'Time-Consuming and Distracting Proxy Fight': Obsidian Energy Trades Barbs With Investor
" Financial Post (03/21/18) Morgan, Geoffrey"
On March 21, Obsidian Energy Ltd. (OBE) and investor FrontFour Capital traded barbs over the appointment of new directors. The hedge fund has launched what Obsidian Chairman Jay Thornton called a "costly, time consuming and distracting proxy fight" by nominating four directors to the company's nine-person board. Thornton said, "We are disappointed that after several months of attempting to work constructively with FrontFour, including the addition of Gordon Ritchie to the board at their suggestion, FrontFour has chosen to put its interests ahead of other shareholders at a critical time in the company's history," indicating that the four directors plus Ritchie would give the hedge fund a majority vote on its board. However, Stephen Loukas, portfolio manager at FrontFour, which owns 6.2% of Obsidian's stock, said the hedge fund did suggest Ritchie as a director, but the company already was considering him for a board seat. "Ritchie then, of his own volition, joined the Obsidian board as an independent director in Dec. 2017, explicitly on the basis that he was not a nominee of FrontFour," he said. In addition to Loukas, FrontFour is nominating former Chevron (CVX) executive Steven Evans, former ConocoPhillips (COP) executive Michael Faust, and Acting Cline Mining Corp. CEO Matt Goldfarb to the Obsidian board. In a letter to shareholders, FrontFour wrote that its nominees would "help drive the necessary decisions" to overhaul the company's assets, focus solely on its properties in the Cardium light-oil formation, and boost its share price.
Exclusive - ILG Explores Merger With Apollo's Diamond Resorts: Sources
" Reuters (03/21/18) Roumeliotis, Greg; Baker, Liana B."
ILG Inc. (ILG), a provider of vacation timeshare properties, is considering a tie-up with Apollo Global Management LLC's (APO) Diamond Resorts International Inc. as an alternative to a sale, according to sources. The deal would add more than 400 of Diamond Resorts' vacation destinations in 35 countries to ILG's 250 managed resorts in about 80 countries. ILG said last month that its board had formed a strategic review committee comprised of independent directors to discuss a potential transaction with multiple parties, which it did not name. Marriott Vacations Worldwide Corp. (VAC) and Hilton Grand Vacations Inc. (HLT) were reported to have held talks about acquiring ILG last year. Although ILG is still exploring a sale to Marriott Vacations, it is also in discussions about combining with Diamond Resorts, which is owned by private equity firm Apollo and could be valued at more than $3.5 billion (£2.4 billion), including debt, according to the sources. The talks with Diamond Resorts are aimed at giving ILG leverage in case its negotiations with Marriott Vacations are unsuccessful, a source added. In January, FrontFour Capital Group LLC announced it had nominated four candidates for election to ILG's board, accusing the company of refusing to engage in constructive talks about its strategy. ILG has disputed that it has not tried to engage with FrontFour. The hedge fund also urged Diamond Resorts to sell itself when it was a public company. In 2016, Apollo took Diamond Resorts private for roughly $2.2 billion.
Avis Adds Biggest Investor's Nominees to Board Slate
" Reuters (03/21/18) Herbst-Bayliss, Svea; Banerjee, Arunima"
Avis Budget Group Inc. (CAR) announced Wednesday it is nominating five candidates to its board, including three proposed by SRS Investment Management last month. However, SRS responded that it will continue to run its original slate of five candidates, arguing the company's proposed slate "falls short of achieving the board refreshment that we believe is necessary." The car rental company's peace offering to its top investor comes as tensions have been growing for months. SRS owns a 31% stake in Avis, including 15% of the company's common shares and another 16% in derivatives, according to a filing. In January, Avis installed a poison pill to restrict SRS from converting derivatives to more voting stock. SRS—which typically stays out of the limelight and has never run a proxy fight—in February announced a slate of five candidates, including two people who are already serving on the board. It has had board representation at Avis since 2016. SRS said in a filing at the time that the company "cannot achieve its full potential under the stewardship of the current Legacy Board." Avis included the SRS nominees to show "willingness to work cooperatively with a significant shareholder to advance the best interests of all shareholders," said lead independent director Leonard Coleman.
Crest Nicholson Faces Potential Shareholder Revolt
" Financial Times (03/21/18) Mooney, Attracta; Williams, Aime"
Institutional Shareholder Services (ISS) has recommended shareholders of U.K. housebuilder Crest Nicholson reject CEO Stephen Stone's appointment to executive chair at the annual general meeting on Thursday. The proxy advisor says the proposal—which would see Stone become executive chair for one year and then a non-executive chair for up to another two years—would violate corporate governance rules and shed doubts on the new chairman's ability to cast proper scrutiny over the company. The U.K.'s Corporate Governance Code stipulates that CEOs should not typically chair the same company. "Such a transition means that the chairman is less likely to bring a properly dispassionate perspective to the board. Further, the ability of the new [chief executive] to implement their strategy may be impaired," ISS said. Investment firm Royal London Asset Management declared it would reject Stone's appointment, believing the three-year period was excessive. "When you have an executive chairman who ran and built the business, what role does the chief executive play? Who runs the business?" said Ashley Hamilton Claxton, the firm's head of responsible investment. ISS also cast doubt over Stone's pay as chair, which would come in at 60% more than the current chair's pay. However, proxy adviser Glass Lewis recommended a vote for Stone's appointment, noting that "the board has appointed a senior independent director and has clearly outlined the processes by which it ensures a proper division between management and non-executive oversight."
Telecom Italia Open to Network IPO Once Fully Regulated: Sources
" Reuters (03/22/18) Flak, Agnieszka"
Telecom Italia (TIM) would consider selling a stake in its future network company and list the unit, but only once it becomes a fully regulated business to guarantee stable returns, according to sources. TIM, whose top shareholder is French media company Vivendi with a 24% stake, is putting its network assets into a separate company (NetCo) fully controlled by TIM, a move likely to take 12-18 months. Last week, Elliott—which is pushing to replace six board members to shake up Vivendi's control of the company—said it would push for NetCo's listing to unlock value. TIM CEO Amos Genish has not ruled out selling a stake in NetCo in future, but would like control to remain with TIM. Elliott has also said it prefers the creation of a single national network, which suggests it would agitate for the merger of NetCo with competitor Open Fiber, a broadband firm jointly owned by utility Enel and CDP. TIM is open to purchasing Open Fiber, a source said, but not at any price. Regarding Elliott's plan to replace six board members, the source said TIM rebuffed the idea of a board overhaul, adding a fully independent board would make reaching agreement difficult. "Management would not be confident it has the backing of the majority of the board," the source said, adding an alternative would be to let Elliott appoint two members to the board. TIM's board will discuss Elliott's proposals on Thursday, while shareholders will vote on the suggested board changes on April 24.
Land & Buildings Issues Open Letter to Board of Taubman Centers
" Business Wire (03/21/18)"
Land & Buildings Investment Management, LLC sent a letter to the board of Taubman Centers, Inc. (TCO) on Wednesday reiterating its belief that the appointment of its nominee, Jonathan Litt, as a director is necessary "to bring a true shareholder representative into the boardroom." Land & Buildings notes that as it "sits on the verge of a second proxy contest against Taubman Centers," it believes all close observers of the company would similarly urge it to embrace the change needed to reverse its trend of self-preservation and underperformance. Taubman has continued to significantly underperform since last year's annual meeting, the letter notes, with a 16% decline in its shares. Land & Buildings also questions the independence of Taubman's board, and argues that the dual class voting share structure has "served to disenfranchise common shareholders." The letter argues that Taubman's board needs "a true shareholder representative with a deep knowledge of REITs and regional shopping malls," which can be found in Litt, Land & Buildings' Founder and Chief Investment Officer. Finally, it recommends that following the board addition, a special committee be formed to develop a plan for the elimination of the dual-class voting structure.
Elliott Said to Back Ferrari-Like Spinoff for Telecom Italia
" Bloomberg (03/21/18) Lepido, Daniele; Ebhardt, Tommaso"
Elliott Management Corp. is weighing a plan to separate the fixed-line network of Telecom Italia SpA that includes an initial public offering by the end of 2019 and wants to reduce the carrier's stake in the grid to a minority, according to sources. The move would mimic a strategy pursued by Fiat Chrysler with Ferrari in 2016, when the carmaker spun off the sports-car unit to investors, more than doubling the market value for its shareholders. Elliott owns 5.74% of Telecom Italia as of March 15, according to a filing Wednesday, and may nearly double that holding to secure a stronger voice in the company as it pushes for a board shakeup, the sources said. Elliott has entered a battle with Telecom Italia's largest shareholder, the French media conglomerate Vivendi SA, which owns 24%. The fund has proposed ousting the carrier's chairman, Arnaud De Puyfontaine, and five other directors and replacing them with six independent board members. In a letter to shareholders last week, Elliott proposed separating and selling part of the network unit—which is valued significantly higher than the current value of the Milan-based company. The aim is to boost the carrier's value with a sum-of-the-parts approach to extract the highly-valued landline network, the sources said. A listed network with Telecom owning a minority interest could grant similar returns to those secured by Fiat with the Ferrari separation, they added. Elliott's proposal may conflict with an existing plan by Telecom Italia executives to separate the network but maintain full control of the business.
N.Y. State Pension Plan to Oppose All Board Directors at Companies Without Women Members
" Pensions & Investments (03/21/18) Steyer, Robert"
The New York State Common Retirement Fund, Albany, intends to vote against all boards of directors standing for re-election at companies that lack female board members. "We're putting all-male boardrooms on notice: diversify your boards to improve your performance," said Thomas DiNapoli, the state comptroller, on Wednesday. DiNapoli added that the $209.1 billion pension fund will cast votes against members of corporate board governance committees for firms with only one female board member. Separately, DiNapoli announced that the pension fund had reached accords with Bristol-Myers Squibb (BMY), Leucadia National (LUK), Packaging Corp. of America (PKG), and PulteGroup (PHM) to withdraw shareholder proposals on board diversity in return for the four companies agreeing to formally commit to seeking "highly qualified" females and minority group members for consideration as directors.
MutualFirst in Ind. Reaches Compromise With Investor
" American Banker (03/20/18) Burns, Hilary"
Muncie, Ind.-based MutualFirst Financial (MFSF) disclosed in a regulatory filing that it will nominate James Bernard, a representative of Ancora Advisors, to join its board. Ancora has a 7.2% stake in the company. Bernard will remain on MutualFirst's board until its 2020 annual meeting and also is expected to join the board of MutualFirst's bank. In exchange, Ancora has agreed to buy no more than 9.99% of MutualFirst's stock, or acquire any company assets. Furthermore, the firm will not attempt to restructure, control, or change MutualFirst's management, board, or policies, and cannot pursue litigation against the bank or its management. The standstill agreement is in effect until the end of next year's annual meeting, and during this period, Ancora will support MutualFirst's board nominees and recommendations.
Pressure Builds on GEA for Swift CEO, Strategy Change
" Reuters (03/21/18) Palmen, Anneli; Kaeckenhoff, Tom"
A major investor in German food processing company GEA is urging it to review its businesses and rapidly replace its CEO following a string of disappointing earnings. GEA is seeking a new CEO after Juerg Oleas last week said he would not stand for another term, following a series of profit warnings. Sebastian Growe, an analyst with Commerzbank, said a leadership change would not be enough to restore confidence and only a thorough review of the business would do. One top-10 investor in the company, who declined to be named, was also pressing for change at the top. “We see this as a catalyst for a positive new chapter at the company,” the investor said. “The executive board needs to review capital allocation, limiting or desisting from acquisitions,” he added. Cost savings could come from reviewing production and procurement and by selling off low-margin businesses. The company should also consider a meaningful share buyback, the investor said. GEA is struggling to win back shareholder confidence after downgrading its earnings targets in both 2016 and 2017. Top investors in GEA include the Kuwait Investment Office, Blackrock, MFS Investment Management, Albert Frere, and U.S. hedge fund Elliott.
South Korean Groups Forced to Seek Out Votes of Small Investors
" Financial Times (03/20/18) Jung-a, Song"
South Korean companies have lost a major source of proxy votes needed to meet quorums and are scrambling to encourage minority shareholders to exercise their voting rights as the annual meeting season begins. This would mark a major change in the country's governance standards, as companies traditionally have not welcomed minority shareholders at annual general meetings (AGMs). "These changes could be troubling for companies, which have seen AGMs just as a formality to push through management decisions," said Park Ju-geun, head of corporate watchdog CEO Score. "But they are going in the right direction in terms of guarding against the excessive clout of major shareholders, especially controlling families." Many South Korean companies—especially smaller ones with a larger weighting of ownership by individual investors—have had a hard time meeting quorum thresholds to appoint board members or execute important actions since the practice of using shares registered with the Korea Securities Depository to pass measures was abolished last year. Now, a minimum of 25% of voting stock is required to appoint directors, and a third is needed for key management decisions such as mergers and acquisitions or share splits. According to Park, the concentration of meetings was designed to limit minority shareholders' participation at AGMs, and "they cannot really talk about shareholder rights without changing this practice."
Barclays CEO Awaiting First Meeting With Investor Edward Bramson
" Bloomberg (03/21/18) Morris, Stephen; Lacqua, Francine"
Barclays Plc (DTYS) CEO Jes Staley said Wednesday he welcomes the views of the bank's new investor, Edward Bramson, after he acquired 5.2% of the voting rights this week. The London-based bank's head of investor relations has already "had a brief meeting" with Bramson's Sherborne Investors, said Staley. "We look forward to hearing what his thoughts are," Staley said in an interview on Bloomberg Television Wednesday, adding he has not heard anything from Bramson about what he wants accomplished at the bank strategically. "We have a very active dialogue with all our shareholders." Pressure on the CEO increased this week with the news of Bramson's stake, which comes with the aim of pushing for strategic change to boost the shares, according to a source. Staley has bet his reputation on improving returns and revitalizing the investment bank, which is Barclays's worst-performing division. Staley also said the lender will be in a position to consider share buybacks once legacy misconduct issues are resolved. Last month, Barclays announced it will return its dividend to previous levels, and consider stock buybacks for the first time in more than two decades, as its capital buffer rose beyond its target. The dividend boost, which will restore the payout that Staley slashed in 2016, indicates executives are confident the bank's slimmed-down balance sheet has enough capital to survive another crisis and settle some remaining misconduct issues.
Land & Buildings Blasts Management of RLJ Lodging Trust
" Wall Street Journal (03/20/18) Grant, Peter"
Jonathan Litt's Land & Buildings Investment Management LLC sent a letter to RLJ Lodging Trust (RLJ) shareholders on Tuesday revealing it plans to nominate two directors to the board at the annual meeting later this year. The investor has been critical of RLJ management since the company acquired FelCor last year in a $3 billion deal, blasting a range of issues including the company's guidance, communications, and stock performance. Land & Buildings, which had been a top shareholder in FelCor, ended up with a roughly 2% stake in RLJ in the wake of the all-stock acquisition. In its letter Tuesday, Land & Buildings also urged RLJ to create a special committee of independent directors to evaluate "all strategic alternatives….given RLJ's significant undervaluation and underperformance." Management of RLJ—one of the largest hotel-focused REITs—predicted the merger with FelCor would lead to savings and greater efficiencies, but the deal was criticized by some who said RLJ was paying too much. Criticism grew just before the shareholder vote, when RLJ revealed it was approached by an unidentified buyer to purchase RLJ for about a 20% premium to its share price. Land & Buildings sent a letter to RLJ shareholders blasting management less than 10 days after the FelCor deal closed. "Our engagement with leadership…has been underwhelming," that letter stated. In Tuesday's letter, the investment firm reiterated past criticism and criticized management compensation. "During a period of poor performance, the senior executive team of RLJ has been paid handsomely," it said.
FrontFour Releases Letter to Obsidian Shareholders
" PR Newswire (03/20/18)"
FrontFour Capital Group LLC sent a letter Tuesday to shareholders of Obsidian Energy Ltd. (OBE) announcing its intention to nominate four board candidates for election at the annual general meeting. FrontFour owns about 6.2% of Obsidian's outstanding shares. The investor says that since issuing its first public letter on Jan. 17, Obsidian's shareholders have expressed frustration with the company's "inconsistent and unsound strategic plan, flawed hedging strategy, and poor leadership team." Thus, FrontFour plans to formally nominate the following directors for election once the meeting is called: Steven P. Evans, Michael J. Faust, Matthew Goldfarb, and FrontFour's own Stephen E. Loukas. FrontFour said it will also release its value creation strategy at Obsidian in coming weeks, initially focused on streamlining the company's organizational profile through the disposition of its remaining non-core legacy gas-weighted production, and the divestiture of its operations in the Alberta Viking and Peace River. In addition, the investor intends to vote against the company's proposed reverse stock split proposal at the meeting.
Vanguard Defends Proxy Powers for Small-Time Shareholders
" Reuters (03/20/18) Kerber, Ross"
An executive at Vanguard Group, the world's largest mutual fund provider, has warned that restricting shareholder resolutions could exclude many minor investors with concerns about corporate governance. The remarks represented the strongest public defense yet of small shareholders' rights by a top asset manager. Glenn Booraem, investment stewardship officer at Vanguard, said in an interview that higher ownership thresholds could undermine shareholders pushing for changes such as annual director elections or independent boards. "Some of the proposed higher limits feel like they all but eliminate the ability of anyone but a handful of shareholders to get proposals out there, which we think would be a step back," he said. Booraem did not rule out supporting some higher thresholds, however. Along with corporate governance issues, shareholder resolutions have taken on new importance lately with growing investor interest in topics like boardroom diversity or climate change. Currently shareholders with $2,000 in a major company's stock can submit proposals to be voted on at its annual meeting, a standard opponents say should be revised to avoid expensive and distracting debates. Some proposals, such as a bill that passed the U.S. House in June that would require resolution filers to own at least 1% of a company's stock, could shut down some investors, said Booraem. He gave the example of Apple Inc. (AAPL), where 1% of shares would be nearly $9 billion. Vanguard also remains concerned about a trend away from equal voting rights, Booream said. "Shareholders deserve the right for their voice to be heard," he said.
Coffee-Shop Spat, Weak Guidance Lead to Board Fight at Natus Medical
" Wall Street Journal (03/20/18) Benoit, David"
Voce Capital Management LLC nominated two directors to Natus Medical Inc.'s (BABY) board on Tuesday, according to sources, escalating a fight at the $1 billion neurological and infant diagnostics company. The fund is a longtime investor in Natus, but it amassed a more than 2% stake after a disappointing forecast sent Natus stock plummeting in January, the sources said. It has not detailed specific demands, but reportedly wants to upset a six-person board with only one new member since 2004. Voce decided to seek board seats after trying unsuccessfully to meet with the board this year, according to sources. The sides appeared to reach a breaking point earlier this month at a contentious meeting at a hotel coffee shop, when an analyst for the fund and executives from the company clashed. Natus CEO James Hawkins said in an interview the company has received communication from Voce about its coming annual meeting and is reviewing it now. He denied the detail about the coffee shop meeting. The stock is down 15% this year to $32.50, and has risen nearly 150% over five years. Voce's stake would make it at least a top-15 investor in Natus.
Noble Group Hit by Lawsuit From Top Holder
" Bloomberg (03/20/18) Tan, Andrea; Ng, Jasmine; Wee, Denise"
On March 20, Goldilocks Investment Co. filed a lawsuit in the Singapore High Court against Noble Group Ltd. and its executives, including founder Richard Elman, for allegedly inflating profits to raise money. Once Asia's largest commodity trader, Noble is on the brink of collapse following an accounting scandal that started three years ago. Chairman Paul Brough is leading the push for a restructuring plan that will hand control of the company to a group of senior creditors, but the move faces opposition from shareholders and some creditors. "If anything, this will likely drag out the debt restructuring process and increases the uncertainty [of] the outcome," said iFast Corp. credit analyst Ang Chung Yuh. "It remains to be seen how much strength Goldilocks can muster in terms of their shareholding." The lawsuit accuses managers of paying themselves inflated salaries and then attempting a cover-up when the accounts came under increased scrutiny. Other defendants include CEO Will Randall and CFO Paul Jackaman. Goldilocks is seeking relief from Hong Kong-based Noble on behalf of shareholders, including about $169 million paid to executives between 2011 and 2017, as well as any interest and damages assessed by the court.
U.S. Judge Declares Mistrial in Trial of Ex-Georgeson Employees
" Reuters (03/19/18) Raymond, Nate"
U.S. District Judge Richard Stearns in Boston on March 19 declared a mistrial in the case of four former employees of Georgeson LLC, a proxy solicitation firm owned by Computershare Ltd. Michael Sedlak, Donna Ackerly, Charles Garske, and Richard Gottcent were on trial for participating in a scheme to pay bribes to learn how a proxy adviser's clients voted. The mistrial was declared due to a medical issue involving the wife of one of the 12 jurors hearing the case. The four ex-Georgeson employees have pleaded not guilty to wire fraud and honest services wire fraud charges. Although three defendants consented to going forward with only 11 jurors, prosecutors were willing to do so only if all four agreed. David Spears, an attorney for Sedlak, said that in light of prosecutors' decision he would seek to prevent a retrial given the U.S. Constitution's prohibition against being tried twice for the same crime. Georgeson in November agreed to pay $4.5 million and enter into a deferred prosecution agreement to resolve charges that it schemed to bribe an Institutional Shareholder Services (ISS) employee. Prosecutors stated that Brian Bennett from 2007 to 2012 used his job at ISS to supply Sedlak with information in exchange for concert and sports tickets worth $14,000. Sedlak passed the information to Ackerly, Garske, Gottcent, and another Georgeson employee, Keith Haynes, prosecutors stated. Ackerly and Garske then arranged for clients to be billed for some of the bribes using bogus descriptions such as "courier services," prosecutors stated. The goal, according to prosecutors, was to gain an illegal edge in their work helping companies shape strategies that could impact the outcome of shareholder votes.
Three Former Newell Directors to Drop Their Proxy Fight
" Wall Street Journal (03/20/18) Terlep, Sharon"
Three former Newell Brands Inc. (NWL) directors who had partnered with Starboard Value LP in a proxy fight have split up with the hedge fund after the company struck a deal with Carl Icahn. Starboard, which recruited the directors in a bid to oust Newell's entire board and CEO, said Tuesday it still may seek some board seats this spring, but is open to giving Icahn a shot at fixing the consumer-products conglomerate. "My agenda was not to win but to change the attitude within the company," said Martin Franklin, one of the three former Newell directors aligned with Starboard. "Carl Icahn is putting his money where his mouth is and if he wants to sort this out, I wish him all the best." Newell CEO Michael Polk has been increasingly clashing with the board, which has seen four directors step down in recent months. Franklin, who left after the Newell board spurned his proposal to fire Chairman Michael Cowhig, said Icahn "will be shocked" when he discovers inflated costs and financial maneuvering within Newell. The agreement with Icahn, unveiled Monday, will give the investor control over five of 11 board seats. Newell also agreed to explore selling more of its businesses. Without Franklin and his team, Starboard said it may still nominate its remaining director candidates. Starboard is expected to urge Newell and Icahn to scrutinize the company's entire portfolio for possible asset sales, and to argue that major operational improvements are needed at the company, sources said. Icahn recently disclosed a 6.9% stake in Newell, while Starboard owns roughly 4.5%.
Life Storage Deal With Investor Litt Could Put Company in Play
" Bloomberg (03/19/18) Deveau, Scott; Clark, Patrick"
Life Storage Inc. (LSI) has struck a deal with shareholder Jonathan Litt to shake up the board, in a move that could make the company a takeover target as self-storage REITs come under pressure. The storage-facilities owner said its co-founders will retire after this year's annual general meeting. In addition, Life Storage CEO David Rogers will join the board, along with Dana Hamilton—head of real estate at Pretium Partners LLC, who has worked with Litt before—and Edward Pettinella, former CEO of Home Properties Inc. There will be eight board members after the changes. The move was more likely intended to improve the board than to put the company in play, said George Hoglund, a New York-based analyst with Jefferies. Still, he said the company has been underperforming its peers and the board may need to consider alternatives or conduct a strategic review if it cannot boost its numbers. Litt's Land & Buildings Investment Management LLC, which owns a roughly 1.8% stake in Life Storage, believes the company is both underperforming and undervalued, according to sources. Life Storage could be an attractive takeover target for some of its bigger competitors, such as Public Storage (PSA) and Extra Space Storage Inc. (EXR), the sources said. "The changes to the board increase independence and remove what we previously viewed to be a potential impediment to a transaction," noted Todd Thomas, an analyst with KeyBanc Capital Markets Inc.
SEC Commissioner Jackson Sees Cyber Threat as a Corporate Governance Issue
" Cooley PubCo (03/19/18) Posner, Cydney"
Securities and Exchange Commission (SEC) Commissioner Robert Jackson recently dubbed cyber threats as "the most pressing issue in corporate governance today." He cited research from the Identity Theft Resource Center which found there were over 1,000 data breaches with an aggregate cost of over $100 billion last year. "In short: the cyber threat is a corporate governance issue," Jackson said. "The companies that handle it best will have relevant expertise in the boardroom and the C-suite, a strategy for engagement with investors and the public, and—most of all—sound advice from corporate counsel who can navigate uncertain times and uncertain law in a critical area for the company's business." Jackson advised counsel to encourage their boards to be transparent in this area, noting that boards face exposure to litigation in the event of incidents. Also, boards should ensure that senior management share critical information early and often with their colleagues so that when any member of the senior management team learns material nonpublic information about a cyberattack, all members of the team avoid insider trading. Jackson noted that one problem companies have in developing effective systems is that the "technologists," who best understand the cyber threats, are typically in a separate silo from the lawyers and business people who would typically be involved in developing controls and procedures. SEC Commissioner Kara Stein expressed similar views in a recent speech at Stanford, noting that "companies need to do more than simply recognize the problem. They need to heed the calls of their shareholders and treat cyberthreats as a business risk."
Newell Strikes Deal With Icahn to Fend Off Other Shareholders
"Wall Street Journal (03/19/18) Terlep, Sharon; Lombardo, Cara"
Newell Brands Inc. (NWL) reached a deal with Carl Icahn on Monday to appoint five board members chosen by the billionaire and to consider selling more of its businesses. The move comes as the company faced a proxy fight with Starboard Value LP, which is seeking to remove the entire Newell board and CEO Michael Polk. A deal with Icahn, if approved by investors, would save Polk's job but oust the company's chairman, Michael Cowhig. Icahn also aims to expand Newell's plan to sell assets, while Starboard sought to halt those efforts. Under the deal with Icahn—who owns a nearly 7% stake in the consumer-products conglomerate—Newell has agreed to appoint four individuals immediately and a fifth at the 2018 annual meeting. These include Brett Icahn, a consultant for Icahn Enterprises and Icahn's son; Andrew Langham, general counsel of Icahn Enterprises; Courtney Mather, portfolio manager of Icahn Capital; and Patrick Campbell, the former CFO of 3M Co. (MMM) as chairman. Newell also said it would expand its turnaround plan to sell some of its business units and close factories by looking for further sales that could bring the total yield to about $10 billion after tax, up from the $6 billion previously announced. Starboard last month teamed up with former executives of Jarden Corp., which Newell purchased less than two years ago for $15 billion. Starboard, which owns a 4.5% stake in Newell, has argued that "governance deficiencies" are behind the company's reversal of fortune in the last year, while Newell has contended that Starboard lacks a clear plan to improve the company.
Barclays in Shareholder Crosshairs as Bramson Takes 5.2% Stake
"Bloomberg (03/19/18) Morris, Stephen"
Edward Bramson's Sherborne Investors has unveiled a 5.2% stake in Barclays Plc (DTYS) and plans to push for change, according to a source. Sherborne sees an opportunity to double the stock price of Barclays through a turnaround, said the source, who declined to elaborate on the investor's strategy. The stock trades roughly a third below the value of the bank's assets, according to data compiled by Bloomberg. "There is clearly substantial opportunity for shareholder value creation from a change in direction," Keefe, Bruyette & Woods analysts Edward Firth and Richard Smith wrote in a note, calling the bank the "perfect activist investment." Still, "Barclays' board has proved intractable in the past." Barclays is in the middle of an overhaul of its investment bank, which is the firm's worst-performing division and has been losing market share to rivals. The London-based bank is emerging from a mixed 2017, saying last month it will return its dividend to previous levels, while considering stock buybacks for the first time in more than two decades. "As with all its shareholders, Barclays will continue to engage with Sherborne, and welcomes them as a shareholder," Barclays said. Bramson is known for engaging smaller British money management firms, including Electra Private Equity Plc, one of the U.K.'s oldest private-equity firms. Bramson has said he likes to push for changes from within, and typically seeks at least one seat on the board, preferably as chairman. Once he has that, he will spend a month or two meeting staff, asking questions, and listening. Staying quiet is tactically smart in a turnaround, Bramson says.
Kobe Steel to Push Governance Reform Under New Chief
"Nikkei Asian Review (03/17/18) Inoue, Minami; Onishi, Tomoya"
Kobe Steel, which has been embroiled in a data-doctoring scandal, will take steps to prevent a recurrence and strengthen corporate governance under its new president. Mitsugu Yamaguchi, currently an executive vice president, has agreed to lead the steelmaker after Chairman and President Hiroya Kawasaki exits on April 1. Yamaguchi, the company's first president to hail from its machinery business, a noncore segment, will be tasked with overhauling Kobe Steel's corporate culture. The company will scrap the position of chairman, instead selecting one of its outside directors to lead board meetings in the hope of encouraging an unbiased perspective.
Investor TCI Pushes for Sale of Legacy Yahoo Assets
" Financial Times (03/16/18) Johnson, Miles"
Sir Chris Hohn's TCI has called on Altaba (AABA), the company containing the legacy assets of Yahoo, to wind down and sell off its $76 billion holding in China's Alibaba (BABA). TCI, which holds a $6 billion stake in Altaba, said the company was trading at an unnecessarily large discount to the value of its assets and should take advantage of recent U.S. tax reform to liquidate. The company currently trades at a 26% trading discount to net asset value, which TCI said it believes could be reduced to 17% to 18% if its assets were sold or distributed to its investors. If successful, this would mark the final phase in a long series of investor campaigns at Yahoo, with Carl Ichan, Third Point, and Starboard Value all having engaged with the company before it ultimately sold its operating business to Verizon (VZ). Hohn indicated that a liquidation could involve Alibaba buying back Altaba's 15% stake in the company at a discount, with Alibaba exchanging its shares for Altaba shares or making an all-stock bid for the company. "Altaba has the highest probability of creating value for its shareholders by taking this action," he said. "It does not preclude a sale to Alibaba, if Alibaba has an interest." However, Altaba responded by saying it would continue its own plan to reduce the discount.
A10 Networks Reaches Settlement With VIEX Capital Advisors, Tor Braham Appointed to Board
" StreetInsider.com (03/16/18)"
A10 Networks (ATEN) has reached a settlement agreement with VIEX Capital Advisors, which has a stake of approximately 5.3% in A10. A10 has appointed Tor R. Braham to its board of directors effective March 14, 2018. Furthermore, A10's board of directors will submit for stockholder approval a proposal to declassify the board of directors at its 2018 annual meeting. "We are pleased to have quickly and collaboratively resolved this matter," said Lee Chen, chairman, president, and CEO of A10 Networks. "A10 has always been committed to the highest standards of corporate governance and after productive consultation with stockholders, we believe that now is the appropriate time to begin the process of declassifying the board of directors. Tor brings valuable experience and perspectives to A10 during this important time for the company and we welcome him to the board of directors." Eric Singer, managing member of VIEX Capital Advisors, said, "We applaud A10 for its constructive and collaborative approach to implementing actions that addressed our concerns and will benefit all A10 stockholders. We look forward to continue working constructively with A10." If the proposal to declassify the board of directors is approved by stockholders at the 2018 annual meeting, declassification of the board will be implemented on a rolling basis beginning with the 2018 annual meeting such that each director serving as of immediately prior to the opening of the polls at the 2018 annual meeting will serve through the remainder of his term and, in general, each director elected or appointed at or after that meeting will serve a one-year term.
Blackwells Comments on Supervalu Plan to Sell Some Farm Fresh Stores
" Business Wire (03/15/18)"
Supervalu (SVU) has taken a step in the right direction by agreeing to sell 21 of its 38 Farm Fresh Food & Pharmacy stores for approximately $43 million, according to a statement from Blackwells Capital. However, it is unfortunate that it took substantial pressure from shareholders to motivate it to make changes at the company, adds the alternative investment management firm, which holds an approximately 4.1% stake in Supervalu. The sale represents about 10% of its retail locations, but Supervalu still owns nearly 200 retail locations that are depressing its valuation and being neglected by management. Jason Aintabi, managing partner at Blackwells, noted that Supervalu trumpeted the transaction as part of a two-year effort "to transform our business," but said "the fact that the share price has declined over 60% during this so-called transformation demonstrates once again a lack of urgency, imagination, and concern for shareholders. Our view remains that the divestiture of these assets must be a priority on the pathway towards a sustainable turnaround." Blackwells still plans to nominate a slate of experienced directors to the board for the 2018 annual meeting of shareholders.
Nestle Chairman Calls CEO 'Man of Action,' Praises His First Year
" Reuters (03/15/18) Bautzer, Tatiana"
Nestle Chairman Paul Bulcke expressed support for CEO Mark Schneider during an interview on the sidelines of the World Economic Forum in Sao Paulo on Wednesday. Schneider has sold Nestle's confectionery business in the United States, closed high-cost factories in Europe, and focused on expansion into consumer health and high growth businesses, with the acquisition of vitamin maker Atrium Innovations, since joining Nestle 14 months ago. "His first year was very good, he's a man of action, he sees the need of change," Bulcke said. Nestle is struggling to recover from a sixth year of slowing growth. Third Point, Daniel Loeb's hedge fund, made a $3.5 billion investment in the world's biggest packaged food company last June. It has demanded that Nestle overhaul its strategy and sell assets like L'Oreal more quickly. Bulcke declined to comment on meetings with Loeb, saying that Nestle "respects investors' opinions," and that Loeb "has strong opinions, but many of his suggestions are already in our program anyway."
State Street's Kumar Wants Answers on Shareholder Rights
" Reuters (03/16/18) Kerber, Ross"
State Street Corp. indicated it will be pushing for answers from companies that lack such things as independent board leaders or equal voting rights for shareholders. "We're going to be asking companies to explain either their compliance or exceptions" from the new principles, said Rakhi Kumar, head of asset stewardship for State Street's asset-management arm, in an interview on Thursday. Companies that cannot sufficiently explain their structures can expect votes against management's recommendations, according to a recent State Street memo sent to corporate directors. State Street and other top fund firms last year adopted a set of good-corporate-governance principles meant to improve oversight at companies whose shares they hold. Critics have said the asset managers could do more to enforce their governance concerns, such as refusing to buy the shares. Kumar said that is not always possible for State Street's index funds, but the burden will be on company leaders. "We want to make sure that you're shareholder friendly and you're putting thought into governance," she said. Despite its efforts to promote gender diversity last year, filings later showed State Street funds abstained on some shareholder resolutions focused on boardroom diversity. Kumar said State Street may cast "abstain" proxy votes more often this year to signal its unhappiness with management. Such votes will give State Street a way to convey nuance, she said, whereas before it might have backed management but "with a heavy heart."
FSC to Toughen Governance Rules for Financial Firms
" Korea Herald (South Korea) (03/15/18) Ji-hyoung, Son"
South Korea's Financial Services Commission has announced an initiative to boost corporate governance rules for financial firms, primarily to address a lack of transparency in the nomination processes for chiefs at local banking companies. The initiative to shore up the Act on Corporate Governance of Financial Companies, to be proposed by June, are geared at prohibiting the incumbent chief of a financial company from joining an internal committee to nominate outside directors. It would also oblige outside directors to comprise more that two-thirds of the committee. If an outside director of a financial company serves more than two terms, the company will be required to carry out an external screening for the person's eligibility. A financial company will also be required to reveal to the public a set of requirements for its new CEO prior to the nomination of a new CEO. The right to engage in a nomination process for external directors or CEO will also be given to minor shareholders who hold shares with face value of at least 100 million won ($93,800) as of the prior quarter. Currently, the rights are recognized only for those with at least a 0.1% share. "The incumbent executives' influence in the nomination process of the CEOs and outside directors (of a financial company) is at an extraordinarily high level," Choi Jong-ku, chairman of the FSC, said March 15. "Independence has not been secured in nominating outside directors, and the directors fell short of playing a proper role in placing checks and balances in executives' actions." Apart from changes revolving around nomination committees, the FSC made other recommendations to boost the corporate governance of financial companies. Controlling shareholders of financial companies will be subject to tighter rules, while a more expansive coterie of "major shareholders" will be brought under eligibility screening by the watchdog to ensure transparency of the companies. The current law delineates that the biggest shareholder is the only one subject to the screening.
No Hurry to Unwind BHP Billiton Dual-Listing: UBS
" Australian Business Review (03/16/18) Chambers, Matt"
The BHP Billiton (BBL) dual-listed company structure under pressure from Elliott Management is unlikely to be unwound any time soon, according to UBS analysts, whose latest analysis shows little compelling reason to pursue unification. The UBS report comes after BHP last month released more information on the value of keeping the dual-listed-company (DLC) structure, in response to Elliott-funded analysis that found dissolving the DLC under an Australian primary listing could reap $US22 billion worth of value. "While we see a collapse likely at some point, we believe BHP might be better off focusing on its priorities of driving productivity, selling shale, restoring its balance sheet, and rethinking potash," UBS says in a note to clients. It added: "There appears to be little compelling story to collapse in the next three years. Post three years, after tax credits have been exhausted, then possibly." The DLC was formed in 2001, when BHP merged with London-listed Billiton, leaving about 60% of the company's shares listed in Australia and the rest in London. Since then, the Australian shares have traded at an average premium of about 15%, UBS says. Elliott, which owns 5% of BHP's London-listed shares, last year called for the structure to be unified under a primary British listing, but later switched positions.
Icahn Representative to AIG Board Will Not Seek Another Term: Filing
" Reuters (03/14/18) Barlyn, Suzanne"
American International Group Inc. (AIG) said Wednesday that Samuel Merksamer, who represents Carl Icahn on the insurer's board, will not seek re-election at the annual meeting in May. Merksamer, who has served as a director on behalf of Icahn since 2016, will continue his work on AIG's board until that time, the company said. Merksamer was a managing director at Icahn Capital, a unit of Icahn Enterprises LP, since 2008 until leaving last year. Icahn is AIG's third-biggest shareholder with a 4.76% stake as of late 2017. Icahn has shaken up management teams and business strategies at various companies, using deputies like Merksamer to implement changes he believes necessary. When Icahn first began amassing his stake in 2015, he called for AIG to separate into three parts. Instead, the insurer initiated a two-year turnaround plan developed by former CEO Peter Hancock, which sought to return $25 billion to shareholders. AIG announced Hancock's resignation in March 2017. CEO Brian Duperreault took over the insurance giant in May, saying that he wanted to expand the company. In January, AIG announced it would buy reinsurer Validus Holdings Ltd. (VR) for $5.56 billion in cash, its biggest acquisition since the global financial crisis.
Elliott Looks to Remove Telecom Italia's Executive Chairman
" Financial Times (03/15/18) Fildes, Nic"
Elliott announced it will seek to oust Telecom Italia's (TI) executive chairman, Arnaud de Puyfontaine, plus five other directors at the extraordinary general meeting next month. The fund recently revealed a stake in the Italian company, which is controlled by top shareholder Vivendi, and declared it would call for governance improvements. Elliott has now informed Telecom Italia that it wants a vote to fire five directors who are linked to Vivendi—including de Puyfontaine, who is Vivendi's CEO—as well as Giuseppe Recchi, the former executive chairman of Telecom Italia. The fund has not leveled its pressure at Telecom Italia CEO Amos Genish, who was appointed to the position last year and is a confidante of Vincent Bolloré, the billionaire who controls Vivendi. Elliott has nominated Fulvio Conti, Massimo Ferrari, Paolo Giannotti De Ponti, Dante Roscini, Rocco Sabelli, and Luigi Gubitosi—a former CEO of Fiat and Wind who was tapped to lead Alitalia as it collapsed last year—as replacements.
Noble Group 'Arrogance' Attacked as Shareholder Revolt Looms
" Bloomberg (03/14/18) Farchy, Jack; Blas, Javier; Ng, Jasmine"
A shareholder rebellion at Noble Group Ltd. threatens to derail the trading house's $3.5 billion restructuring deal agreed with senior creditors. If shareholders vote against the deal, the company will seek to implement the restructuring as a prepackaged administration in the U.K., an action that would effectively concede the company's insolvent, Noble said on Wednesday. Noble's fifth-largest shareholder, Goldilocks Investment Co., attacked the plan on Thursday, saying it is "astounded" that the company has ignored calls to make the deal more equitable for minority investors, and blasted the trader for trying to "bulldoze its way through" by attempting to shift its main interests to the U.K. Several of the top shareholders held talks with the company's advisers last week and expressed their concerns with the deal, according to sources. The biggest shareholder is Richard Elman, the company's founder, who still sits on its board. The next four largest shareholders, which include Goldilocks, collectively own 38.4% of the company. The deal will require the approval of at least half of shareholders' support at a meeting this spring. In a nod to the shareholders' importance to the restructuring, Noble has slightly improved the deal for them from an original plan in January. However, Goldilocks is unimpressed. "Management will ultimately continue to be handsomely rewarded" and the revised deal is "nothing more than window-dressing," Goldilocks said. "We caution that Goldilocks does not take kindly to Noble's arrogance. This matter will escalate and we reserve all our rights," it said.
Reuters: Vivendi Ready to Support Other Investor-Backed Strategy at Telecom Italia to Boost Share Price
" Reuters (03/14/18) Jewkes, Stephen"
Telecom Italia's (TI) top shareholder, Vivendi, believes in the company's new strategic plan, but is also prepared to consider any move backed by shareholders to improve its share price, a spokesman said Wednesday. Last week, Elliott Advisors revealed a stake in Telecom Italia and said it was ready to replace board members in an effort to boost strategy, value, and governance. The spokesman said Vivendi CEO and Telecom Italia Chairman Arnaud De Puyfontaine was ready to consider suspending his executive functions at the company during the period dedicated to this strategic debate. "Elliott Management repeatedly attacks States and companies... and is known for its financial approach focused on short term gains, most probably leading in this case to dismantling [Telecom Italia]," the spokesman said. Vivendi owns roughly 24% of the company.
Oil Majors Give in to Investors With Share Buyback Spree
" Reuters (03/14/18) Bhattacharjee, Nivedita; Paul, Anirban"
U.S. oil producers are announcing share buybacks after nearly three barren years for investors. Since the beginning of the year, 11 companies have promised buybacks, including Devon Energy (DVN), Hess Corp. (HES), and Noble Energy Inc. (NBL), committing to buy back about $3.6 billion worth of shares. Meanwhile, Chevron Corp. (CVX) hinted that it would start buying back shares if it produced stronger cash flow this year. The payouts can be attributed to a combination of higher and more stable oil prices and pressure from investors. Hess, for instance, announced its plan to avoid a battle with Elliott Management—which owns more than 6% of the company—ahead of nominations for its board. Analysts have indicated that companies can afford to continue their focus on shareholder returns so long as oil holds to current prices.
Starboard Nominees to Purchase $25 Million of Newell Stock If it Successfully Replaces the Board
" StreetInsider.com (03/14/18)"
Starboard Value LP announced Tuesday that three of its directors nominees have pledged to buy a combined $25 million of Newell Brands Inc. (NWL) if the hedge fund successfully replaces the board at the annual meeting. Starboard owns a roughly 4.5% stake in Newell. If elected, the director nominees—Ian G.H. Ashken, Martin E. Franklin, and James E. Lillie—also agree not to sell any of those shares for the extent of their directorships at the company, unless Newell's share price exceeds the company's share price on April 15, 2016, which is the day Newell closed its acquisition of Jarden Corp. Franklin stated, "Newell is a great company, with great people and fantastic brands. Over the past two years, we, along with many shareholders, have suffered significant value destruction under the current leadership team. We are committed to helping put the Company back on the path to success. Ian, Jim and my commitment to purchase stock, along with our current substantial holdings, is an indication of how strongly we believe in the value creation opportunity at Newell and how important it is for the Board to have interests that are strongly aligned with shareholders through meaningful equity ownership."
Ingles Adds Investor Nominee to Board Slate
" Supermarket News (03/13/18) Hamstra, Mark"
Ingles Markets (IMKTA) has reached an agreement with longtime investor Gamco Investors to appoint one of its nominees to its board, according to its proxy filing with the Securities and Exchange Commission. The supermarket chain said it is recommending shareholders vote for John R. "Jack" Lowden as a new director at the annual meeting on April 24. Lowden, president and CIO of NewCastle Partners, was one of two director nominees proposed last October by the investor. Gamco founder Mario Gabelli said his firm has been pushing to improve Ingles' transparency and communications with analysts and investors. Ingles has not held conference calls to discuss its earnings results in recent quarters. "We were a little frustrated that our analysts were not able to get fundamental information that all companies are willing to share," Gabelli said. However, he said he is supportive of the company's direction and its management. "I told [Ingles Chairman Robert P. Ingle II], 'We're not looking to have you do anything differently, but just realize that you have institutional shareholders who are responsible as fiduciaries to their clients,'" he said. In a filing last year, Gamco—which at the time owned 16.5% of Ingles Class A shares—argued Ingles' board lacked independence from the family that controls the company. Only three of the eight board members are independent, according to Gamco.
SEC Chairman Non-Committal on Dual-Class, Cybersecurity, Fiduciary Rulemaking
" Pensions & Investments (03/13/18) Kilroy, Meaghan"
Securities and Exchange Commission (SEC) Chairman Jay Clayton discussed dual-class share structures, proxy-voting procedures, cybersecurity disclosures, and broker-dealers and advisers at the Council of Institutional Investors' conference in Washington on Monday. Asked whether he thought the SEC would address dual-class structures formally or informally, Clayton said he was not placing it at the "front of the agenda for something (the SEC) should weigh in on." He added that he's "not persuaded by absolutists on either end" of the dual-share class issue and that "governance by indexation" or barring companies from indexes because of their voting share structures is not something he approves of at the moment. In addition, when asked if there should be "federal regulation or greater oversight of proxy-advisory firms," Clayton said that he has "not formed a definitive view of whether we should have SEC regulation of proxy-advisory firms." On the issue of cybersecurity, Clayton did not say whether there would be rule-making on how companies should respond to cybersecurity incidents, but he did note that staff would be focusing on how public companies disclose cybersecurity risks and breaches. Finally, when asked to explain more about the SEC's initiative to address the different standards of conduct for investment advisers and broker-dealers, Clayton said it has become "increasingly apparent" to him that more needs to be done to bring "consistency or harmony." Clayton said he hopes the SEC is able to present a proposal on this, but declined to provide a timeline.
Ex-Newell Director Conroy Backs Starboard, Says Change 'Needed'
" Bloomberg (03/12/18) Mittelman, Melissa; Deveau, Scott"
Former Newell Brands Inc. (NWL) director Kevin Conroy, who resigned from the board last week after seven years, said he backs Starboard Value's efforts to turn around the company. Conroy said his decision to leave the board was a personal choice, and although he departed on amicable terms, he wants "to set the record straight" on the reasons for his exit. "I resigned because I do not believe that the current course is the optimal path forward for the company," he said. "I am not comfortable with recent events and have come to believe that change is needed." Conroy was the fifth director to resign from Newell as the company faces a proxy fight from Starboard. The fund is teaming up with former executives of Jarden Corp.—which was purchased by Newell two years ago—in its campaign to overhaul Newell's entire board. "Kevin's public statement of support for our efforts is much appreciated and even further validation, we believe, that our director candidates are the right ones to deliver the material change required for the benefit of the company and its shareholders," Starboard's Jeff Smith said Monday. Newell's shares, which increased 6.1% to $28.99 on Monday, are down 40% over the past year.
Yakira Capital Management Sends Letter to Board of Safeguard Scientifics (SFE)
" StreetInsider.com (03/12/18)"
Yakira Capital Management, Inc., which owns roughly 2.5% of Safeguard Scientifics Inc. (SFE), sent a public letter on Monday to the board of directors. The investor said it was "appalled" to learn that the board is in the process of finalizing new employment contracts with Safeguard's senior management, and urged it to postpone any such discussions about management's pay packages until after the annual shareholders' meeting in May. "We believe it is highly inappropriate, and a breach of proper corporate governance, for any Board that is in the midst of a proxy fight—particularly a contest with the high likelihood of a dramatically altered Board composition—to sign off on material compensation packages for the current management team," the letter stated. Yakira said it was also "extremely dismayed" by the company's move to institute a poison pill designed to prevent eight of the top ten shareholders from purchasing more shares. It noted that two other investors have also voiced displeasure that the board undertook such an anti-shareholder action, and called it "a flagrant act of entrenchment." Yakira said it believes that Safeguard needs senior management that can successfully execute on the following three areas: first, to assess when, and if, to add follow-on capital to existing portfolio companies; second, to achieve the best possible exits for existing portfolio companies; and third, to return capital in the most beneficial way to shareholders.
U.S. Shareholders Look to 'Bust Some Heads' at Aimia Meeting
" Financial Post (03/12/18) Critchley, Barry"
A U.S.-based investment manager has upped its stake in Montreal-based Aimia Inc. for the third time in six months and indicated it may push for changes at the annual meeting on April 27. The stock has been falling for nearly four years and is down about 80% since last May. Last September, Mittleman filed an early warning report noting it had purchased enough shares to put it over the 10% limit. In February, it made another filing disclosing a 10.6% stake, and earlier this month, Mittleman revealed it had upped its position to a nearly 15% stake. In that March 2 filing, Mittleman used some new language suggesting it may become active. In the filing's purpose of the transaction section, Mittleman said "it may in future, seek to effect material changes in the issuer's business or corporate structure." Specifically it could seek changes to the board or management, or "the sale or transfer or material assets." Or it could call a shareholder meeting "and the solicitation of proxies from the Issuer's security holders in manner permitted by law." Such wording was absent in Mittleman's September filing. One prominent Canadian money manager noted that originally Mittleman made a 13G filing with the Securities and Exchange Commission, indicating a passive investment; recently that was upgraded to a 13D filing, indicating it expects to influence the company.
Spurned Babcock & Wilcox Suitor Becomes its Largest Shareholder
" Charlotte Business Journal (03/12/18) Downey, John"
A spurned suitor of Babcock & Wilcox Enterprises Inc. (BW) is now the company's top shareholder, according to filings with the U.S. Securities & Exchange Commission (SEC). Steel Partners Holdings now owns a 15.5% stake in the company, surpassing the 14.9% position held by Brian Kahn's Vintage Capital Markets, which is about to take control of B&W's nine-member board. Warren Lichtenstein, founder of Steel Partners, made a bid Dec. 15 to buy B&W for $6 per share. In a Feb. 15 SEC filing, Lichtenstein declared B&W "has been unwilling to engage in any meaningful discussions ... regarding this proposal." The filing said the group would consider making proposals to change "the operations, management ... board composition, ownership, capital or corporate structure, capital allocation, dividend policy, strategy and ... potential strategic transactions" involving B&W and its assets. Meanwhile, in a Dec. 12 SEC filing, Vintage said it was interested in changes to B&W's "business strategy or prospects" or "the sale or merger" of the company. In January, B&W expanded its board and placed Kahn and two allies on it in exchange for Kahn's agreement not to make any proposals at the shareholder meeting or lead any efforts against board members. B&W later agreed to give the fund essentially five seats on the board. Meanwhile, the embattled company also faces a shareholder suit over whether it misled investors about the problems in the waste-to-energy operations before announcing the steep losses for 2016.
UK Fund Demands Tokyo Broadcaster Sells Crossholdings
" Nikkei Asian Review (03/12/18) Yuda, Masayuki; Fukui, Tamaki"
Asset Value Investors wants Tokyo Broadcasting System Holdings (TBS) to sell down crossholdings and return the cash to shareholders. The London-based fund plans to issue an official proposal at the June annual meeting of Japan's key TV broadcaster, if the fund's current informal pitch is rejected. According to Asset Value Investors CEO Joe Bauernfreund, TBS has behaved more like an amateur fund with a small broadcasting business, given that about 40% of its more than 700 billion yen ($6.6 billion) of net asset value comes from its stock holdings. Another 40% comes from real estate, and operating businesses generate only slightly more than 10% of its entire net asset value. He added that TBS "has no fundamental business relationship" with 72% of its securities portfolio and that there was "no rational reason" to have those stakes on the balance sheet. The fund, which owns 1.7% of TBS, has sent four letters to the broadcaster since it bought into the company in January 2017, receiving two replies that Bauernfreund called "benign" but "superficial." He said the fund's most recent meeting with the company on March 7 indicates that "TBS is taking our suggestions seriously, but at the same time they do not appear to be willing to sell down the securities portfolio."
Exclusive: GE Explores Divesting Electrical Engineering Business - Sources
" Reuters (03/09/18) Brumpton, Harry; Roumeliotis, Greg"
General Electric Co. (GE) is considering a sale of its electrical engineering business, according to sources. The divestiture would be the latest in a string of asset sales the U.S. industrial conglomerate is exploring as its stock has lost half its value in the last 12 months. GE CEO John Flannery is also under pressure from investors, including Trian Fund Management LP which sits on its board of directors, to revitalize the business. Flannery hinted earlier this year that he was open to breaking up the company, and said that a spinoff of any of its units, which include power, healthcare, and aviation, was possible. GE acquired Converteam, an electrical engineering company, for $3.2 billion in 2011 to increase its presence in that sector. At the time, energy was GE's most profitable business, accounting for one-fourth of the company's revenue. Since then demand for its products has declined, and profit at the division plunged 45% last year. Converteam, which in 2012 was rebranded GE Power Conversion, is now expected to fetch less than what GE paid for it, the sources said. GE is considering ways to shed the unit before launching a sale process, said the sources. Flannery said in October that GE would sell at least $20 billion in operations to stabilize its financial performance.
Newell Starts Sale Process for Goody Brand
" Wall Street Journal (03/09/18) Kang, Jaewon"
Newell Brands Inc. (NWL), which is under pressure from Starboard Value LP, launched a sale process for hair accessories brand Goody Products Inc., according to sources. Goody has been part of the consumer products company since 1993, and is among the first Newell brands to be sold as part of the conglomerate's transformation plan to unload noncore businesses. Newell said in January it plans to sell other assets, including baseball equipment brand Rawlings Sportings Goods Co., container brand The Waddington Group, and U.S. Playing Cards. On a conference call to discuss financial results, the company said it anticipates generating roughly $6 billion in net proceeds after taxes from its divestitures. Although Newell has said it expects the broad divestiture of noncore brands to command purchase price multiples of about 12-times EBITDA, the businesses are of "mixed quality," noted Jefferies LLC analyst Kevin Grundy. There is a concern about how realistic that goal is given that the stock is trading below the 12-times range, he added. Starboard Value launched a campaign last month to replace the entire company's board, and also urged Newell to postpone major divestiture decisions until its annual shareholder meeting in May. The Goody auction will test private equity's interest in investments in brands with big names but slow growth.
U.S. Hedge Funds File Lawsuit Over Marine Fuel Firm's Deal
" Wall Street Journal (03/09/18) Fletcher, Laurence"
A shareholder group has filed a lawsuit against Aegean Marine Petroleum Network Inc. (ANW), the world's biggest independent supplier of physical marine fuel, accusing it of trying to conduct "a corrupt corporate acquisition." The lawsuit filed on Thursday is seeking a temporary restraining order in an effort to block Athens-headquartered, U.S.-listed Aegean's $367 million purchase of H.E.C. Europe Ltd. The group—led by Sentinel Rock Capital's Tyler Baron—owns roughly 12% of Aegean Marine. They claim its purchase of H.E.C. will "line the pockets" of its founder and is designed to block their own recent efforts to appoint new board members at Aegean Marine by diluting their shareholdings. H.E.C. is owned by Dimitris Melissanidis, who is also the founder of Aegean Marine, along with family members and the Agiostratitis family. Melissanidis pared his stake in Aegean Marine to zero in 2016, according to the company, but the investors say his control over the company has remained unchanged. As part of the deal, Melissanidis and the other sellers will receive 20 million shares, giving them control of around one-third of Aegean Marine. The shareholder lawsuit describes the price of the deal as "a massive overpayment" and says the board's decision-making on the deal is "highly suspect," adding it is a "transparent effort to entrench current directors."
Starboard Issues Letter to Newell Shareholders
" PRNewswire (03/09/18)"
Starboard Value LP, a significant shareholder of Newell Brands Inc. (NWL), which together with the other participants in its solicitation beneficially owns approximately 4% of the company's outstanding shares, today announced that it has issued a public letter to the company's shareholders. In the letter, Starboard commented on yesterday's announcement by Newell that a fifth director had abruptly resigned from Newell's board of directors. The letter says: "Yesterday, just one week after the announced resignation of Ros L'Esperance, Newell announced that another long-tenured director, Kevin Conroy, had resigned from the Board. In our opinion, there is no reasonable explanation for this mass exodus other than directors desiring to cease their association with such poor corporate governance and dismal operational performance." Starboard's letter noted that significant change at Newell is warranted, given a lack of leadership and deteriorating performance.
Breitburn Energy Bankruptcy Plan Denied in Blow to Elliott, WL Ross
" Reuters (03/09/18) Rucinski, Tracy; Hals, Tom"
A U.S. judge ruled against Breitburn Energy Partners LP's (BBEPQ) bankruptcy exit plan on Friday, dealing a setback to an effort by investors led by Elliott Management Corp. and WL Ross & Co. to acquire choice oil and gas reserves in West Texas. The parties must now renegotiate a deal that would transfer Breitburn's Permian reserves to investors including Elliott and WL Ross through their participation in a $775 million rights offering. U.S. Bankruptcy Judge Stuart Bernstein in New York ruled the plan, which aimed to reduce Breitburn's $3 billion in debt, discriminated against retail bondholders. The judge rejected the plan because institutional bondholders were recovering more than twice the amount offered to individuals holding the same bonds, who were getting 4.5 cents on the dollar. Retail investors only hold about $45 million in bonds, so Breitburn could double their recovery for a few million dollars. Judges rarely spurn big corporate Chapter 11 plans, in part because the parties typically reach a broad consensus before seeking court approval. Breitburn filed for Chapter 11 bankruptcy in 2016 after a lingering slump in commodity prices. As commodity prices have recovered from lows, the plan's opponents said Breitburn's reserves had increased in value and justified a greater recovery for creditors and equity holders. Equity holders had argued the company's valuation was twice the $1.8 billion estimated by Breitburn's investment banker, but Bernstein countered that they were hopelessly "out of the money." The Breitburn bankruptcy is especially painful for equity investors because the company is structured as a master limited partnership, which treats canceled debt as taxable income—meaning shareholders could be hit with a tax charge.
Showdown of Investors Looms Over Troubled Babcock & Wilcox
" Charlotte Business Journal (03/08/18) Downey, John"
Two shareholders are contending for control of Babcock & Wilcox Enterprises Inc. (BW), which could result in a possible showdown at the upcoming shareholder meeting. Warren Lichtenstein's Steel Partners Holdings spent nearly $2.8 million this week buying more shares of the embattled power engineering and manufacturing company. It now owns 14.4% of B&W. Lichtenstein has been upping his stake since he proposed purchasing the company for $6 a share in December. He said in filings last month that B&W was "unwilling to engage in any meaningful discussions ... regarding this proposal." He added that in acquiring shares, Steel Partners is considering its options and may push for anything from asset sales to restructuring to the sale of the company. Meanwhile, another investor, Vintage Capital Management is also strengthening its hold on the company. Vintage is B&W's largest shareholder with 14.9% of the outstanding stock, and it will soon have five seats on B&W's nine-member board of directors. Last week, four directors stepped down, clearing the way for Vintage to nominate two new board members. Vintage managing partner Brian Kahn and two allies are already on the board, placed there by the company as part of an agreement not to push for changes at the annual shareholder meeting this May. B&W's board aligned with Kahn, making two deals with Vintage in 2018, but Lichtenstein appears to be gathering enough shares to mount a challenge to that.