Facing Investor Pressure, Thyssenkrupp Pledges to Refine Strategy
" Reuters (01/19/18) Steitz, Christoph; Käckenhoff, Tom"
Thyssenkrupp CEO Heinrich Hiesinger said Friday the company would review its strategy after a planned merger with India's Tata Steel, fuelling investor hopes for further steps to streamline the sprawling industrial group. Frustrated shareholders, led by Cevian, argue the German elevators-to-submarines maker is too unwieldy and should be broken up further. Hiesinger has already slashed the number of business units, pared down debt, and launched an effort to transform Thyssenkrupp into a group focused on technology and less on the steel business for which it is famous. It agreed to merge its European steel business with that of Tata Steel in September, though this has not stopped investors from seeking more changes. "Naturally Thyssenkrupp will look different with the establishment of the joint venture in the steel area," Hiesinger said at the group's annual general meeting. "We will hone our strategic vision and also adapt our financial targets accordingly." The company will hold an annual strategy discussion in May and more changes to the group's structure could follow if they make sense. Cevian—Thyssenkrupp's second-largest shareholder with an 18% stake—has been the biggest supporter of a further break-up, saying the company had underperformed the market and should be worth twice its current share price. Its co-founder Lars Foerberg this week said Thyssenkrupp's complex structure was the "root cause" of its underperformance, suggesting spin-offs, listings, and a joint venture for the other business areas.
Proxy Advisor: Vote Against J. Alexander's M&A Plan
" Nashville Post (01/18/18) De Lombaerde, Geert"
Investor Mario Cibelli is welcoming Institutional Shareholder Services' recommendation that investors vote against J. Alexander's plan to buy 99 Restaurants. Cibelli has publicly protested the purchase plan, saying it is "ill advised and poorly timed" and calling into question the forecasts used by J. Alexander's to justify the deal. "They saw exactly what we saw with this shareholder-unfriendly transaction," says Cibelli, whose firm, Marathon Partners, owns 6% of J. Alexander's. "We have heard from many shareholders that oppose the deal and are hopeful that the transaction will be voted down." The proxy advisor on Wednesday said the casual-dining chain's plan has a "tenuous strategic rationale" and added that its board "does not appear to have thoroughly explored other alternatives." As proposed, the acquisition of 99 would cede control of J. Alexander's to Cannae Holdings, a newly independent company that had been under the umbrella of Fidelity National Financial—the company that acquired J. Alexander's in 2012 and spun it out again three years later. In its report, the proxy advisor said J. Alexander's six board members can not be considered truly independent in their dealings with Fidelity, the Cannae-controlled entity that owns 99. The firm also questioned J. Alexander's projections.
Breakingviews—Nestlé Fashions a More Activist-Friendly Board
" Reuters (01/19/18) Ryan, Carol"
Observers indicate that Nestlé (NSRGY) is making its board more activist-friendly, with the company poised to appoint Adidas CEO Kasper Rorsted and Inditex CEO Pablo Isla to the board. Their e-commerce expertise will help steer efforts to sell more directly to consumers, and they also might help pre-empt any plan by Third Point's Dan Loeb to install his own candidates, according to observers. Rorsted and Isla would be joined by Kimberly Ross, former CFO of Baker Hughes (BHGE). The trio has a strong track record for rewarding investors, with Inditex and Baker Hughes delivering total shareholder returns of 46% and 74%, respectively, over the past five years and Adidas shareholders up 178% in the same period, according to data from Eikon. Loeb, whose Third Point fund has a $3.5 billion stake in Nestlé, could still put forward his own board nominee.
Lowe's Bows to Shareholder Pressure, Appoints 3 New Directors to Board
" Financial Times (01/19/18) Yuk, Pan Kwan"
Lowe's (LOW) announced Friday it has added two new independent directors to its board and will nominate another for election following "constructive" talks with shareholder DE Shaw. The move expands the size of Lowe's board to 13 directors, 12 of whom are independent. "We appreciate Lowe's collaborative approach and are pleased to have worked together to enhance the company's board of directors," said Quentin Koffey, a portfolio manager at DE Shaw. "Lowe's is an excellent company with tremendous value creation opportunities in front of it, and we believe the new directors will be significant assets to the board. We believe the refreshed board and the management team are committed to achieving outstanding performance and maximising shareholder value." David Batchelder, co-founder of Relational Investors, and Lisa Wardell, CEO of Adtalem Global Education, will join the company's board on March 22. Lowe's will also nominate Brian Rogers, chairman of T Rowe Price, for board election at its annual shareholder meeting. The U.S. home improvement retailer's shares jumped to a record high last week following reports that DE Shaw had acquired a stake in the company.
Thyssenkrupp Shareholder Says Simpler Firm Could Double
" Bloomberg (01/19/18) Biesheuvel, Thomas; Henning, Eyk; Schatzker, Erik"
Cevian Capital, Thyssenkrupp AG's second-largest shareholder, expects the German steelmaker will fix an overly complicated structure that is responsible for poor investor returns. The stock could double if the company was not so complex, Lars Forberg, a managing partner at Cevian, said in an interview on Bloomberg Television. Thyssenkrupp is an oversized conglomerate that needs to restructure, he added. "Something is not working, and the root cause of that problem is the structure of the group," Forberg said. We are expecting a "very thorough review that will lead to a very thorough change." Thyssenkrupp CEO Heinrich Hiesinger expressed surprise by Cevian's public criticism, telling shareholders at an annual general meeting Friday that the company has enjoyed "constructive dialog" with the investor. Hiesinger said Thyssenkrupp is heading in the right direction toward a more diversified industrial group. The company will have a strategy dialog in May where it will refine its strategic vision as it prepares to exit steel. Supervisory Board Chairman Ulrich Lehner pledged support for Hiesinger's strategic overhaul, adding: "A process of change doesn't happen overnight." Union Investment fund manager Ingo Speich, one of the top 20 shareholders, argued that returns have been "disastrous," with the stock far underperforming the sector since Hiesinger took charge in 2011. Speich urged the CEO to consider all options for the businesses, including more joint ventures or selling operations. Cevian, which Forberg said engages constructively with Thyssenkrupp, holds a seat on the company's board and will continue speaking with management and participate in the strategy dialog this year.
Myer CFO Exits, 50 Head Office Staff to Go in Shake-Up
" Australian Business Review (01/19/18) Woodhill, Samantha"
Under intense pressure from declining sales and a shareholder revolt led by Solomon Lew, Myer has announced a management shake-up. In addition to shedding 50 head office staff, CFO Grant Devonport will be replaced with former Spotless CFO Nigel Chadwick, effective Jan. 29. The retailer also has promoted Chief Digital and Data Officer Mark Cripsey to the newly created role of COO, with responsibility for an integrated business unit, including the store network, the online business, data analytics, and marketing. "The business needs to be a lot more integrated and we need to pull together the digital and the physical environments so that they operate seamlessly," said CEO Richard Umbers. The management overhaul follows a decision by Chairman Gary Hounsell in November to undertake a review of all aspects of the business. "Myer is over two years into its five-year turnaround and this announcement reflects the board and management's heightened sense of urgency in delivering shareholder value," he said. Lew led a move to reject Myer's remuneration report at its annual general meeting in November, causing a "first strike" against the company.
Nestlé Looks to Shake Up Board Amid Shareholder Pressure
" Financial Times (01/18/18) Daneshkhu, Scheherazade"
Nestlé, bowing to pressure from Dan Loeb, announced Thursday it is renovating its 14-member board by nominating three new independent directors. Loeb's Third Point in June blasted the world's largest food group as being "stuck in its old ways" and accused it of lagging behind competitors. The hedge fund said it invested $3.5 billion in the company. Third Point is known to have thought Nestlé would benefit from having more directors from consumer industries on its board. The majority of Nestlé's board directors are from finance and insurance, or from non-governmental organizations and academia. Nestlé declared Thursday that it had nominated two heads of consumer companies: Pablo Isla, CEO of Inditex, the Spanish owner of the Zara retail chain; and Kasper Rorsted, CEO of Adidas, the sportswear group that used to head Henkel, the German consumer goods group. Nestlé also nominated Kimberly Ross, a former finance director for cosmetics group Avon (AVP) and Dutch retailer Royal Ahold. The nominees will stand for election at the annual meeting in April when three current directors are slated to step down. Paul Bulcke, Nestlé's chairman, said all of its nominees bring a "unique depth of experience and expertise" that will be directly relevant to the company.
Whitbread Boss: Now Is Not the Right Time to Spin Off Costa Coffee
" The Telegraph (United Kingdom) (01/18/18) Gerrard, Bradley; Torrance, Jack"
The current structure of Whitbread fits the purpose of the U.K. leisure giant, according to Alison Brittain, chief executive of the company. Sachem Head, which acquired a 3.4% stake in Whitbread last month, has called for a division of the company. Whitbread could be broken up via the sale of coffee chain Costa Coffee, but Brittain compares such a move to selling a house half-way through a renovation project. Brittain maintains that Whitbread is only part way through its transformation plan. With Costa, Whitbread is moving toward more sites at travel hubs and drive thrus, and is looking to expand in China, which should "add great shareholder value," according to Brittain. Retail has struggled of late for Whitbread, but Brittain says the company continually stress-tests the business. Whitbread talks regularly to all of its shareholders, and that would not exclude [Sachem Head]," according to Brittain. The company plans to speak with all of its major shareholders next month as part of a scheduled roadshow, and is expected to meet with Sachem Head.
Major Shareholder Demands Xerox Disclose Agreement With Fuji
" Reuters (01/17/18) Rai, Sonam; Aripaka, Pushkala; S, Sangameswaran"
Darwin Deason, the third-largest shareholder in Xerox Corp. (XRX), has called on the company to make public its joint venture agreement with Japan's Fujifilm Holdings Corp., arguing that U.S. securities laws require it. Xerox and Fujifilm have a 50-year-old copier joint venture focusing on the Asia Pacific region, leaving Xerox to cover the rest of the world. In a Jan. 17 letter, Deason urged Xerox's board to hire new and independent advisers to examine the photocopier company's strategic options with Fujifilm. Deason said the options "including the potential termination of what I suspect but am unable to yet confirm is a one-sided value destroying agreement disfavoring Xerox." The shareholder said he had written to the board last year regarding the copier maker's relationship with Fuji and requested relevant documents, but that Xerox failed to provide them. Xerox responded that Deason's claims are "false and misleading," adding that: "The Xerox board of directors and management are comfortable with our disclosure and with the strategic direction in which the company is heading." Xerox, under pressure to discover new growth sources amid falling demand for its printer and copier business, was reported last week to be discussing a deal with the Japanese camera maker that could include a change in control of Xerox. Xerox has also been agitated by Carl Icahn, its biggest shareholder, who said last month that the company "desperately" needed new leadership as it was slow to launch new products and boost revenue.
Sachem Head Pushes Whitbread to Consider Break-up - Sources
" Reuters (01/17/18) Martin, Ben"
Sachem Head has requested that Whitbread think about divesting its Costa Coffee chain from its hotels and restaurant businesses, according to sources. Sachem Head last month revealed a 3.4% stake in Whitbread, sending the company's shares up more than 7% on the day amid speculation Sachem Head would call to break up the company. The U.S. hedge fund wants Whitbread's management team, led by CEO Alison Brittain, to examine a divestiture as a way to increase the value of its individual businesses, the sources said. Whitbread's current market capitalization is about 7.2 billion pounds. Analysts at Barclays said in a note dated Jan. 3 that the "most 'obvious' step" for Whitbread would be to sell Costa, should Brittain decide to restructure the company. Whitbread has more than 2,300 Costa stores in the United Kingdom, and it also has almost 7,000 Costa Express machines.
Investors Intensify Pressure on Thyssenkrupp Boss Before AGM
" Reuters (01/17/18) Steitz, Christoph; Kackenhoff, Tom"
Cevian is leading renewed calls for structural change at Thyssenkrupp ahead of the steelmaker's annual general meeting. Lars Foerberg, co-founder of Cevian, told Reuters that the root cause of Thyssenkrupp's underperformance is its complex structure. Cevian is Thyssenkrupp's second-largest shareholder after the Alfried Krupp von Bohlen and Halbach Foundation and holds a stake of about 18%. "Management and board need to address the (complex) structure so that each and every business area gets a chance to thrive," Foerberg said, adding a new structure could be achieved via spinning off or listing businesses or creating joint ventures. Shareholders welcomed Thyssenkrupp's deal with India's Tata Steel in September to combine their European steel activities, but have questioned whether producing everything from steel and car parts to submarines and elevators is still the right set-up for Thyssenkrupp. Ingo Speich, fund manager at Union Investment, one of Thyssenkrupp's top 20 shareholders, told German newspaper WAZ that the corporate overhaul has to continue. Thomas Hechtfischer, managing director of shareholder advisory group DSW, which usually represents 1% of Thyssenkrupp's voting rights at its annual general meeting, said it is not so far-fetched of Cevian to suggest a stock market listing. The renewed calls for structural change put more pressure on CEO Heinrich Hiesinger before Thyssenkrupp's annual general meeting on Jan. 19.
Rolls-Royce to Exit Commercial Marine Business in Restructuring -- Update
" Dow Jones Newswires (01/17/18) Wall, Robert"
British aircraft-engine maker Rolls-Royce Holdings is considering exiting the commercial marine business, and focusing on its commercial-aerospace activities, which generate most sales and profit, as well as its defense and power-systems businesses. The company said Wednesday that it has launched a strategic review over the future of its commercial marine business, which had GBP1.1 billion ($1.5 billion) in sales in 2016 but posted a GBP27 million loss amid slack demand. The move would mark the highest-profile step by CEO Warren East to boost Rolls-Royce's profitability since taking over the company in 2015 following several profit warnings. Rolls-Royce, which is facing pressure to improve its financial performance, has made large layoffs, overhauled management, and closed some sites. Investor ValueAct Capital Management in 2016 won a seat on the company's board after becoming its largest shareholder. As part of the deal to gain board representation, ValueAct agreed not to push for changes in Rolls-Royce's strategy or publicly challenge management for about two years. That agreement runs until the next shareholder meeting expected in May. East has previously promised investors that the company will generate at least GBP1 billion in cash by 2020.
Poisoned Pill: Avis Tumbles Following Efforts to Block Investor, Guidance
" Barron's (01/16/18) Alpert, Bill"
Avis Budget Group (CAR) has adopted a poison pill rights plan to block the demands of its largest shareholder, SRS Investment Management. This marks the second time the car rental company has adopted a poison pill to head off the New York-based hedge fund, which owns 15% of Avis shares and has derivatives worth another 16% of Avis' shares outstanding. In January 2017, Avis adopted a similar poison pill plan—which would trigger a highly dilutive share issuance—to ward off a hostile takeover attempt. Avis ended last year's poison pill in May 2017, when SRS agreed to work with management under an agreement that expired this week. In announcing the new poison pill on Monday, Avis said it had offered SRS another board seat, in addition to the two that SRS already controls, but claims that the fund demanded the ability to further increase its voting power, as well as a veto over appointments to Avis's board and management. Investors may be frustrated that the new poison pill limits the firm's clout over Avis management. Avis on Tuesday preannounced preliminary results for the just-ended 2017 year, roughly in line with expectations. Meanwhile, Avis CEO Larry De Shon warned that Avis anticipates continued headwinds in 2018, including "rising interest rates and other items." Rental car shares fell Tuesday: shares of Avis are down 11% at $43.50, while those of rival Hertz Global Holdings (HTZ) are down 13% to $21.35.
BlackRock's Message: Contribute to Society, or Risk Losing Our Support
" New York Times (01/15/18) Sorkin, Andrew Ross"
Companies need to make profits as well as contribute to society if they want to receive the support of BlackRock (BLK), according to a letter that the chief executives of the world's largest public companies received Tuesday from Laurence D. Fink, founder and CEO of the investment firm. Governments are failing to prepare for the future, and society is increasingly turning to the private sector for answers to broader societal challenges, writes Fink. As the largest investor in the world, BlackRock has the clout to make this kind of demand, which may be a watershed moment on Wall Street, one that raises all sorts of questions about the very nature of capitalism. Fink, who is adding staff to help monitor how companies respond, contends that if a company doesn't engage with the community and have a sense of purpose "it will ultimately lose the license to operate from key stakeholders." Jeffrey Sonnenfeld, a senior associate dean at the Yale School of Management and an expert on corporate leadership, says, "It is huge for an institutional investor to take this position across its portfolio." Until recently, companies like BlackRock have traditionally been passive investors and have done little to pressure the leaders of companies they invested in. In a surprising twist, even activist investors are taking up social causes. Jana Partners and Calstrs recently wrote a letter to Apple (AAPL) demanding that it focus more on the detrimental effects its products may have on children.
Elliott Urges Changes to Bezeq Telecom Board
" Reuters (01/16/18) Cohen, Tova"
Elliott has unveiled a 4.8% stake in Bezeq Israel Telecom and is calling for an overhaul of the board. In a letter to Bezeq's interim chairman David Granot on Tuesday, Elliott Advisors (UK) Ltd. demanded a restructuring of Eurocom Group—the debt-laden holding group that controls Bezeq—and the immediate resignation of some Bezeq board members. "Moreover, we believe that the board of Bezeq, as currently composed, is no longer fit for purpose," Elliott wrote. "A number of the directors are subject both to investigations of serious financial misconduct at Bezeq and/or are affiliated with Eurocom, which is subject to legal actions by its creditors." Israel's securities watchdog has been investigating Bezeq over accusations that former chairman Shaul Elovitch, who owns Eurocom, had interfered in the merger in 2015 between Bezeq and its satellite TV unit YES for personal financial gain. Elovitch has denied any wrongdoing. Elliott proposed the immediate replacement of all Bezeq directors implicated in the Israel Securities Authority's investigation and those affiliated with Eurocom. On Monday, Eurocom petitioned a Tel Aviv court to allow a debt settlement that would give it a new controlling shareholder. Elliott argued that any directors nominated by the new controlling shareholder should be chosen according to their relevant experience and their clean records, adding that major Bezeq shareholders should be consulted in the process. Elliott noted that independent shareholders own 73.7% of Bezeq. "We ... believe there is significant value to be unlocked if the right steps are taken to improve the company's corporate governance," the letter stated.
GKN's Largest Active Investor Urges Melrose Talks
" Financial Times (01/15/18) Hollinger, Peggy"
Vulcan Value Partners, GKN's biggest active shareholder, is urging the engineering firm to open talks with Melrose Industries after the board spurned an unsolicited £7 billion cash and shares offer from the industrial turnaround specialist last week. The asset manager—which GKN says owns a roughly 4% stake—argues that although the transformation and demerger plans unveiled by the board last week seemed practical, they were not enough to justify refusing talks with Melrose. Melrose made its offer just over a week ago, prompting GKN to accelerate the unveiling of its transformation plan and management changes, but it has not yet launched a formal bid. However, Vulcan Value Partners' push to get GKN's board to talk to Melrose does not mean it is ready to accept the offer as is. "We believe the Melrose offer does not reflect the intrinsic value of GKN, and this position is supported by the current market price of GKN," said C.T. Fitzpatrick, founder and CEO of Vulcan Value Partners. The position of GKN's largest active investor represents a setback to the board, as the company launches its campaign this week to persuade shareholders that a new management team can deliver long-awaited margin and cash flow improvements. The plan includes an eventual split of its aerospace and automotive businesses, a move long sought by some shareholders. BlackRock has the biggest total shareholding at 6% but just 3.2% is actively held, according to GKN. On Monday, Elliott disclosed about a 1.7% position in GKN via contracts for difference.
D.E. Shaw Builds Stake in Lowe's
" Bloomberg (01/12/18) Hammond, Ed; Deveau, Scott"
D.E. Shaw & Co. reportedly has acquired an active stake in U.S. home retailer Lowe's Cos. (LOW). Although the investor's specific plans for the investment could not immediately be learned, the firm does plan to push for changes at Lowe's, according to sources. Lowe's shares rose as much as 4.5%, while rival Home Depot Inc. (HD) rose as much as 2.3%. Lowe's lags behind Home Depot in sales growth, and has struggled to pull ahead of its bigger competitor. Both chains are seeking to avoid the slump that has plagued the retail industry. While construction needs after Hurricanes Harvey and Irma helped improve Lowe's third-quarter same-store sales, the company left its full-year profit forecast unchanged, missing Wall Street estimates. D.E. Shaw has launched a new activist platform under portfolio manager Quentin Koffey, who joined the firm from Elliott Management Corp. in June. D.E. Shaw disclosed a 0.12% stake in the company in a November filing. In October, D.E. Shaw unveiled a position in EQT Corp. (EQT) and pushed the company to spin out its midstream assets, among other initiatives to boost shareholder value.
Citigroup Bows to Investor and Discloses Gender Pay Data
" Financial Times (01/15/18) Noonan, Laura"
Citigroup Inc. (C) will increase compensation for women and minorities to bridge pay gaps in the United States, the United Kingdom, and Germany, as part of its annual pay process this year. Citi said it had conducted a survey in the three countries, where it found that women and minorities are paid slightly less than men and non-minorities, respectively. Compensation would be raised based on the pay gaps identified in the survey. Arjuna Capital, which had waged a disclosure campaign, on Jan. 15 declared victory and dropped a resolution for the company's next shareholder meeting that had called for Citi to be more transparent and to produce policies to reduce the gap. "Citigroup is stepping into a leadership role on the gender pay gap that we have not seen from any of its U.S. financial peers," said Natasha Lamb, managing partner at Arjuna. She characterized the move as "a tipping point" for Wall Street banks.
HomeStreet in Seattle Rejects Shareholder Request for Board Seat
" American Banker (01/11/18) Davis, Paul"
HomeStreet (HMST) in Seattle has rebuffed Blue Lion Capital's demand for a board seat. In a Jan. 11 letter to shareholders, the $6.8 billion-asset company said it voted against the request from Charles Griege Jr., a managing partner at Blue Lion, following a unanimous recommendation from its human resources and corporate governance committees. Blue Lion—which owns a roughly 6% stake in HomeStreet—has criticized the company's reliance on mortgages and bank acquisitions, arguing this strategy has led to underperformance. HomeStreet has countered those claims, and defended its position in its letter to shareholders. "The board has sought to work constructively with" Blue Lion, meeting with Griege several times, wrote Mark Mason, HomeStreet's chairman, president, and CEO. Griege's request was spurned after he completed a questionnaire and participated in a Jan. 8 interview with the company's recommending committee and lead independent director. "After a careful assessment of ... Griege's analysis of our business strategy, however, the board concluded the issues of greatest concern regarding the operating efficiency of our bank are best addressed with the company's current strategic plan," Mason wrote.
Xerox Is in Talks for a Deal With Japan's Fujifilm
" Wall Street Journal (01/10/18) Benoit, David; Cimilluca, Dana; Mattioli, Dana"
Sources say Xerox Corp. (XRX) is in talks to potentially strike a major deal with Japan's Fujifilm Holdings Corp. that may or may not include a change of control of Xerox. However, the sources note that a full takeover of Xerox is not on the table. The companies already have a joint venture, Fuji Xerox, which sells copiers and printers in the Asia-Pacific region. The talks come as Xerox faces a second fight with investor Carl Icahn, who has a 9.7% stake in the company, over its board of directors and CEO Jeff Jacobson. Last month, Icahn canceled a previous agreement with the company by pulling off his board representative to campaign for more board seats. He has warned that Xerox is at risk of losing ground it staked out with decades of research and development and worries that it could suffer a fate similar to that of Eastman Kodak Co. (KODK), which emerged a year after filing for bankruptcy in 2012 having sold assets and shed unprofitable business lines.
Nuance Communications Weighs Options for Automotive Unit
" Bloomberg (01/09/18) Porter, Kiel; Deveau, Scott"
Nuance Communications Inc. (NUAN) has hired investment bank Evercore Inc. to help examine strategic options for its automotive business, according to sources. The process could include selling part or all of the business, the sources said. Nuance could receive as much as $1.5 billion in a sale or retain the business, they said. Nuance has come under pressure from asset manager Neuberger Berman Group to remove Chairman and CEO Paul Ricci. The group's proposals in a December letter included appointing a new independent interim chairman and replacing the chairman of its governance committee. Also in December, Ivory Investment Management, which said it owned a 1.6% stake in Nuance, pushed the company to cut its affiliation with Ricci and name a successor. On Jan. 8, Fairpointe Capital voiced concerns about Nuance's board and CEO succession. Carl Icahn, who had previously engaged the company, sold his stake in it last year.
Facebook Investors Say They Can Help Fix the Company
" Quartz (01/08/18) Kozlowska, Hanna"
Investor Trillium Asset Management submitted a shareholder proposal with Facebook (FB) in October to establish a risk oversight committee within Facebook's board of directors that could include experts in journalism, ethics, or psychology. Trillium filed the proposal to create a separate risk committee, which would address issues ranging from fake news to social media addiction, on behalf of a client, the Park Foundation. The non-profit holds about $3 million in Facebook shares, and Trillium as a whole holds about $13.5 million, giving the two entities only a nominal share of the votes. Trillium expects the measure to be included in the company's proxy statement for vote at the company's annual meeting around early June. Facebook normally urges shareholders to vote against proposals from shareholders. In opposing past shareholder proposals, CEO and founder Mark Zuckerberg has wielded the decision-making clout—he holds more than 53% of the voting power in the company, according to the company's latest proxy statement. Facebook will not be able to ignore the proposal if outside shareholders give it 15-20% of the vote, says Jonas Kron, director of shareholder advocacy at Trillium. In a statement, the investor cited problems such as Russia meddling in U.S. elections, terrorists using Facebook to incite violence, and discriminatory advertising algorithms.
Seeking Enlightenment, Corporate Directors Embark on Tech Pilgrimages
" Wall Street Journal (01/08/18) Nash, Kim S."
At the annual CES trade show in Las Vegas this week, a group of 40 board members from companies in automotive, retail, and other industries have signed up for a guided tour to determine the implications of new technology for corporate governance. The tour was coordinated by the National Association of Corporate Directors (NACD) and is one of several field trips directors are taking to improve their understanding of technology’s implications in business. For board members in attendance, NACD President and CEO Peter Gleason states, scheduled stops among the approximately 3,900 exhibitors will expose them to products in artificial intelligence, biometrics, and more. Gleason commented, "We've got to have directors thinking about disruption as a constant." That includes both thinking about how information technology can bring in new revenue and how firms can guard against cybersecurity attacks, he added.
Troubled Babcock & Wilcox Negotiates Truce With Investor
" Charlotte Business Journal (01/09/18) Downey, John"
Babcock & Wilcox Enterprises (BW) has agreed to immediately appoint three new directors to its board in a deal with Vintage Capital Management, its largest shareholder. The investor reportedly spent about $20 million last week to buy a 14.9% stake in the energy engineering and manufacturing company. Vintage and Managing Partner Brian Kahn said in regulatory filings that the purpose of the purchase was to force changes in the "business strategy or prospects" of B&W or "the sale or merger" of the company. On Jan. 3, B&W's board expanded itself from seven members to 10, appointing Kahn and two allies to the new seats. In return, Vintage "has agreed that it will not nominate or recommend for nomination any person for election to the board, (or) submit any proposal for consideration at, or bring any other business before, a shareholder meeting" until the 2019 meeting, according to a regulatory filing. It also says Vintage will not engage in proxy solicitation or other activities "regarding any merger, acquisition, recapitalization, restructuring, disposition or other business combination" for B&W. The company has also faced pressure from Viex Capital Management, which acquired a 6.4% stake in B&W in October and urged management to develop a plan for improving its operations and shareholder returns by November. In response, B&W CEO Jim Ferland announced measures aimed at saving $45 million in annual operating costs.
Kingsgate Staves Off Metal Tiger As Board Spill Attempt Defeated
" Australian Financial Review (01/09/18) Wiggins, Jenny; Ker, Peter"
Kingsgate Consolidated's board narrowly survived an ouster at a bitter extraordinary general meeting on Tuesday, with many investors continuing to demand an overhaul. Metal Tiger, a British shareholder with an 8.5% stake in the Australian gold mining group, called for a board shakeup in November with the goal of ousting three current directors and adding five new ones. All resolutions to remove and install directors were rebuffed on Tuesday, but some failed by narrow margins with 45% of shareholders in favor of ousting executive chairman Ross Smyth-Kirk and independent director Sharon Skeggs. In addition, 45% voted in favor of adding two of Metal Tiger's nominees, including former Dupont Australia CEO and serial corporate board director Richard Warburton. Smyth-Kirk said after the meeting that the company would "look at" board renewal. The head of Metal Tiger, Michael McNeilly, disagrees with the way Kingsgate has handled a dispute over its Chatree gold mine, believing the company should negotiate with the Thai government rather than spend years in arbitration. Metal Tiger also wants to bring in Thai investors and may consider a future listing of the mine on the Thai stock exchange.
Broadcom Turns Focus to Shareholders in Bid for Qualcomm
" eWeek (01/08/18) Burt, Jeffrey"
Broadcom (AVGO) is taking its $105 billion bid for Qualcomm (QCOM) directly to the chipmaker's shareholders, urging them to pressure the company to negotiate a deal. In a letter sent with other proxy materials Jan. 5 to Qualcomm investors, Broadcom President and CEO Hock Tan argued that his company's offer for Qualcomm would be a financial boon to shareholders and urged them to vote for 11 Broadcom-backed candidates for Qualcomm's board at the annual meeting on March 6. Qualcomm directors have spurned Broadcom's unsolicited bid, saying it greatly undervalues their company, and last month declared they would not nominate Broadcom's slate of 11 board candidates. However, in his letter, Tan said Qualcomm investors and users want executives to speak with Broadcom. "…we have spoken with many Qualcomm stockholders and customers, and we have heard their desire for Qualcomm to engage with us regarding our compelling proposal," he wrote. Should shareholders back Broadcom's candidates, those 11 would reappoint three existing Qualcomm directors. The company also is attempting to buy chipmaker NXP (NXPI) for $38 billion. Qualcomm officials had hoped that deal would have closed last week, but it has been held up by regulatory challenges. In addition, Elliott Management has been agitating Qualcomm to sweeten its bid for NXP. Broadcom officials have doggedly continued to pursue Qualcomm despite rejection from its executives, saying they will buy the company with or without the NXP deal closing.
Wall Street Fighters, Do-Gooders—and Sting—Converge in New Jana Fund
" Wall Street Journal (01/07/18) Benoit, David"
Jana Partners LLC plans to launch the Jana Impact Capital fund this year to invest in companies the hedge fund believes are good bets but could do better for the world. The fund's board of advisers includes musician Sting and others who have a track record of pressuring companies on environmental, social, and governance issues. Jana's presence, coupled with that of Sting, is expected to lend more legitimacy to socially responsible investing. Jana's first endeavor on this front is a partnership with the California Teachers' Retirement System to push Apple Inc. (AAPL) to address concerns about teenage iPhone addiction. "We still plan on finding good investments, but they will also be companies that can enhance and protect long-term value by focusing on the well-being of the public, our economy, and our society, all of which are inextricably linked with long-term returns," said Jana partner Charles Penner. Outside of the new fund, Jana will continue to push for board changes at companies, among other moves.
Tenet Healthcare Increases Job Cuts
" Wall Street Journal (01/08/18) Evans, Melanie"
Tenet Healthcare Corp. (THC), under pressure from shareholders, announced Monday it is ramping up its cost-cutting efforts without waiting to replace its CEO. Since longtime Tenet CEO Trevor Fetter left in October, Tenet has revealed plans to slash jobs and squeeze $250 million from its costs, and announced the possible sale of one of its three business segments. On Monday, the company said it was increasing the number of job cuts to 2,000, or roughly 2% of its workforce, from the 1,300 it had previously announced. "I am not a caretaker," interim CEO Ronald Rittenmeyer said in an interview. "My objective is to clearly reshape the company so that we are more effective, more efficient, more focused on patient care and doing what we're supposed to do to return to our shareholders the right kind of value," he said. The search for Fetter's successor continues, said Rittenmeyer, who was also named Tenet's executive chairman late this summer. The shake-up followed a move in August by Tenet shareholder Glenview Capital Management LLC to terminate a standstill agreement that prevented Glenview from launching a proxy fight. The next month, media reported the company was exploring strategic options, including a possible sale of the company. Tenet announced in December it is exploring the sale of Conifer Health Solutions, which could raise cash to help lower Tenet's nearly $15 billion in debt. Asked if Tenet was exploring the sale of any other assets, Rittenmeyer said that, as a public company, Tenet is "for sale in the marketplace every single day. At this point, I would say that we're very focused on providing our shareholders the best possible return in the quickest amount of time."
Acorda Therapeutics Exploring a Potential Sale
" Wall Street Journal (01/05/18) Mattioli, Dana"
Biotechnology company Acorda Therapeutics Inc. (ACOR) reportedly is exploring a possible sale, bowing to calls from Scopia Capital Management LP. The process is at an early stage and it is possible Acorda will choose not to proceed with a formal auction. Acorda, which has faced some difficulties lately, had a market value of $970 million as of Friday afternoon. The biotech has been facing the threat of generic competition for its main product, multiple-sclerosis drug Ampyra, since a federal court invalidated several important patents early last year. It also recently ended development of a Parkinson's drug after reporting five deaths in treatment studies. The company has made efforts to conserve spending, including a restructuring to slash 20% of jobs, while waiting on its most advanced drugs in development to succeed. In August, Scopia penned a letter to Acorda's board urging it to launch a sales process and find an owner that could help develop its Parkinson's treatment. The hedge fund owns an 18% stake after first investing in 2015. Acorda recently adopted a poison pill, a common tactic for a company seeking to foil an unwanted takeover.
Canada: Glass Lewis' 2018 Canada Policy Guidelines On Proxy Advice
" Mondaq (01/05/18) Riley, Victoria"
Proxy voting firm Glass Lewis recently unveiled its 2018 Policy Guidelines for Proxy Advice in Canada, which contains three major changes from the previous year's report related to board gender diversity, virtual shareholder meetings, and proxy access. First, Glass Lewis this year will not make voting recommendations solely on the basis of board diversity. However, starting in 2019, Glass Lewis says it will typically recommend voting against the nominating committee chair of a board that has no female members or that has not adopted a formal written gender diversity policy. Second, Glass Lewis believes virtual-only meetings could potentially prevent shareholders from meaningfully communicating with the company's management; but a "hybrid meeting" may encourage participation of shareholders who are unable to attend in person. Beginning in 2019, Glass Lewis plans to generally recommend voting against governance committee members where the board is planning—and does not provide disclosure—to hold a virtual-only meeting. In 2018, Glass Lewis will study Canada's regulatory landscape to determine whether existing proxy access rights are sufficient or preferable over U.S.-style proxy access rights, which a number of shareholder proposals have requested at Canadian companies. In situations where Glass Lewis believes the current laws, policies, or regulations either provide shareholders with sufficient proxy access rights or would prevent a company's adoption of the requested provision, it will recommend that shareholders vote against such U.S.-style proposals.
Envision Healthcare Provides Business & Governance Update
" Business Wire (01/04/18)"
Envision Healthcare Corp. (EVHC) on Thursday announced moves to enhance corporate governance, including destaggering the board and allowing proxy access. Envision's board plans to submit a proposal to shareholders at the 2018 annual meeting to amend its charter to allow for annual director elections. If approved, directors voted in at this year's meeting will be elected to a three-year term, and beginning with the company's 2019 annual meeting, directors whose terms expire at each annual meeting would be elected for a one-year term. Thus, by the company's 2021 annual meeting and after, the entire board would be elected annually. In addition, the board intends to amend its bylaws before the 2018 annual meeting to allow proxy access. This will allow a shareholder or group of up to 20 shareholders owning 3% or more of the company's outstanding common stock for at least three years to nominate a limited number of director candidates. "These steps to modify and enhance our governance are reflective of our conversations with shareholders and consistent with our commitment to adopt corporate governance best practices," said Envision Chairman William A. Sanger. The board has also appointed James D. Sheldon as lead independent director, effective immediately, amid an ongoing review of strategic alternatives.
Whitbread Picks Former ITV Boss Adam Crozier as New Chairman
" Financial Times (01/04/18) Ahmed, Murad"
Whitbread—the owner of Premier Inn and Costa Coffee—announced Thursday that veteran executive Adam Crozier will become the company's new chairman, replacing Richard Baker when he retires in February. Crozier has an impressive track record spanning British business, having previously served as CEO of ITV, the Royal Mail, the Football Association, and Saatchi and Saatchi. Crozier has been a senior independent director on Whitbread's board since April last year. In his new role, Crozier will be faced with demands to break up the company. In December, it emerged that New York-based investor Sachem Head had acquired a position worth 3.4% of the company's voting rights. Analysts at Barclays said at the time that the two most likely avenues for Sachem Head to pursue were a spinoff of Costa, and a sale and leaseback of assets. Crozier said Thursday, however, that he backed the strategy set out by CEO Alison Brittain, indicating continuity at the top. For Costa Coffee, this includes introducing finer blends in its coffee shops to attract new customers, the introduction of self-service "express" machines in locations throughout the U.K., and attempting to break into new markets such as China. For its Premier Inn chain of hotels, it includes a renovation plan for its U.K. venues and continuing with steady expansion internationally.
Avaya CIO Joins Akamai, Seizing on 'a Dream Opportunity'
" Boston Business Journal (01/04/18) O'Brien, Kelly J."
Akamai Technologies Inc. (AKAM) has named Fari Ebrahimi—previously the chief information officer of Avaya (AV)—as its new CIO. The management shakeup comes a few weeks after Elliott Management disclosed a significant stake in Akamai, although there is no evidence that the hedge fund influenced the move. Akamai did not reveal how long the search for a new CIO has been underway, but called the process a "planned transition." Ebrahimi has been at Avaya—a California-based maker of corporate communication infrastructure—since 2013, and previously worked as an IT executive at Verizon Communications (VZ) for over a decade. "CIOs have the opportunity to be a change agent," Ebrahimi stated. "In Akamai's case, they are already extremely successful, and I have the opportunity to leverage the company's own technologies to further propel and enable transformation and growth. That is a dream opportunity for a CIO." Cambridge-based Akamai, which says it delivers up to 30% of global internet traffic through its international network of servers, is one of the state's largest tech companies, with a market valuation over $11 billion. However, Akamai has struggled in recent years as the largest customers of its content delivery business have begun to build their own in-house delivery networks. Revenue for the company's Media Delivery Solutions segment fell 9.4% to $787 million from 2015 to 2016.
Casey's Comments on Letter from JCP Shareholder Group
" Business Wire (01/03/18)"
Casey's General Stores, Inc. (CASY) responded Wednesday to a letter from JCP Investment Management, LLC, BLR Partners LP, and Joshua E. Schechter, which together own a roughly 1% stake in the company. Terry Handley, Casey's President and CEO, noted that the company met with representatives from JCP this past summer. However, during those talks the shareholders did not raise their suggestions that the company explore strategic alternatives, "and there has been no substantive engagement with them since that time," he said. Nevertheless, the board will thoroughly review the shareholders' letter. Casey's has a strong history of delivering value for shareholders: the company's 5-year total shareholder returns of 121% exceed that of the S&P 500 index (108%) and the S&P Retail index (46%) over the same period. Hadley noted the company is focused on delivering long-term value for shareholders, citing "new initiatives to accelerate same-store growth and returning cash to shareholders through share repurchases and a steadily increasing dividend."
Howard Hughes Shares Hurt as Ackman Trims Stake to Invest in Own Fund
" Reuters (01/03/18) Herbst-Bayliss, Svea"
William Ackman, the chairman and biggest shareholder of Howard Hughes Corp. (HHC), announced Wednesday his hedge fund Pershing Square Capital Management would sell 2.5 million shares in the company. Howard Hughes' stock fell more than 3% following the news. Ackman, who called the company an attractive buy in May, is slimming the firm's holdings for tax reasons and says he has not turned on one of his hedge fund's longest-held investments. He needs to make the move in order to invest roughly $300 million of his own money into Pershing Square Holdings, his publicly listed portfolio that trades like a closed-end fund. The company helped performance at Ackman's firm in the first three quarters of 2017, he told clients. Ackman announced the move—which trims his Howard Hughes stake from 23.4% to 17.6%—as he tries to fix his lagging portfolio. After months of buying back more than $40 million worth of Pershing Square Holdings shares, the shares were still trading roughly 20% below their net asset value. Poor returns along with investor withdrawals and concerns that Ackman's investment ideas are not as powerful anymore are driving new moves, including the planned $300 million cash infusion from Ackman and senior associates. The cash infusion from Ackman aims to "assist in reducing the discount to net asset value at which PSH's public shares currently trade," the release said.
JCP Issues Letter to Shareholders of Casey's General Stores
" PRNewswire (01/03/18)"
JCP Investment Management LLC, BLR Partners LP, and Joshua E. Schechter, together significant shareholders of Casey's General Stores Inc. (CASY) who collectively own approximately $45 million of the company's common stock, today issued an open letter to Casey's shareholders. The letter says the investors "believe Casey's shares are significantly undervalued as they do not reflect the true earnings power and full real estate value of the Company's irreplaceable fleet of 2,000+ stores. ... Casey's has significantly underperformed the industry leader, Alimentation Couche-Tard Inc., since Casey's decision to reject ATD's offer and remain independent in 2010. Casey's has also underperformed Murphy USA Inc. (MUSA) since Murphy became an independent company in August 2013. We are concerned that Casey's store level returns on invested capital have declined as the Company has gone from operating in nine states to 15 states. Prior to 2010 (before the offer from ATD), the Company had only operated in nine states since 1995. We believe such rapid expansion coupled with seeming declining returns on invested capital is symptomatic of a company that has been unable to manage growth effectively. ... We believe Casey's shares could be worth from $150 to greater than $170 per share to a potential acquirer. We believe this is realistic given the significant synergies and real estate value that Casey's offers. The gap between Casey's current share price and its strategic value is significant. We do not believe that waiting for an increase in share price in the face of significant declining EBITDA is the prudent path to take considering that we believe that Casey's could potentially realize $150 to greater than $170 in a sale today. We believe that Casey's Board should immediately engage a financial advisor to explore all strategic alternatives, including a potential sale, merger, or similar transaction in order to maximize shareholder value."
Alexion Agrees to Work With Hedge Fund Elliott on Filling Board Seat
" Wall Street Journal (01/02/18) Al-Muslim, Aisha"
Following pressure from Elliott Management Corp., Alexion Pharmaceuticals Inc. (ALXN) announced Tuesday it will work with the hedge fund to find a new director. The agreement is part of efforts to "maintain active and constructive dialogue with all of our shareholders," Alexion Chairman David Brennan said. Elliott reportedly acquired a position in the rare-disease drugmaker last month and urged it to make changes to boost its stock price. Alexion revealed in November that it was looking for someone to fill a seat on its board, which currently has 11 members. The company has reshuffled management over the last year, including hiring CEO Ludwig Hantson in March, after an internal investigation showed senior management pushed staff to convince customers to order its flagship drug earlier than needed to meet financial targets. Under Hantson's leadership, many senior executives were replaced. Alexion announced in September it was slashing its workforce by 20%, moving its headquarters from Connecticut to Boston, and shuttering sites as it works to reduce its overhead. The moves were expected to create $250 million in annual cost savings by next year. "We are encouraged by actions taken under Ludwig's leadership to improve financial performance and reset Alexion's strategy," an Elliott spokesperson said.
Outspoken CEZ Shareholder Group Gets More Rights After Building 1% Stake
" Reuters (01/03/18) Hovet, Jason"
A shareholder group critical of Czech power utility CEZ's strategy has purchased a more than 1% stake in the company, giving it greater power to defend its interests. A representative of the group, Michal Snobr, informed an investor conference on Wednesday that the group had reached qualified shareholder status, giving it the ability to call for general meetings along with other rights. The group blasted a cut in CEZ's dividend payout last year and opposes CEZ financing the Czech Republic's plans to expand its nuclear power capacity. The country is debating how to fund nuclear power expansion but the government has so far refused to provide any support to 70% state-owned CEZ, such as price guarantees, for the construction of reactors. Prime Minister Andrej Babis has said CEZ itself could fund the expansion, an option opposed by Snobr. "In the position of a qualified shareholder we will have enough tools to defend against such things," Snobr said. CTK news agency reported that the group would seek an extraordinary general meeting before the annual general meeting this year to address the issue of financing nuclear power expansion. CEZ last year reduced its dividend payout, although Snobr said CEZ had a high cashflow and could have maintained its dividend at past levels.
Oi Shareholder Calls for Vote to Take Action Against CEO, CFO
" Bloomberg (12/29/17) Harrison, Crayton; Moura, Fabiola"
Pharol SGPS SA—Oi SA's biggest equity investor—is calling for a shareholder meeting to determine whether to take legal action against the Brazilian phone company's management and to inspect its restructuring plan. The investor declared in a letter on Friday that CEO Eurico Teles and CFO Carlos Brandao overreached their authority by negotiating the plan with creditors without the board's approval, and investors should decide whether to file a civil liability claim against them. The bankruptcy court overseeing Oi's restructuring awarded Teles full authority to negotiate with creditors without requiring the board's approval, but shareholders are nevertheless threatening legal action to prevent the deal from moving forward. The plan's installment of new board members and a capital hike also require shareholders' approval, argued Pharol, a Lisbon-based publicly traded holding company. Oi spurned the call, saying: "There's no support for any allegation of supposed illegal behavior or violations of corporate bylaws by an Oi executive. The plan … adhered to the highest corporate governance standards and established legal precepts." Teles was fulfilling a judge's decision to present a plan for creditors' approval, regardless of the board's input on it, Oi said. Along with another top investor—Societe Mondiale—Pharol has fought against the restructuring plan, which would dilute the holdings of shareholders and give control of the company to creditors.
United States: ISS And Glass Lewis Update Proxy Voting Guidelines for 2018
" Mondaq (12/28/17) Lowder, Janet D."
Institutional Shareholder Services (ISS) has released policy updates for annual meetings occurring after Feb. 1, 2018. Key changes for 2018 include updates to what constitutes a liberal change in control (CIC) definition; extension of the Equity Plan Scorecard (EPSC) to evaluate additional types of plan amendments; identification of new problematic pay practices; the impact of CEO pay ratio disclosures on ISS's review; a new policy targeting excessive non-employee director pay; revisions to the EPSC affecting minimum vesting, CIC vesting, stock ownership guidelines, and other matters; addition of a new performance element (Financial Performance Assessment) to ISS's quantitative pay for performance screen; and a new policy and increased focus on board gender diversity. Meanwhile, Glass Lewis's 2018 Proxy Paper Guidelines contain several key changes in the areas of board gender diversity, dual-class share structures, board responsiveness, virtual shareholder meetings, and CEO pay ratio. Glass Lewis also made clarifying edits to its Director Commitments and Pay for Performance policies.
Corporate Governance: Over 150 Independent Directors Quit in Last Two Months
" IBTimes (12/29/2017) Deb, Purnita"
In India, more than 150 independent directors have quit in the last two months due to strict regulatory interference by the market, banking, and insurance regulatory bodies, according to Prime Database. Some 982 directors have quit since January last year. As the compliance burden on them increases, more directors are likely to resign, thereby negatively affecting the talent pool. "This is a concern not just for independent directors, but also for the companies, as potential independent directors are becoming more selective and cautious," says Ketan Dalal, managing partner at Katalyst Advisors. Independent directors are concerned about potential personal liability stemming from any corporate malfeasance. Directors increasingly are setting aside a portion of their assets in an asset-protection trust to protect their personal wealth. An increasing number of board members at companies with stressed loans are being taken to task by the regulators. A number of independent directors at these companies have resigned. Markets regulator Securities Exchange Board of India earlier in 2017 proposed several changes in regulations to boost corporate governance. If implemented, the changes could result in a bigger compliance burden on independent directors.
Chipotle Seeks a New CEO Who Can Restore Buzz for a Damaged Brand
" Bloomberg (12/27/17) Giammona, Craig; Melin, Anders"
Chipotle Mexican Grill Inc. (CMG) is searching for a new CEO to replace Steve Ells, who said last month that he will step down but stay on as chairman. The chain faces numerous challenges, including the fallout from the company's food-safety crisis more than two years ago and pressure to mount a turnaround. Chipotle's shares will finish 2017 down for a third consecutive year, and its largest shareholder, Bill Ackman of Pershing Square Capital, has not commented on who should lead the company. Observers say there are five possible candidates for the role: Ron Shaich, founder of Panera Bread Co.; J. Patrick Doyle, CEO of Domino's Pizza Inc. (DPZ); Cheryl Bachelder, former CEO of Popeyes; Brian Niccol, CEO of Taco Bell; and Lucy Brady, an executive at McDonald's Corp. (MCD).
FSC to Improve Corporate Governance
" Taipei Times (12/27/17) Chen, Ted"
Taiwan's Financial Supervisory Commission (FSC) is considering measures to improve corporate governance by strengthening the independence of outside directors. The Company Act enables a government agency or a juristic person to act as a shareholder and be elected as a company director or supervisor, and appoint a neutral individual as its proxy on the invitee's board of directors. Industry and legal experts who have criticized the act argue that major shareholders can easily replace proxies and their undue influence compromises the independence of outside directors, limiting their ability to carry out their supervisory duties. "We want to see more neutral board members rather than proxies of major shareholders," FSC Chairman Wellington Koo said. "We also want to set a new rule that requires companies to allocate more than half of total board seats to independent directors," Koo said, adding that many boardrooms of the country's listed companies are occupied by institution-appointed proxies. Meanwhile, 272 independent directors resigned between 2014 and the first half of this year, Taiwan Stock Exchange and the Taipei Exchange data showed. Their exit is due to low pay relative to the extreme potential legal consequences they could face if they are unable to spot and prevent mismanagement or poor operating performance, Koo said. Contrary to beliefs that directors are highly paid, 92.8%—or 3,429 independent directors—earn less than NT$2 million per year, while 6.9% were paid between NT$2 million and NT$10 million, Koo said, citing FSC data. Only 0.03% were paid more than NT$10 million last year, he said.
Judge Sides Against Ackman and Valeant in Preliminary Allergan Ruling
" Wall Street Journal (12/23/17) Morgenson, Gretchen; Benoit, David"
A federal judge's preliminary ruling against William Ackman, Pershing Square Capital Management LP, and Valeant Pharmaceuticals International Inc. in an insider-trading case could prompt a settlement between the billionaire and shareholders of Allergan (AGN). Ackman, his partners, and the plaintiffs have recently been in contact with the mediator in the matter, according to sources, although a deal is far from guaranteed. In a ruling, federal Judge David O. Carter sided with plaintiffs on most of the issues in the case and rebuffed two major legal arguments from Ackman, Pershing Square, and Valeant. Allergan shareholders allege that the three improperly traded ahead of their takeover bid for Allergan in 2014. The judge emphasized that he could change his mind, though the tentative ruling could raise the risk for Ackman, Valeant, and other defendants of paying major damages following a trial, which is slated for February. Addressing one of the defendants' arguments—that they were partners in the Allergan bid and thus permitted to trade—the judge said, "This cannot be correct." He added that if it were, it "would undermine the very purpose" of rules about who can trade in the takeover attempt. Pershing Square's Allergan profit was demolished by a $4 billion loss it suffered on a stake it subsequently bought in Valeant. The firm secured a $2.3 billion gain on the Allergan trade, while Valeant made more than $400 million. But both have struggled following losses at the Canadian drugmaker after their Allergan collaboration ended. The result of the trial could alter the story of one of Ackman's best trades when he is already facing pressure. Pershing Square, roughly flat this year, is facing its third-straight year of underperformance compared with the broader market.
Nestle Cites 'Robust' Interest, Plans to Sell U.S. Chocolate Business by March
" Food Dive (12/22/17) Siegner, Cathy"
Nestle SA plans to sell its U.S. confectionery unit by the end of March. The world's biggest food company likely will reach an agreement in the first quarter of 2018, according to a spokesperson. The unit could sell for $1 billion to $3 billion, analysts say. The sale comes amid a sputtering U.S. chocolate market; in August, Lindt & Spruengli AG blamed North America when it forecast the weakest revenue growth in at least eight years, and other companies also are struggling. Meanwhile, Hershey Co. (HSY), which has been cited as one of the potential bidders, this week agreed to pay $921 million for Amplify Snack Brands Inc. (BETR), to expand into popcorn and potato chips. Nestle CEO Mark Schneider has been seeking ways to tighten the company's focus since he took over the top leadership position in January. And in June, Third Point took a $3.5 billion position in Nestle, or about 1.25% of the company's shares. The hedge fund has called for changes such as improving margins, innovating the core business, and selling non-core assets. Nestle recently sold two of its tea brands. The move to sell "represents a compelling opportunity for U.S. candy companies to consolidate the category at a critical moment. Consumers have cut back on sugar-based snacks and shifted more of their shopping online," Robert Moskow of Credit Suisse noted when the decision was first announced.
Snow Park to Challenge Altisource Residential's Board - Sources
" Reuters (12/21/17) O'Donnell, Carl"
Snow Park Capital Partners LP reportedly is lining up a slate of nominees to replace directors on the board of Altisource Residential Corp. (RESI). Sources said the hedge fund could announce the move on Thursday. The challenge comes after Snow Park held unsuccessful private discussions with the company urging it to reconsider its portfolio management agreement with its external manager, Altisource Asset Management Corp. (AAMC). Snow Park has informed Altisource Residential that the agreement with Altisource Asset Management damages shareholder returns and causes Altisource Residential's stock to trade at a significant discount to the value of its real estate, the sources said. Based in the U.S. Virgin Islands, Altisource Residential is a residential real estate investment trust (REIT) with a market capitalization of $615 million. Altisource Residential's management agreement with Altisource Asset Management provides the latter with a payment equal to 2% of the REIT's invested capital, and additional payments linked to performance. Some of the payments can be made in stock instead of cash. Snow Park wants Altisource Residential to also review other legacy agreements, including its deal with Altisource Portfolio Solutions SA, a Luxembourg-based real estate services firm. Altisource Residential's stock has lagged recently, falling by roughly two-thirds since its peak in early 2014. Last year, Altisource Residential agreed to add two new independent directors to its board to settle a fight with RESI Shareholders Group, which owned about 2.5% of the company's shares.
Offshore Driller Ocean Rig Prepares to Explore Sale - Sources
" Reuters (12/20/17) French, David"
Ocean Rig UDW Inc. (ORIG) is considering a sale amid pressure from some of its largest shareholders to review its strategic alternatives, multiple sources say. The move will be an important test of the offshore driller's value after having emerged from Chapter 15 bankruptcy in September. Its business has taken a hit as low oil prices have made offshore drilling less economically attractive. The company has interviewed investment banks in recent weeks to appoint a financial adviser that will help it explore a sale, although whether a deal will be reached is uncertain, the sources say. Shares rose 7% on the news and were up 4.3% in morning trading in New York on Dec. 20. Within a month of exiting bankruptcy, Ocean Rig's biggest shareholder, Elliott Management Corp., called for the company to review strategic options. Elliott said it planned to recruit the company's second biggest shareholder, BlueMountain Capital, in its efforts. A day later, Avenue Capital Group—the company's fifth-biggest shareholder—was on board, demanding that Ocean Rig evaluate a possible sale. The three hedge funds collectively own 39% of Ocean Rig's shares.
Exxon Ends Restrictions on Meeting Shareholders
" Financial Times (12/19/17) Crooks, Ed"
ExxonMobil (XOM) has bowed to shareholder demands to let investors directly engage board members. The oil company said its board has decided, "where appropriate, to engage directly with key shareholders," adding that it understood the importance of keeping investors up-to-date about the business. The move comes after Exxon also announced last week it would allow a shareholder vote calling for it to report on the potential impact of climate policy on its business. It is unusual for a top U.S. company to refuse to allow even its biggest shareholders to meet with board directors, with Exxon until now sending investor relations executives instead to meetings. Calpers, the California state employees' pension fund, was one of the investors to express frustration with the restrictions. Anne Simpson, the fund's investment director for sustainability, last year called Exxon "an outlier, a minority of one" among top U.S. companies in not allowing contact between directors and large shareholders. The issue of access to directors especially concerned investors seeking to urge Exxon to do more to address the threat of climate change.
GAM to Cap Bonuses After Shareholder Revolt on Excessive Pay
" Portfolio Adviser (12/20/17) Hill, Louise"
GAM will introduce new caps on executive bonuses next year following a shareholder rebellion against excessive payouts. Chairman Hugh Scott-Barrett announced a review of the company's compensation structure this spring following a contentious shareholder meeting which saw investors rebuff a plan to award $16.1 million in bonuses to upper management. The eight-month review of its compensation structure has resulted in a framework "developed around four principles: pay for performance, alignment with shareholders' long-term interests, transparency, and the importance of sound risk management," GAM announced Wednesday. Shareholders will now have to approve all future management bonuses, with the 2017 compensation plan slated for a vote next April. If approved, CEO Alexander Friedman and CFO Richard McNamara will have their annual bonuses limited at 250% and 200% of their respective salaries, and their long-term incentive plan (LTIP) award capped at 200%. Total annual bonuses and incentives for the eight members of GAM's group management board will be capped at 5% of the company's underlying pre-tax profit, with some exclusions. Earlier this year, Institutional Shareholder Services cited "considerable doubts" over how appropriate decision-making was in relation to management payouts. "The remuneration system appears to lack appropriate safeguards against inappropriate or excessive pay," it said. The company has also vowed to improve transparency with a pledge to reveal the targets set for financial performance that are used to determine bonuses.
Hedge Fund Knight Vinke Lifts Stake in M&A Target Uniper
" Reuters (12/20/17) Steitz, Christoph; Keidan, Maiya"
Knight Vinke has upped its stake in Germany's Uniper to just over 5% and declared it would not tender that stake to Finland's Fortum as part of an 8 billion euro ($9.5 billion) takeover offer. The hedge fund's increased holding comes one day after Elliott Management disclosed it had boosted its own stake in Uniper to 7.38%. Elliott has not revealed how it will respond to the takeover offer. Knight Vinke, which has been an Uniper shareholder since 2016, said it was not working with any other shareholder. A source noted that Knight Vinke was not under any legal obligation to declare that it was acting on its own, but did so for clarification to the market. "They've got their agenda, Elliott have their own agenda," the source said. The news comes ahead of plans by E.ON, Uniper's former parent, to tender its remaining 46.65% stake in Uniper to Fortum for a fixed price of 22 euros per share by Jan. 11, 2018, which is below the current share price of roughly 26 euros. The offer extends to all Uniper investors under German takeover rules and runs until Jan. 16.
Shareholders Revolt Against London Stock Exchange Chairman Donald Brydon
" The Times (London) (12/19/17) Wilson, Harry"
At the recent extraordinary general meeting, nearly 21% of London Stock Exchange (LSE) investors voted to oust Chairman Donald Brydon, and another 3.2% withheld their support. The vote follows complaints from the Children's Investment Fund (TCI), which owns a 5% stake in the LSE, that Brydon forced out CEO Xavier Rolet against his will. Christopher Hohn's TCI accounted for about 25% of the shares voting against Brydon. Egerton Capital, with about 3% of the shares, had indicated it would vote with TCI. Hohn said the result of the vote marked a "serious rebuke" of Brydon's handling of Rolet's departure, and that other large investors are mobilizing to demand a succession plan for the chairman. "This is a strong vote against a sitting chairman of a major FTSE 100 company. It demonstrates a clear view among a substantial part of the shareholder base that there has been a major corporate governance failure at the London Stock Exchange. The chairman must take responsibility," he said. Meanwhile, Interim LSE CEO David Warren has arranged to meet TCI next month.
Robust Support for Proxy Advisory Firm Reform Legislation
" NASDAQ (12/19/17)"
Nasdaq gathered almost 300 signatures for a letter sent Friday to the U.S. House of Representatives in support of H.R. 4015, Corporate Governance Reform and Transparency Act. The bill is slated for a vote on the floor of the House this week. "Reforming the proxy advisory industry is a topic important to many public companies and we see widespread industry support for our efforts," Nasdaq states. "While proxy advisory firms wield enormous influence over the corporate governance landscape, their methods are not transparent, and they are rife with conflicts of interest." Nasdaq says although its 2017 Nasdaq-Chamber Proxy Season Survey results demonstrate slight improvement in communication between companies, proxy advisors, and shareholders, problems still remain. As an advocate for all public companies, Nasdaq remains committed to advancing proxy advisory legislation through the process of becoming law, it states. "Nasdaq is proud to advance dialogue for reforms that provide for more robust, transparent and efficient markets for both issuers and investors."
Activist Investors' Role Needs More Transparency, SEC Nominee Says
" Wall Street Journal (12/18/17) Michaels, Dave"
Robert Jackson, a Democratic nominee to join the Securities and Exchange Commission (SEC), wants the regulator to force more disclosure of activist investors' stakes and to get stricter on stock buybacks. Hedge funds have found legal routes to avoid or delay disclosure of positions they are building, Jackson wrote in a letter responding to questions from Sen. Tammy Baldwin (D., Wis.). Baldwin had objected to quick Senate consideration of Jackson and a Republican nominee to join the SEC, Hester Peirce, until they answered questions about hedge funds, stock buybacks, and executive compensation. A spokesman for Baldwin said Monday that she would now agree to expedite a full Senate vote on the nominees. Jackson's letter stated that activists may use derivatives to gain influence over a company without triggering rules—written with common stock in mind—that demand disclosure of a significant stake. Jackson's letter offers a more detailed picture of his regulatory views, after Baldwin questioned research he published in 2011 that protested stricter disclosure of hedge funds' holdings. Jackson wrote in his letter that big shareholders can still play an important role "in holding corporate managers' feet to the fire." CEOs may be too sensitive to short-term pay incentives, he added, but the SEC could force them to hold stock for longer periods. Meanwhile, Peirce—who has often criticized regulators and laws that seek to restrict financial risk-taking—wrote that "buybacks, if properly and legally used, can contribute to economic growth." The letters by Jackson and Peirce are dated Dec. 8 but were released by Baldwin on Monday.
P&G Concedes Proxy Fight, Adds Nelson Peltz to Its Board
" Wall Street Journal (12/15/17) Terlep, Sharon; Benoit, David"
Procter & Gamble Co. (PG) announced Friday it would add Nelson Peltz to its board beginning March 1, after the biggest proxy battle in history essentially ended in a tie. The company said an official vote tally showed its 11 directors were re-elected but Peltz won nearly 50% of the votes cast by shareholders. Because the results were "extremely close" and because so many shareholders had supported Peltz, the company decided to add him to the board. Peltz, whose Trian Fund Management has invested about $3.5 billion in P&G, had urged the company to end the battle over recent weeks and appoint him to its 11-person board. In an interview, P&G CEO David Taylor said Peltz adopted a more cooperative tone following the proxy vote, which led P&G to end its opposition to his candidacy. "I found him, in the conversations we've had in the last many weeks, to be constructive and forward-looking," Taylor said. "We've both tried to find a way to build a bridge to move forward." Strong shareholder support for Peltz was a major factor in adding him and adjusting executive compensation metrics, Taylor said. "The shareholders did communicate a pretty strong message advocating for Nelson," he said. P&G said it and Peltz have agreed the company would not take on excessive leverage, significantly slash R&D spending, or break up the company. P&G also will change its stock performance program to give awards based on sales growth and shareholder returns so that incentives are based on the company's performance overall and not just compared to peers, something Peltz argued for during the fight. P&G also said it would appoint Novartis AG (NVS) CEO Joseph Jimenez as a director, increasing the size of the board to 13 members.
Hedge Funds Line Up Against Institutional Investors in Endgame to London Stock Exchange Chairman Battle
" City A.M. (12/17/17) Jolly, Jasper"
U.S. firm Lone Pine Capital—a top-five shareholder in the London Stock Exchange (LSE)—reportedly will back the resolution of Sir Chris Hohn, manager of The Children's Investment (TCI) fund, to oust Chairman Donald Brydon. The hedge fund is the second so far to support Hohn, along with Egerton Capital, ahead of a shareholder vote on Tuesday. However, major long-term institutional investors seeking to move past the dispute have thrown their support behind the LSE's board, with Standard Life Aberdeen the latest to add its backing, along with Blackrock, the Qatar Investment Authority, and Aviva. The disagreement highlights the investment community's split over whether to back Hohn's campaign, which was launched in November based on what he believed was an unfair removal of the former CEO, Xavier Rolet. The exchange has already conducted multiple interviews with prospective CEO candidates, in a sign that Brydon—who will retire in 2019—is moving ahead in re-establishing management. Meanwhile, shareholder advisors at the Pensions and Investment Research Consultants (Pirc) have accused Brydon of presiding over a "governance crisis," recommending an abstention in the vote. Hohn's campaign is widely expected to fail, with attention now turning to the size of the shareholder revolt against the board. A source said that while TCI may require 50% to win, it does not need 50% to send a clear message to the board about good corporate governance.
Italy's Mediaset Wins Approval for Board Changes, Squeezing Vivendi
" Reuters (12/15/17) Segreti, Giulia; Navach, Giancarlo"
Mediaset shareholders on Friday approved new governance rules which included a proposal to reduce the maximum number of board seats from 21 to 15 and to change the way its members are appointed. The move could limit the influence of France's Vivendi, the TV group's second-largest investor, by leaving minority shareholders with only two or three seats. The new rules are also expected to give the private Italian broadcaster's board greater stability as they strengthen Silvio Berlusconi's clout over the company. Mediaset is controlled by Berlusconi, Italy's former prime minister, whose family holding owns a 39.5% stake. The move escalates a spat between the two sides, who are now meeting in court after Vivendi's unexpected decision last year to pull out of a deal that would have given it control of Mediaset's pay-TV unit. Afterward, Vivendi rapidly amassed a 28.8% stake in Mediaset. The Italian government has expressed concern over the growing influence of Vivendi, which also owns a 24% stake in Telecom Italia (TIM). Fininvest had already said it voted for the new rules but proxy adviser Glass Lewis had recommended shareholders vote the other way "given the potential for the amendment to entrench Fininvest's control of the board." Amber Capital, which owns just over 2.5% of Mediaset, said it opposed the changes as they would have "a negative impact on the company and on the rights of minority shareholders." It added, "It is not acceptable that Vivendi's presence and conducts...are today the excuse to introduce a hidden poison pill which irreparably damages (the rights) of minority shareholders."
Elliott Preps for Potential Fight With Hess, Seeking CEO Ouster
" Wall Street Journal (12/14/17) Benoit, David; Olson, Bradley"
Elliott Management Corp. is angling either to remove Hess Corp.'s (HES) chief executive John B. Hess or urge him to consider selling all or part of the energy company. Elliott, which owns a 6.7% stake in Hess, also wants the company to change its approach to shareholder returns, pressing for a dividend cut in favor of stock buybacks, sources said. This is the second time the hedge fund and oil-and-gas company have clashed, with a 2013 fight resulting in Hess giving up his role as chairman and adding Elliott nominees to the board. Since then, the stock has underperformed, including falling sharply this year. "As long-term shareholders in Hess, we are frustrated by the company's continuing underperformance," Elliott portfolio manager John Pike said. "Shareholders are getting impatient because the changes needed to remedy Hess's severe undervaluation are substantial and need to be announced without delay." A battle could depend on whether Hess maintains shareholder support amid growing impatience about the company's multibillion-dollar oil and gas projects. Hess executives recently said the company will not generate free cash flow through 2020 because of investment needs related to a massive oil discovery in 2015 off the coast of Guyana, a timeframe that has frustrated shareholders. Elliott has been working with investment bankers to gauge interest from potential buyers for the company or assets, such as its Asian offshore acreage or its U.S. shale plays, and has even proposed selling a stake in the Guyana asset, sources said. It has also hired recruiting firms to suggest candidates for CEO and the board, they added. Elliott has until March to launch a challenge for Hess's 2018 annual meeting.