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13D Monitor Real-time Activist Newsfeed


MediaNews Group Inc., the largest shareholder in Monster Worldwide Inc. (MWW), announced plans Friday to nominate seven members to overhaul Monster's entire board.  MediaNews opposes the company's pending $429 million sale to a Dutch recruitment firm, Randstad Holding NV, and has called for Monster to consider all options, such as an auction.  The investor has also advised Monster to reduce expenses by $100 million to $150 million, and to take other steps like a "rebranding campaign to attract millennials."  In a new letter to Monster shareholders, MediaNews blasted the company's sale process as "flawed and unorganized," and said it has no faith in Monster's current management.  MediaNews is a newspaper owner with a nearly 12% stake in the online job-posting company.  Monster replied Friday that its board continues to recommend the Randstad offer.

Ralph Whitworth, a founder of Relational Investors LLC and a trailblazer in activist investing, lost his battle with throat cancer on Thursday. The 60-year-old served on 11 U.S. company boards, including as chairman at Hewlett-Packard. During his career, he spurred change at major firms and engaged some of the biggest corporate titans, helping to remove CEOs at Home Depot, Sprint Nextel Corp., and Sovereign Bancorp Inc. His approach—since adopted by many other activist funds—entailed building modest stakes in flailing companies, seeking board representation, and persuading fellow directors to demand change. "Without Ralph, modern shareholder activism would have never been as successful as it has been," said Charles Elson of the Weinberg Center for Corporate Governance at the University of Delaware. Whitworth also gained plaudits as chairman of Apria Healthcare Group Inc., where he convinced board members to let shareholders nominate directors without a full-blown proxy fight. It was the first such move by a publicly owned U.S. company.

A regulatory filing indicates that Elliott Associates has upped its stake in Mentor Graphics Corp. (MENT), calling the stock deeply undervalued, and approached management and the board to discuss strategy. Elliott and its subsidiaries acquired an 8.1% interest in the electronics design firm, doubling their position since June. Shares of the Wilsonville, Ore.-based company jumped in after-hours trading Thursday following the disclosure.

Elliott Management is angling to push Colombian airline Avianca into a sale or strategic partnership. The U.S. hedge fund has become increasingly influential in discussions about Avianca's future, sources say, and has held talks with the company's senior executives in recent weeks. Although Elliott does not own a stake in the airline, it reportedly is leveraging its position as lender to Avianca's controlling shareholder. The loans are secured against the holder's 51% stake and are linked to the carrier's stock price, meaning Elliott would benefit from a sale. Avianca management called talk of a potential sale “speculation” but did confirm the company is pursuing a strategic partner to counter other regional alliances. The Latin American aviation industry has already undergone major consolidation, and Avianca is seen as one of the last available assets there for large U.S. airlines angling for greater access to the region. Delta, United, and Panama's Copa Airlines reportedly are considering bids for all or part of Avianca.

Carl Icahn has whittled a nearly 6% stake in Transocean Ltd. (RIG) down to 1.5%, according to a regulatory filing Wednesday. Shares in the Swiss offshore drilling company are down 16.4% over the past year, and it has slashed its massive fleet of offshore drilling rigs as it tries to recuperate from a poorly timed expansion just before oil prices caved. Icahn cited tax-planning purposes as the impetus behind both the lower stake in Transocean and a more than 50% reduction in his Chesapeake Energy Corp. (CHK) holdings earlier this month.

Elliott Management Corp. founder Paul Singer is upping his stake in German 3D printer company SLM Solutions Group AG, with plans to “exert influence” over matters such as capital structure and the composition of managing and supervisory bodies. Singer intends to acquire additional voting rights in SLM in the next 12 months, he revealed in a filing Wednesday after surpassing the 10% threshold. He now owns 16% of SLM's shares. The move comes after General Electric Co. (GE) this month announced plans to acquire SLM and Swedish 3D-printer maker Arcam AB for an aggregate $1.4 billion in a major expansion of its 3D-printing capabilities. Singer may be trying to push for a higher price from GE or another competitive bidder, one analyst speculated. He is the second-largest holder of SLM, with 2.9 million shares, and the fourth-largest shareholder of Arcam, according to data compiled by Bloomberg. SLM management intends to meet with Elliott's leaders, according to a company spokesman, but no date has been set. Arcam CEO Magnus Rene said management has not had conversations with Elliott about the shareholding, and the board still recommends that shareholders accept the offer.

A sale of Cabela's Inc. (CAB)—the outdoor gear retailer agitated by Elliott Management Corp.—could be on the horizon after two consortia formed to make bids this week, sources said on Thursday.  Privately held retailer Bass Pro Shops, which has teamed with Goldman Sachs Group Inc.'s (GS) private equity arm, reportedly is now working on an offer with Capital One Financial Corp. (COF), which is interested in Cabela's credit card business.  Private equity firm Sycamore Partners, meanwhile, has formed its own consortium with credit card company Synchrony Financial (SYF), the sources added.  Binding offers are due this week.  Sidney, Nebraska-based Cabela's said last December that it was working with an investment bank to explore strategic alternatives, including a sale, following pressure from Elliott.

Pier 1 Imports Inc. (PIR) on Tuesday announced efforts to protect itself from any single shareholder taking a stake of 10% or greater, a week after Alden Global Capital LLC disclosed a 9.5% holding in the home-goods retailer. The adoption of a so-called poison pill, which will limit the influence of any big investor, comes amid lackluster sales and a search for a new CEO launched earlier this month. According to a statement, the new restriction will not prevent a takeover “but may cause substantial dilution to anyone acquiring 10% or more of the company's common stock, which may block or render more difficult a merger, tender offer, or other business combination.” Pier 1 did not specify Alden Global in the statement but said the board finds it important “to guard against coercive or unfair tactics to gain control of the company.” Last week, Alden said it has spoken with Pier 1 management regarding shareholder representation to the board, the company's recent financial results, and the hunt for a new CEO.

Stewart Information Services Corp. (STC) reportedly is on the brink of a deal with Starboard Value LP on board composition, as it works to placate disgruntled investors over declining revenue. The settlement would involve replacing four sitting directors on the nine-member board, sources said this week. Starboard, which acquired a 9.9% stake in Stewart in August, said in a regulatory filing it would talk to the company about "potential business combinations or dispositions." Houston-based Stewart, one of the biggest U.S. title insurers, has already added three new directors over the last three years, removed its dual-class shares, and increased dividends. The company has also come under pressure from Engine Capital LP, Bulldog Investors, and Foundation Asset Management. In July, Foundation disclosed a 5.6% holding in the company and called for a special meeting to remove two directors whom Starboard is also seeking to replace.

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ABB Likely to Clash With Shareholder Over Power Grids Decision
" Reuters (09/29/16) Revill, John"

At ABB's update of its strategic review next week, the Swiss engineering group appears likely to tell shareholders it wants to keep its Power Grids business. This would put it at odds with Cevian Capital—ABB's second-largest shareholder with a 6.2% stake—which has campaigned for a spin-off of the business. The stakes for Cevian are high: ABB is its biggest investment at about 15% of its portfolio, and it believes a break-up would boost ABB's lackluster share price. However, ABB appears to favor keeping the business because of the benefits it provides to the group overall. CEO Ulrich Spiesshofer's experience also points toward a revamping of the Power Grids business, ABB's least profitable. In addition, analysts see ABB's decision to sell the high-voltage cabling business of Power Grids as an indication ABB wants to keep the rest of the business. ABB's board is slated to reveal plans for the business on Oct. 4.

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Blackstone's Baratta Says Activists Drive CEOs to Private Equity
" Bloomberg (09/28/16) Banerjee, Devin"

Shareholder activism increasingly has motivated CEOs of public companies to consider deals with private equity firms, said Blackstone Group LP's Joe Baratta at the Bloomberg Markets Most Influential Summit in New York on Wednesday. Blackstone “applauds the activist investment community that's out there making their lives more difficult and making them have to account for how the business is being governed,” said Baratta. He added that Blackstone is seeing more public-company CEOs receptive to conversations about having a different form of governance and ownership. Several recent deals by private equity firms have been instigated by shareholders pushing for change at companies. Infoblox Inc. (BLOX) agreed last week to a $1.6 billion leveraged buyout by Vista Equity Partners after pressure from Starboard Value. In November, Blackstone invested $820 million in NCR Corp. (NCR), which was more than one-third owned by hedge funds at the time, including Jana Partners and Marcato Capital Management.

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Ireland Ripe for Activist Investors - Industry Experts
" The Independent (Ireland) (09/25/16) McLoughlin, Gavin"

Irish companies represent an opportunity for activist investors, experts say. Executive pay is coming under increasing scrutiny, they note. And Brexit may be a factor, says Peter Reilly, a senior research manager at Glass Lewis. Steven Galet, head of corporate governance and activist engagement at FTI Consulting's strategic communications unit, say Ireland's regulatory environment is favorable, such that an activist may want to engage. "The activists are slowly starting to say in our survey results that it's getting a bit tighter in the U.S. market for them to operate," Galet points out. "You're seeing more than one activist involved in a company, sometimes three or four. So they have to look abroad, and you've seen the first wave come in terms of Valueact [which has obtained a seat on the board of Rolls Royce] and Elliott setting up an office. There'd be no reason for them to exclude Ireland. They're probably looking for the right company to make the first activist foray with, and also they want to understand the economy."

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Corporate Governance and Shareholder Activism
" ValueWalk (09/25/16) Copland, James R.; O'Keefe, Margaret M."

Six “corporate gadfly” investors dominate the shareholder-proposal process. In 2016, these six and their family members sponsored one-third of all shareholder proposals. Thirty-eight percent of proposals were sponsored by institutional investors with a specific social, religious, or policy view. Institutional investors affiliated with labor—such as funds affiliated with the American Federation of Labor–Congress of Industrial Organizations—sponsored 21% of all shareholder proposals in 2016. Fifty percent of shareholder proposals involved social or policy concerns, up from 42% in 2015. Furthermore, the number of social- and policy-related shareholder proposals per company rose from last year. For three consecutive years the two most prevalent types of shareholder proposals were those concerning the environment or corporate political spending or lobbying. Shareholder proposals concerning employment rights doubled in 2016 from 2015, and those concerning human rights trebled.

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Bill Ackman’s Bite of Chipotle Is Part of a Larger Trend
" Fortune (09/23/16) Kell, John"

Shareholders at Buffalo Wild Wings (BWLD) and Chipotle Mexican Grill Inc. (CMG) must decide whether they want to embrace engagement by Marcato Capital Management and Bill Ackman's Pershing Square Capital, respectively. At Buffalo Wild Wings, same-store sales are falling after years of consistent growth; Marcato is advocating a change in management and a keener focus on the core brand. At Chipotle, its “Food with Integrity” image became a liability after a prolonged E. Coli crisis, and revenue has fallen 20% to $1.83 billion for this year. Pershing Square hasn’t disclosed its plan for change. However, in the past activists have successfully engaged restaurant chains. Still, observers say activism should be viewed on a case-by-case basis—not judged by industry. “Activists don’t do anything but offer shareholders a choice,” says Ken Squire, founder of 13D Monitor. Squire says activists can help both Buffalo Wild Wings and Chipotle, but he notes that both situations are “totally different.”

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Activist Investors Double Chance of CEO Exits, Study Shows
" Bloomberg (09/21/16) Basak, Sonali; Jinks, Beth"

Activist hedge funds settled for, or won, board seats in 46% of the more than 300 contests monitored from 2011 to 2015, according to advisory firm FTI Consulting. "When activists attain board seats, we found that CEOs leave their posts at twice the normal rate," said Steve Balet, head of corporate governance and activist engagement at FTI. Average CEO turnover was 16.6% within a year for a firm without such an investor, and 30.9% over two years, FTI said, using a set of 2,500 companies, and data provided by S&P Capital IQ and PriceWaterHouseCoopers. When an activist gained board seats, CEOs left their firms 34.1% and 55.1% of the time in those respective periods. "It seems natural that there would be an increased rate of CEO turnover, but activists generally don’t publicly target the CEO for replacement," Balet said. "Even in cases where activists do not gain board seats, CEOs leave their post 71 percent greater than the normal rate."

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Shareholder Activism Is in 'Phase Three,' Debevoise's Rosen Says
" Bloomberg (09/19/16) Fournier, Elizabeth"

Companies are now engaging with activist shareholders and are more welcoming, according to attorney Jeffrey Rosen of Debevoise & Plimpton LLP. The so-called "third stage" of shareholder activism is based on a more dynamic engagement between corporations and shareholders than earlier phases. In the first stage of activism, shareholders often enter a company with a regulatory filing disclosing their stake and a strongly worded letter. In the second stage, companies and investors begin to exchange strategies more openly. "The structure of the engagement was overtly somewhat hostile and corporations responded very strongly," Rosen says of early activist interactions. "It was confrontational."

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