Qatar Backs LSE Chairman in Battle Against Investor
" Financial Times (12/12/17) Stafford, Philip"
The Qatar Investment Authority (QIA) has said it will back London Stock Exchange Group (LSE) Chairman Donald Brydon at an extraordinary shareholder meeting on Dec. 19, where shareholders will vote on the Children's Investment Fund's (TCI's) proposal to remove Brydon from the board. QIA is LSE's second largest shareholder, with a 10.37% stake. A person briefed on QIA's position said, "There wouldn't be a benefit to the LSE Group to change [the] chairman at this time." TCI, which holds a 5% stake, called the meeting over Brydon's handling of the departure of CEO Xavier Rolet at the end of November. ISS and Glass Lewis recently urged shareholders to back Brydon, indicating that TCI failed to present a compelling case for his removal. However, Egerton Capital, which owns a 2.8% stake in LSE, said it would support TCI.
Icahn Nominates Four Directors to Xerox's Board
" Reuters (12/11/17) Panchadar, Arjun; Chatterjee, Laharee"
Xerox Corp. (XRX) announced Monday that Carl Icahn has nominated four individuals to the board of directors. The move comes after a current Icahn-appointed director stepped down due to a difference of opinion with the board, ending a standstill arrangement between the company and the Icahn Group made in June 2016 and enabling Icahn to make his nominations, Xerox said. Jonathan Christodoro, a former managing director of Icahn Capital LP and a Xerox board member since June last year, informed Xerox's chairman in a letter that he was one of the four Icahn nominations. "Until the last few weeks, it appeared that the Board's decisions would be consistent with my views on the best interests of Xerox and our shareholders," Christodoro wrote in a Dec. 8 letter to Chairman Robert Keegan. "It now appears, however, that the Board will make decisions and take Xerox in a direction with which I strongly disagree." Christodoro did not offer further details on these decisions. In a statement, Xerox reiterated its full-year forecasts for adjusted operating margin, earnings per share, cash flow, and revenue and pointed out that its stock has risen almost 30% this year, outperforming the S&P 500. Icahn Associates Corp. is Xerox's top shareholder with a 9.7% stake as of September.
Reuters: Hong Kong Fund Tells Toshiba That Chip Unit Sale to Bain Group Not Necessary
" Reuters (12/11/17) Fuse, Taro; Yamazaki, Makiko"
Argyle Street Management Ltd. sent a letter to Toshiba Corp.'s board on Monday declaring the $18 billion sale of its chip unit to a Bain Capital-led group is no longer necessary after its recent capital injection. The Hong Kong-based hedge fund is inviting the more than 30 foreign investors who participated in Toshiba's 600 billion yen ($5.3 billion) new share issue to partner up, and is already in talks with at least three funds who agree. While the potential for funds to derail the deal will depend on how many join in opposition, Argyle's letter highlights the anxiety about Toshiba's recruitment of activist shareholders in its new share issue. Toshiba agreed in September to sell chip producer Toshiba Memory to the Bain consortium to cover billions of dollars in liabilities stemming from its embattled U.S. nuclear power unit Westinghouse. To ensure it remains listed, Toshiba also secured the $5.3 billion cash injection from overseas funds, which gives it enough funds to cover its liabilities. Argyle believes "there no longer is any urgency to undertake a sale of Toshiba Memory," it said in the letter seen by Reuters, and proposed a meeting with Toshiba's board in December or January. The deal "significantly undervalues the business," the letter said, adding that the board should instead weigh an IPO for Toshiba Memory. The new share issue included some big-name shareholders including Third Point LLC and Oasis Management Company. Argyle also said it thought Toshiba's U.S. nuclear unit Westinghouse still had value and it was confused as to why Toshiba had assigned zero value to its claims against Westinghouse.
KKR's Tender Offer for Hitachi Kokusai Succeeds by Slight Margin
" Reuters (12/08/17) Fujita, Junko"
U.S. buyout fund KKR & Co. LP (KKR)—under pressure from Elliott Management to boost its offer price—scraped a successful tender offer for the Japanese semiconductor equipment maker Hitachi Kokusai Electric Inc. KKR had sought at least about 24% of Hitachi Kokusai at 3,132 yen each in a tender offer that closed on Friday, and won 24.9%, company statements revealed on Saturday. Parent Hitachi Ltd. agreed to sell its stake of just over 50% back to Hitachi Kokusai at 1,870 yen per share as part of the $2.2 billion deal. KKR had sweetened its offer price twice to mollify Elliott, known for buying stakes in firms in the middle of takeovers. The first increase came after Elliott disclosed a stake in Hitachi Kokusai in September, and the final price was 25% higher than the initial offer of 2,503 yen. Elliott has since increased its holding to 8.59%. KKR said 26,242,364 shares were tendered, compared to the minimum 24,815,889 it was seeking. The tendered shares equal 25.5% of Hitachi Kokusai when excluding treasury shares.
Elliott Management Is Said Push for Changes at Alexion
" New York Times (12/07/17) de la Merced, Michael J."
Despite remaking its executive ranks over the past year after numerous problems under previous management came to life, Alexion Pharmaceuticals (ALXN) is being engaged by Elliott Management, which, according to sources, believes the biopharmaceutical company could do more to lift its stock price. The sources say Elliott could launch a proxy fight to claim seats on Alexion's board, among other things, if management does not take action. Elliott reportedly began investing in the company in April, and while the hedge fund has expressed support for Alexion's overall strategy, the sources say it also is calling for the new management team to further reduce costs, impose higher financial performance targets, and improve communications with investors and analysts. Furthermore, Elliott has argued that more changes to the board are necessary, including the addition of more biotech experts as directors, and it has cautioned against ambitious acquisitions outside of the company's core expertise.
Germany's Uniper Flags Higher Dividends to Fend off Fortum Bid
" Reuters (12/07/17) Steitz, Christoph; Käckenhoff, Tom"
German energy firm Uniper is urging shareholders not to tender their stock to Fortum in the Finnish group's 8.05 billion euro ($9.49 billion) takeover bid, pledging Thursday higher dividends in the future. Uniper's management argues the deal undervalues the company and lacks strategic sense given Uniper's large exposure to gas- and coal-fired power plants compared with Fortum's focus on clean technologies. Uniper said it would pay a total dividend of roughly 310 million euros for 2018, up 24% from this year, adding payouts would increase by a quarter on average through 2020. Uniper shares were trading around 25 euros per share on Thursday, above the 22 euros Fortum is offering and up more than twice since it was spun off from former parent E.ON and listed in September 2016. Under Fortum's takeover offer, E.ON can sell its remaining 46.65% stake in Uniper by Jan. 11, 2018, which is considered likely given a large fee it would have to pay if it fails to do so. All other shareholders can tender their shares by Jan. 16. Fortum on Thursday confirmed it would not raise its bid even after Elliott Management, known for buying into pending M&A deals to extract higher offers, acquired a stake in Uniper this week. The group emphasized it was largely focused on E.ON's Uniper stake, but would accept all shares.
Proxy Firm ISS Advises Shareholders to Back Marcato at Deckers
" Reuters (12/06/17) Herbst-Bayliss, Svea"
Institutional Shareholder Services (ISS) changed its position Wednesday to recommend shareholders of Deckers Outdoor Corp. (DECK) vote for Marcato Capital Management's slate of directors at the Dec. 14 annual meeting. The proxy advisory firm had signaled its support for Marcato last week but hesitated to fully endorse the dissident's campaign, considering its bid to replace all nine members of the board too harsh. After Marcato slimmed down its proposed slate on Monday to just three independent directors, the proxy advisor changed its tune, throwing its support fully behind Marcato. ISS declared Wednesday that the Deckers board has been sluggish in addressing problems at the company and that it was time for a shake-up. "Shareholders are therefore advised to directly support dissident nominees Fuller, Waterman, and Feldman by voting FOR their election on the dissident (GOLD) card," ISS wrote. Steve Fuller was previously marketing chief of L.L. Bean, Anne Waterman is a former Michael Kors (KORS) executive, and Kirsten Feldman is a former Morgan Stanley (MS) executive. The new ISS report commended the nominees' retail expertise. Meanwhile, proxy advisory firm Egan-Jones recommended Wednesday that shareholders vote for all of Deckers' incumbent directors, while Glass Lewis backed the company's directors last week. Marcato, which owns an 8.5% stake in Deckers, has already won one proxy contest at Buffalo Wild Wings (BWLD) this year and posted some of the hedge fund industry's strongest returns. Its flagship fund up was 24% through November.