Starboard Threatens to Replace Mellanox's Board
" Calcalist (11/22/17) Abramson, Ran; Reich, Dror; Hazani, Golan"
A Starboard Value LP senior executive says the hedge fund is preparing to make changes in Mellanox Technologies Ltd. after taking a 10.7% interest in the Israel-based chip company. "As in all of our investments, we are seeking to bring a positive change at the company," the unnamed senior executive said in an interview with Calcalist. "As we proved in prior situations over the years, if the management and the board are not willing to work with us, certainly we are willing to seek changes to the board through an election process." The executive cited Mellanox's assets, such as great technology and good products, and "its ability to generate over 70% gross margins" but pointed out that "because of elevated operating expenses, their operating margins are significantly below where they should be and significantly below their peer group." High spending on research and development is a contributing factor to the company's inflated expenses. The executive said the company's workers need not be concerned about their jobs, at least in the short term. "There are many ways to drive operational improvements. We want to see good things happen in Mellanox for the benefit of shareholders and employees."
Myer Circles the Wagons Against Lew Assault
" The Australian (11/21/17) Murdoch, Scott; Carter, Bridget"
Australian retailer Myer is gathering a team of prominent lawyers, advisers, and experts in a bid to ward off shareholder Solomon Lew's advances. The company reportedly hired Melbourne advisory firm Flagstaff Partners after Lew demanded new directors, assailing the board for its "New Myer" strategy. Joining Flagstaff as well as Myer's long-time house adviser, Goldman Sachs, is Clayton Utz's Melbourne-based partner Fred Prickett to provide legal advice. The retailer has also retained proxy solicitation expert Maria Leftakis from Morrow Sodali while GRA Cosway is working on public relations, even though Myer already has various in-house communications practitioners. The combination of all these formidable players demonstrates the expense and efforts Lew is going up against. Lew reportedly is working with UBS and lawyers Arnold Bloch Leibler on his bid to overhaul Myer's board. He has proposed voting against the retailer's chairman-elect, Garry Hounsell, and two other directors at the annual meeting this Friday.
Macerich Executives to Get $32 Million Sweetener if Firm Is Sold
" Bloomberg (11/21/17) Katz, Lily; Melin, Anders"
Macerich Co. (MAC) revealed in its quarterly filing on Nov. 3 that it had adopted a cash-severance plan, signaling the company could be preparing for a sale. The new severance agreements ensure that four top executives at the shopping-mall operator would get a hefty payout if the firm were sold and they lost their jobs as a result. Shareholder pressure and escalating deals among mall operators have led to speculation that Simon Property Group Inc. (SPG)—which offered to buy Macerich two years ago—will make another offer. At the time, Macerich rejected Simon's $16.8 billion bid, saying it was too low. Investors agitated Macerich after it spurned Simon's offer and it attempted to adopt a poison-pill provision and stagger the terms of its board members. Following shareholder pressure, it scrapped those plans and instead added two independent directors. Shares of Macerich had fallen as much as 26% this year, bottoming out at $52.72 on Sept. 22. Dan Loeb's Third Point revealed earlier this month that it acquired a stake during the third quarter and is expected to push for changes, which could include a potential sale, sources have said. Starboard Value also disclosed a stake. The stock has jumped about 17% since Macerich published its new severance policy on Nov. 3, which states that the four senior managers will be eligible for more than $32 million if they leave or are fired within two years of a change of control.
ISS Announces 2018 Updates to US Proxy Voting Guidelines
" Lexology (11/20/17) Breheny, Brian V.; Gerber, Marc S.; Grossman, Richard J."
Institutional Shareholder Services' (ISS) updates to its U.S. proxy voting guidelines for the 2018 proxy season reflect institutional investors' continued focus on environmental, social, and governance matters. The voting policy updates will be effective for shareholder meetings held on or after Feb. 1, 2018. Among the changes, ISS will recommend against all directors at a company every year for so long as a nonshareholder-approved long-term rights plan remains in place. The proxy advisory firm has adopted a new policy providing for adverse voting recommendations for members of the board committee responsible for approving or setting nonemployee director compensation where there is a pattern (over two or more consecutive years) of "excessive" nonemployee director pay without a compelling rationale or other mitigating factors. ISS will now take into consideration the rankings of CEO total pay and company financial performance relative to an applicable peer group over a three-year period. The disclosure of shareholder engagement efforts affecting ISS' view of a board's responsiveness will now include disclosure of the timing and frequency of shareholder engagements and whether independent directors participated; the specific concerns voiced by dissenting shareholders that led to the say-on-pay opposition; and specific and meaningful actions to address shareholders' concerns. Also, ISS has updated its policy on shareholder proposals related to climate change risk to generally recommend in favor of proposals seeking disclosure on how the company identifies, measures, and manages those risks.
Jana Discloses Large Stake in Outback Steakhouse Owner
" Wall Street Journal (11/20/17) Armental, Maria"
Jana Partners LLC unveiled a roughly 8.74% stake in Bloomin' Brands (BLMN) on Monday and intends to call for a review of strategic alternatives, including a potential sale. The hedge fund believes Outback Steakhouse owner's stock is undervalued, according to a securities filing. It shot up 12% to close Monday at $20.54, representing the biggest one-day gain in almost four years. Jana's roughly 8 million shares in the company would make it the second-biggest shareholder, according to FactSet data. Jana recently led the campaign to overhaul Whole Foods Market that helped trigger the grocer's sale to Amazon.com Inc. (AMZN). Bloomin' Brands also manages Carrabba's Italian Grill, Bonefish Grill, and Fleming's Prime Steakhouse & Wine Bar. As of Sept. 24, the company had almost 2,000 restaurants and franchised 294 locations, according to regulatory filings.
Nestle Is Among Potential Suitors for Hain Celestial
" Bloomberg (11/20/17) Hammond, Ed; Nair, Dinesh; David, Ruth"
Swiss giant Nestle SA reportedly has held preliminary talks about purchasing all or parts of Hain Celestial Group Inc. (HAIN), as both companies face shareholder pressure. Nestle would benefit from Hain's U.S. distribution network as it seeks to expand into healthier foods; but an acquisition would be costly at current valuations, said MainFirst analyst Alain Oberhuber. With changing consumer tastes afflicting many food companies, Hain's profit has fallen from a peak of $180 million in 2015. In June, Engaged Capital disclosed a 9.9% stake in Hain Celestial and began pushing for changes, including a possible sale. Engaged Capital believes the company could secure $46 to $73 a share in a sale based on recent acquisitions in the food industry, a source said at the time. Shares of Hain Celestial closed up 2.6% to $40.89 on Monday, valuing the company at more than $4.2 billion. Hain Celestial announced in September that it was working with advisers to explore strategic alternatives and also agreed to add six new directors nominated by Engaged Capital. Meanwhile, Nestle's sales fell to $91 billion last year from a peak of more than $100 billion in 2014, according to data compiled by Bloomberg. Since Dan Loeb disclosed a stake in Nestle in June, CEO Mark Schneider has initiated acquisitions in niche markets like organic food and hipster coffee as the company anticipates the slowest sales growth in at least two decades this year.
WPP Accepts Bain's Offer for Japan's ADK, Says Bain
" Reuters (11/20/17) Fujita, Junko; Holton, Kate"
U.S. private equity firm Bain Capital LLC confirmed Tuesday that its $1.35 billion offer for Asatsu-DK Inc. (ADK) was accepted by WPP, the Japanese company's 25% shareholder. WPP—which partners with ADK—criticized Bain last month when it sought to purchase the advertising agency, arguing that the offer undervalued the firm. Other ADK shareholders, including London-based fund manager Silchester International Investors LLP and Hong Kong-based hedge fund Oasis Management Co. Ltd., also considered Bain's offer too low. However, Bain said Tuesday that WPP has now agreed to sell its ADK shares for 3,660 yen ($32.53) each, the same price it rebuffed last month. WPP and Bain would now discuss the possibility of WPP holding roughly 25% of a group that would own ADK, the Japanese agency said. Bain's first offer came after ADK asked it to purchase WPP's stake to end a two-decade business partnership which ADK said failed to produce synergy. WPP sought a higher price and filed for arbitration, seeking a ruling that ADK's plan to end the alliance was invalid and that ADK had no right to request or require WPP to sell its shares. Bain said that WPP would end arbitration and injunction proceedings if the tender offer succeeds.
Nelson Peltz Will Bring 'Fresh Perspective' to P&G: CalSTRS
" CNBC (11/17/17) Fox, Michelle"
CalSTRS, the California State Teachers' Retirement System, believes that adding Nelson Peltz to the board of Procter & Gamble (PG) will be positive for shareholders. "Someone like Nelson would bring a fresh perspective to the boardroom at P&G. They really have had a lot of insiders there. They've done well over the years, but I think bringing a fresh set of eyes and a new start there would be beneficial to shareholders," Anne Sheehan, director of corporate governance at CalSTRS, told CNBC on Friday. Peltz, the manager of $12.5 billion Trian Partners, won a proxy-vote recount for a board seat in a surprising turn earlier this week, although P&G can still challenge the result. Sheehan said that after the vote is certified, P&G should award board representation to Peltz, who began agitating P&G this summer after the company rebuffed his request for a board seat. CalSTRS, which owns nearly 5.6 million shares of P&G stock, announced its support of Peltz last month. The pension fund has been an investor with Trian since 2011. According to Sheehan, CalSTRS supports numerous activists. "They play a positive role in the capital markets. They help generate enhanced shareholder return for us," she explained. P&G on Wednesday said the vote results are preliminary and subject to a review and challenge period.
LSE Directors Weigh Publishing Dossier on Rolet
" Financial Times (11/17/17) Gapper, John; Stafford, Philip"
A board committee at the London Stock Exchange Group (LSE) is considering how detailed to get in a dossier about the behavior of CEO Xavier Rolet, following accusations by The Children's Investment Fund (TCI) that the board unjustly ousted him. The panel is working on a "shareholder circular" regarding its concerns regarding the aggressive management style favored by Rolet, who announced last month that he would depart amicably by the end of 2018. He is credited with transforming the LSE and bringing about a number of deals that boosted its value from £800 million to £13.4 billion during his eight-year tenure. However, he is also perceived as controlling, abrasive, and dismissive of other' views, as documented in what one source called "an accumulation" of incidents over the past two years. The board committee is debating whether to publish details of emails sent by Rolet during that time. This month, TCI challenged Rolet's exit and called for Chairman Donald Brydon's resignation, saying Rolet had been dismissed unfairly and should be reinstated until at least 2021. The company has called an emergency general meeting and will publish the circular to investors in order to provide more information about Rolet's departure, but it is still contemplating the level of detail to include. TCI last week requested to know "the specific reasons that the board dismissed Xavier Rolet" and whether he was considered "fit and proper" by the LSE's regulators.
Toshiba Gains Breathing Room With $5.4 Billion Share Issue to Overseas Investors
" Reuters (11/19/17) Yamazaki, Makiko; Hughes, Jennifer"
In a bid to avoid a delisting, Toshiba Corp. has announced plans for a $5.4 billion new share issue to more than 30 overseas investors—including Third Point LLC, Oasis Management Company, and Cerberus Capital Management. As Toshiba faces billions of dollars in liabilities at Westinghouse—its bankrupt U.S. manufacturer of nuclear reactors—the company has been working to make up the difference by the end of the financial year in March or be delisted. An extended auction for its lucrative chip unit has meant it cannot depend on realizing those funds on time. The share issue, decided at a board meeting Sunday, is equivalent to a 35% stake in the struggling Japanese conglomerate. The deal was designed for overseas investors as Toshiba has only recently come off a Tokyo Stock Exchange watchlist it had occupied after a 2015 accounting scandal, making it tough for domestic firms to invest. For some foreign investors, it is an investment that will succeed even if the agreed sale of Toshiba Memory—the second-biggest producer of NAND chips—to a consortium led by Bain Capital fails. If the sale does in fact survive legal challenges and goes through, Toshiba will still own 40% in the semiconductor unit as it plans to reinvest. Singapore-based fund Effissimo Capital Management will become the biggest shareholder in Toshiba, with an 11.34% stake.