dodd-Frank is a public float under $75 million. Another provision of the proposed Choice Act would extend the exemption from auditor review for emerging-growth companies for an additional five years, to a total of 10 years, if they have annual revenue below $50 million.

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'Overpaid' CEOs a Risk for Investors, Study Finds
" Reuters (02/13/17) Kerber, Ross"

Shareholder group As You Sow released a study on Monday showing that executive pay out of sync with a company's past performance may also herald poor returns.  The group reports that average returns for the 100 S&P 500 companies it previously flagged as having the most problematic pay underperformed the index by 2.9 percentage points over an approximate two-year period ended Jan. 31.  As You Sow identified as "overpaid" various CEOs known for high compensation despite the mixed performance of their companies' shares at the same time.  For example, Discovery Communications Inc. (DISCA) chief David Zaslav received $32.4 million in 2015, according to a proxy filing; but Discovery shares declined 12% during the study period.  "If you have a CEO whose primary interest is increasing his own wealth, that's not going to be good for shareholders," said study lead author Rosanna Landis Weaver.  Despite high executive pay being controversial, investors regularly approve compensation at most big U.S. companies, with boards claiming they have connected it to performance metrics.  To judge if S&P 500 CEOs are overpaid, As You Sow examined factors that raised questions about how a board set compensation and generated a financial prediction of what each CEO might have been paid based on shareholder returns.  Companies with the most discrepancies between their actual and predicted compensation were judged the most overpaid.

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The Growing Importance of Proxies
" CFO (02/17) McCann, David"

Proxy statements continue to evolve, getting longer, providing more disclosure and greater detail, and adding graphics and other visual elements in an effort to enhance transparency around boardroom decisions. The trend emerged after the passage of the Dodd-Frank Act in 2010, which required public companies to submit to annual shareholder advisory say-on-pay votes on the acceptability of their executive compensation programs and include a "compensation discussion and analysis" (CD&A) section in proxies that explain the rationale for the design of such programs. In an effort to mollify shareholders, companies have become increasingly willing to provide more information in proxies than is required. "Proxies are clearly becoming more important, especially considering the rise of shareholder activism and the level of companies' engagement with long-term institutional shareholders," says Dan Marcec, content director for Equilar. According to Equilar, the percentage of S&P 100 companies disclosing in their proxies detailed programs through which they engaged with shareholders rose from 12% in 2012 to 63% in 2016. Over the same period, the percentage of companies that reported changes made as a result of shareholder engagement jumped from 14% to 42%, and the proportion that specifically disclosed the responses they made to say-on-pay votes surged from 17% to 32%. Furthermore, the percentage of companies including a summary at the top of the proxy addressing the most important topics climbed from 39% to 79%, and the percentage that provided a checklist showing the types of executive compensation the company does and does not use increased from 5% to 66%. The survey also found that the percentage of companies using color in their CD&As rose from 48% in 2012 to 77% in 2016. The longest CD&A in 2016 was 18,494 words, while the shortest was 512 words.

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New Code of Corporate Governance for Publicly Listed Companies in the Philippines
" Business Mirror (Philippines) (02/12/17) Patajo-Kapunan, Lorna"

The Code of Corporate Governance for Publicly Listed Companies, which was approved by the Securities and Exchange Commission (SEC) in the Philippines in November, took effect on Jan. 1, and all publicly listed companies are required to submit a new manual on corporate governance to the SEC on or before May 31, 2017. The code defines "corporate governance" as "the system of stewardship and control to guide organizations in fulfilling their long-term economic, moral, legal, and social obligations toward their stakeholders," and it adopts the "Comply or Explain" approach, which combines voluntary compliance with mandatory disclosure. This means companies do not have to comply with the code, but they are required to indicate in their annual corporate governance reports whether they comply with the code provisions, identify any areas of noncompliance, and explain the reasons for noncompliance. The code does not prescribe a "one-size-fits-all" framework, instead giving boards some flexibility in establishing their corporate governance arrangements, with larger companies and financial institutions generally expected to follow most of the provisions and smaller companies able to decide that the cost of some of the provisions outweigh the benefits or are less relevant in their case. The code is arranged into Principles, or high-level statements of corporate governance good practice that apply to all companies; Recommendations, or objective criteria intended to identify the specific features of corporate governance good practice that are recommended for companies operating according to the code; and Explanations, which should be written in plain language and in a clear, complete, objective, and precise manner so that shareholders and other stakeholders can assess the company's governance framework.

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Activist Hedge Funds Poised for 'Interesting' Year
" New York Post (02/10/17) Carleton, English"

Activist hedge funds are expected to have an "interesting" year in 2017, according to a report by eVestment. "Given the apparent desire of leadership in the U.S. to have an influence in capital markets, 2017 should be an interesting year for activist funds," the report stated. Activist-focused strategies were up approximately 1% in January, while the broader hedge fund industry saw returns of about 1.2%. A year ago, activist hedge funds were down approximately 4.3% compared with a negative 2.7% return for the broader hedge fund industry. Boosted by Donald Trump's presidential win, activist strategies ended 2016 up 11.9%, making them the second-best performing strategy behind distressed debt, which was up 12.9%.

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European Investors Warm to Activism
" Financial News (02/08/17) Pritchard, Becky"

European activist investors are following in the footsteps of their U.S. counterparts and becoming more assertive in how they deal with companies. In addition, they are reaping the benefits of changing attitudes among other shareholders. "What we are doing is really creating a European way of doing activism," said Anne-Sophie d'Andlau, co-founder of the French hedge fund Charity Investment Asset Management. "Of course, we are looking at what they are doing in the U.S. and what they have done, and the tactics and all of this, but you have to adapt this to Europe, to the Continent." Research by Activist Investing Annual Review reveals that the number of European companies publicly facing activist demands rose from 72 in 2015 to 97 in 2016. In the United Kingdom, that figure jumped from 27 to 43 over the same period. It used to be that taking a company to court was considered the nuclear option for an activist in Europe, whereas in the United States, hedge fund managers like Carl Icahn and Bill Ackman are known for more upfront approaches. However, European hedge funds have studied the approaches of their U.S. counterparts to see what tactics have worked. Meanwhile, traditional asset managers are now more willing to be vocal critics of company boards and engage with activist investors. According to Scott Hopkins, a partner at Skadden Arps Slate Meagher & Flom, "One of the things that activists have got good at in recent years is leveraging other actors in order to optimize [a situation]."

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