Elliott Steps Up Attack on Hyundai Motor Group
" Bloomberg (04/23/18) Kim, Sohee"
Elliott Management Corp. on Monday declared that Hyundai Motor Group's 10.6 trillion won ($9.9 billion) merger of two units would shortchange minority shareholders and lacks business sense. Instead, Elliott suggested that Hyundai Motor Co. be merged with Hyundai Mobis Co. to form a holding company that would oversee the group. The fund also said group units should return excess cash, boost dividends, and cancel treasury shares. Hyundai Motor Group responded that it will "continuously communicate with shareholders and investors around the world including Elliott Management to explain the underlying goal and needs of the proposed restructuring plan." Elliott revealed earlier this month it had acquired a stake of more than $1 billion in three group units, Hyundai Motor, Kia Motors Corp., and Mobis. In late March, Hyundai Motor Group proposed a reorganization plan to streamline its complex ownership structure, which included the proposed multi-billion-dollar merger of part of Mobis's business with affiliate Hyundai Glovis Co. Under Elliott's counter proposal, a merger between Hyundai Motor and Mobis would result in a more efficient structure, it said. The fund also claims the current plan is inefficient and undervalues the spun-off business, and that the group failed to address the need to improve shareholder returns and governance. In addition, Elliott criticized Kia's plan to sell its shares in Mobis to the founding family as lacking "a transparent process to realize fair value." It also called for Hyundai Motor and Mobis to lower a combined 12 trillion won in excess cash, and demanded the group add three independent board members and introduce a measure to bring corporate governance in line with global standards.
Judge Ruling Delays Telecom Italia Board Seats Showdown to May
" Reuters (04/23/18) Flak, Agnieszka; Rebaudo, Stefano; D'Alessandro, Manuela"
A judge has ruled in favor of an appeal by Telecom Italia (TIM) and its top investor Vivendi to block a vote on some Elliott board nominees at an April 24 shareholders meeting. The U.S. fund—which owns a 9% stake in TIM and is seeking to change the way Vivendi runs Italy's biggest phone group—was set to face off with the French investor for the first time at the Tuesday shareholder meeting. TIM will still hold its AGM on Tuesday to approve financial results and confirm Amos Genish as CEO, but the battle over board seats will now be delayed to another shareholder meeting slated for May. The fund had called for six Vivendi-nominated board members, including TIM Chairman and Vivendi CEO Arnaud de Puyfontaine, to be replaced with well-known Italian business leaders to help improve governance and strategy. But following Elliott's move, eight board members nominated by Vivendi resigned, triggering a vote on a full board renewal at a separate shareholder meeting on May 4. Despite the mass resignations, TIM's statutory auditors included Elliott's proposal on the agenda for this week's meeting, a decision TIM's board and Vivendi had challenged in court and which the judge suspended with its ruling. Explaining the decision, the judge said the mass board resignations made it necessary for shareholders to elect an entire new board rather than vote on partial changes that would be temporary.
Whitbread Boss Believes Costa Coffee Split Inevitable: Report
" Reuters (04/22/18) James, Williams"
Whitbread CEO Alison Brittain reportedly believes that a separation of the company's hotel and coffee shop businesses is inevitable, after shareholders including Elliott Advisors have pushed for such a change. Last week, Elliott Advisors became the second investor to urge Whitbread to split its Premier Inn hotel chain from the Costa Coffee businesses, sending the company's shares higher. Brittain is expected to present her position on Wednesday, when she is slated to announce the company's annual results. She is not "philosophically opposed" to a split, according to sources, and considers such a move as a case of "when, not if." The group said in January it had an open mind about its future structure. Whitbread has in recent years sold off its brewing business and some pubs to focus mainly on Costa, as well as Premier Inn hotels, the Beefeater restaurant brand, and the Brewers Fayre pub restaurant chain. Elliott believes that splitting Whitbread into two listed entities would enable the market to value it properly, a source said last week. Fellow shareholder Sachem Head has also been angling for a breakup.
Macquarie Infrastructure Corp. Battle Heats Up
" Australian Financial Review (04/22/18) Kehoe, John"
At least eight institutional and wealthy individual shareholders in Macquarie Infrastructure Corp. (MIC) are backing Moab Capital Partners' campaign to remove six board members and end a contract paying lucrative fees to Australia's Macquarie Group. The U.S. shareholders say they have lost trust in the company and want the board overhauled and the company potentially liquidated after it recently suffered a more than 40% stock slump. Nine-year MIC investor Overbrook Management "fully supports the Moab effort," said CEO Andrew Goffe. "The board has lost all credibility and the best outcome for shareholders is for the company to be sold because we don't think there is a path forward as a public company," he said. Goffee blasted Macquarie for extracting roughly $750 million in management and performance fees in exchange for overseeing MIC's U.S. infrastructure assets over the last five years, according to his calculations. Another shareholder, the $7 billion New York investment manager Levin Capital Strategies, argues questions need to be fully answered by MIC's directors. "They should call a new shareholder meeting, change the board to include additional independent directors, and modify the management contract," said the firm's head, John Levin.
South Korea's Antitrust Chief Says Expects Change in Samsung Governance 'in Near Future'
" Reuters (04/20/18) Lee, Joyce"
Samsung Group's decision to sell a stake in affiliate Samsung C&T to ease cross-shareholding ties and recognize the union of certain temporary workers at a Samsung Electronics unit are "enormous changes" for the powerful family-controlled conglomerate, or chaebol, according to South Korea's antitrust chief. "Samsung Group has been busy announcing various measures," changing the way it does business, Kim Sang-jo, head of the Korea Fair Trade Commission, recently told foreign media. He expects Samsung Group to unravel its governance structure in the near future. The government and investors have called for reform of the powerful chaebol. "I think Samsung's most crucial task is to resolve ties between Samsung Life and Samsung Electronics," said Kim. Samsung Life Insurance is at the heart of a cross-shareholding structure in which it owns about 8% of Samsung Electronics. Chaebols have come under criticism for their complicated cross-shareholding structures, which Kim has said are aimed at cementing family control. Scrutiny of chaebols has intensified since the arrest last year of Samsung Group heir Jay Y. Lee, who denies wrongdoing, on charges of bribery and embezzlement.
Netherlands Leads Morningstar List of Countries With Strong ESG Companies
" Pensions & Investments (04/19/18) Kilroy, Meaghan"
Dutch companies are the world's sustainability leaders, according to a recent report from Morningstar. In an analysis of 46 country indexes and their constituents on environmental, social, and governance factors, Morningstar found the Netherlands index took the top spot with a score of 60.54, helped by high-scoring companies like ASML Holding (ASML), ING Group (ING), Philips (PHG), and Ahold Delhaize. (Scores are calculated on a scale of 0-100). The next highest scoring country based on sustainability criteria was Denmark at 60.47, followed by Finland at 60.2.
Jana Takes Pinnacle Foods Stake, May Push for Sale
" Bloomberg (04/19/18) Deveau, Scott"
Jana Partners disclosed a 9.5% stake in Pinnacle Foods Inc. (PF) and is pushing the packaged food manufacturer to explore a sale or other transactions in the frozen food space, according to a regulatory filing Thursday. Jana believes the company is in a good position to consider consolidation given its strong standing in the frozen foods industry. The hedge fund said it may also discuss other issues with the company, including its cost structure, operations, and board makeup. Jana has partnered on the investment with former Unilever (UN) executive James Lawrence, Lululemon Athletica Inc. (LULU) Chairman Glenn Murphy, and Rodan & Fields LLC CEO Diane Dietz. A Pinnacle spokesman said Friday the company was aware of Jana's investment, adding that Pinnacle's board of directors and management welcome shareholder input. Jana already has a track record in the food sector, including having acquired a stake in Whole Foods Market Inc. last year before it was purchased by Amazon.com Inc. (AMZN). Jana has also agitated for changes at Conagra Brands Inc. (CAG) and more recently at Bloomin' Brands Inc. (BLMN), where it won a board seat this year. The possibility that Conagra, where Jana is still invested, could acquire Pinnacle remains one of the most likely transactions in the sector, according to David Palmer, a New York based analyst with RBC Capital Markets. Merging the companies would create the highest gross margin and profit upside of any transaction in his coverage space, Palmer said. He added that Conagra's management already has an "intimate knowledge of Pinnacle's business" from a previous deal that fell through.
Xerox Says CEO Had Authority on Fujifilm Deal Talks
" Wall Street Journal (04/19/18) Benoit, David"
Xerox Corp. (XRX) is defending CEO Jeff Jacobson against accusations from shareholder Darwin Deason, saying Jacobson had appropriate board authority to negotiate a deal with Fujifilm Holdings Inc. Deason has alleged in a lawsuit that Jacobson's goal was to retain his job in rushing to finalize a transaction with Fujifilm in January. The suit references documents and board communications that it says reveal Jacobson was on the verge of being fired when he entered into the deal that would keep him in his job. The suit cites documents showing Jacobson had been told in November to halt negotiations because the board was considering replacing him. Xerox doesn't dispute that, but says Chairman Robert Keegan and lead independent director Ann Reese subsequently endorsed his efforts to keep working on the deal after the November discussion. Deason and Carl Icahn, Xerox's largest investor, want to block the deal and overthrow the board. They are working with an executive, John Visentin, whom Xerox almost hired to succeed Jacobson. "The transaction was thoroughly negotiated, fully vetted, and unanimously approved by the Xerox board of Directors…as the best available alternative to create value for Xerox shareholders," Xerox said in a court filing. "This fabricated narrative is preposterous." Deason countered, saying the company is redacting information "as big as Texas." Xerox's legal response alleges Icahn had told Jacobson, while hosting the executive for dinner at his apartment, that he wanted to see Xerox sold or he would push for Jacobson to be removed.
Powerful Investors Are Pushing for More Women on Corporate Boards
" Yahoo! Finance (04/19/18) La Roche, Julia"
Gender diversity in boardrooms was a hot topic at the recent 13D Monitor Active-Passive Investors Summit in New York. Pershing Square Capital Management's Bill Ackman said, "I actually have wanted to run a proxy contest with an all-female, diverse ethnic slate. First of all, I think it sends an incredible message and I think we would win hands down. I really mean that." He pointed out that it is difficult for him to recruit directors, particularly women, in the activist context. "I think as more women serve on activist slates, it will make other women more comfortable on activist slates. If you're a diverse candidate, whether it's gender, ethnic, or otherwise, and you're interested in serving in an activist context, get in touch with us," Ackman said. "What the shareholders can do is...make clear the fact that someone who hasn't served on a board before shouldn't disqualify them from being a credible candidate for a board. One way to make it difficult for people to break the glass board ceiling is to say one of the qualifications for serving for winning on an activist slate is that you have to have already served on a board. That kind of stuff creates barriers that are problematic." Meanwhile, Blue Harbour CEO Cliff Robbins noted that "when I'm sitting down now with a CEO before I invest...I'm asking them a bunch of questions—'Tell me what you think about gender pay equality. Are there opportunities for women and minorities in your company? Do you have a diverse board?'" He emphasized the importance of investors holding those companies accountable. He added, "When I'm calling up my CEO three months after we made the investment, in addition to saying, 'Where are we on this spinout? Where are we on the balance sheet? Where are we on the margins?' I'm saying, 'Where are we on that commitment you made to me to make the board more diverse?'"
'Rogue Executive' Led Xerox Into Fuji Deal, Complaint Claims
" Bloomberg (04/19/18) Hammond, Ed; Dolmetsch, Chris"
An amended complaint, filed in state court in Manhattan on April 19 by investor Darwin Deason, details a breakdown of corporate governance at Xerox Corp. (XRX) as it raced to sell itself to Japanese rival Fujifilm Holding Inc. The new court filings contain portions of correspondence, some previously redacted, among Xerox board members, executives, their counterparts at Fuji, and their advisers. The complaint centers on Deason's accusation that Xerox CEO Jeffery Jacobson acted without authorization to forge a deal with Fujifilm that preserved his job at the expense of shareholder value. The complaint includes text from what is reportedly a Dec. 7, 2017, letter from Xerox director Cheryl Krongard to Chairman Robert Keegan in which she, among other things, called Jacobson a "rogue executive" who disobeyed the board to secretly negotiate with the Japanese firm. Other communications show that Jacobson allegedly called investor Carl Icahn—who has partnered with Deason to block the merger and push for changes at Xerox—"crazy" and a "mutual enemy." The deal, announced in January, would involve Xerox first merging with a joint venture that the company operates with Fujifilm in Asia. Xerox shareholders will receive a cash dividend of $9.80 per share, and Fujifilm ultimately will own 50.1% of the combined entity, which expands the joint venture to include all of Xerox's operations.