Swiss Investor Bohli Engages Credit Suisse
" Bloomberg (10/16/17) Foerster, Jan-Henrik"
Rudolf Bohli's RBR Capital Advisors is calling for Credit Suisse Group AG (CS), Switzerland's second-largest bank, to break into three parts. The local investor has acquired a 0.2% stake in Credit Suisse, worth about 100 million francs, according to a source. Bohli has met with executives in recent weeks to discuss some of his ideas, including a split of the firm's investment bank from the private-banking units, the source said. Credit Suisse launched a restructuring led by CEO Tidjane Thiam two years ago, reducing turbulent trading operations and focusing more on managing money for the wealthy. Progress on improving profitability has been tepid and the shares have fallen by one-third under Thiam. However, the stock is up about 10% this year amid greater optimism about the cost cuts; and profit rose 78% in the second quarter as reduced expenses buoyed the global markets business. While Bohli indicated earlier this year that he did not plan on engaging a bank soon because of their size and complexity, he wrote in an investor update that Credit Suisse was a "misunderstood jewel" with an undervalued wealth-management business. Gael de Boissard, former co-head of Credit Suisse's investment bank, reportedly is backing Bohli. The hedge fund is expected to announce its strategy this week at the Robin Hood investors conference in New York. Analysts and investors suggested it is unlikely Bohli could force a breakup of Credit Suisse, with one noting that the businesses are too integrated and the bank is still undergoing a major restructuring.
Credit Suisse's Biggest Shareholder Dismisses Investor's Plan
" Bloomberg (10/17/17) Foerster, Jan-Henrik; Winters, Patrick"
Credit Suisse Group AG's (CS) top shareholder has denounced a plan by RBR Capital Advisors to break up the company into three. David Herro, who says his Harris Associates owns 9% of the Swiss bank, argued Tuesday that the current strategy is beginning to produce results. He added that Swiss hedge fund manager Rudolf Bohli, whose RBR Capital Advisors holds a 0.2% stake in Credit Suisse, has "hardly any skin in the game." The Swiss lender began a restructuring two years ago, and Herro believes the current plan will revitalize the bank if given more time to work. "You can't turn around an aircraft carrier in a couple of months or quarters," he said in an interview on Bloomberg TV. "I think management is doing a good job." Bohli—whose firm manages 250 million francs ($256 million)—is calling for Credit Suisse to be split into an investment bank, a wealth manager, and an asset-management business, according to sources. "The reason why the activist is going after this bank is that its really undervalued—our view is that there is substantial upside here," Herro said. His firm has held Credit Suisse shares for more than 12 years.
Solomon Lew Ups Pressure on Myer's Incoming Chair Ahead of Strategy Day
" The Australian (10/16/17) Greenblat, Eli"
Solomon Lew has ramped up the pressure on Myer and its board ahead of the department store operator's crucial strategy day on Nov. 1. The billionaire retailer has demanded an update on first quarter trading and promised to scrutinize any changes made to the "New Myer" strategy launched in 2015. And Lew's flagship investment company and Myer's biggest shareholder, Premier Investments, has said it will closely examine Myers' recent performance and the sustainability of the New Myer strategy after Garry Hounsell, incoming Myer chairman, last week publicly voiced his support of the strategy unveiled by Myer CEO Richard Umbers in 2015. In a statement on Monday, Myer signaled it would not give in to Lew's demands to release its first quarter trading performance at the strategy day. Last month, Lew launched a scathing attack on Myer's recent performance, its board, and what he derided as its very poor retail execution. The spat led to pressure last week that saw Myer Chairman Paul McClintock announce his intention to resign ahead of schedule at its AGM in late November to make way for Hounsell. Lew also asked for a copy of the Myer share register, which he has now received. He might mount a campaign to vote against the election of Hounsell to the board.
Worley Parsons Bonuses Face Shareholder Heat at AGM
" Australian Business Review (10/17/17) Carter, Bridget; Murdoch, Scott"
Worley Parsons has drawn the attention of the Australian Shareholders Association (ASA), which could speak up at the annual general meeting (AGM) on Oct. 27. The group is concerned about bonus payments being offered to executives in the past financial year, even as the company's share price hike has been due to potential takeover activity and cost cuts rather than fundamental earnings growth of the business. Worley Parsons has been struggling since the mining downturn, and as a result has slashed jobs and its overall operations. Last year, the Middle Eastern-based Dar Group made a takeover bid for the company then acquired a 19.5% blocking stake in the business in recent months, sending its shares soaring. The suitor appears to be staying around only as a strategic investor. While shares have rallied, the company is actually treading water, according to some shareholder advocates. Meanwhile, CEO Andrew Wood received $2.9 million in total pay for the 2017 financial year, including a $1.4 million cash salary and a $317,000 cash bonus, increasing 49.5% from the prior year. The argument is that the company is offering top management 25% of their cash bonus payments even though performance does not meet the company's own criteria involving earnings growth. However, the board has opted to offer the payments regardless as a reward for the group's cost-cutting efforts. Yet some shareholders support its remuneration policy for the past year, saying higher bonuses were needed to prevent departures as the industry starts to improve. The ASA protested the pay structure at last year's AGM.
P&G's Too-Close-To-Call Battle With Investor Is Expected to Enter Rare 'Snake Pit' Stage
" CNBC (10/16/17) Picker, Leslie"
Procter & Gamble (PG) declared last week it had won a proxy battle against Nelson Peltz's Trian Fund Management, while the hedge fund claimed the vote was "too close to call." The fight is now likely to descend into the "snake pit," a term used for the process where proxy-fight participants investigate each contested vote. "You're talking about the end stage of an election campaign, where the parties haven't kissed and made up," explained Bruce Goldfarb, head of Okapi Partners, a proxy-solicitation firm. "There's a little bit of venom to the process." P&G is expected to file an 8-K on Monday describing the preliminary results announced last Tuesday at its annual meeting: that its slate of 11 directors had been elected and that Peltz had not received enough votes for a board seat. Afterward, Peltz said in a CNBC interview that his numbers show the vote is as "close to a dead heat as possible," with a difference of "plus or minus 1 percent." IVS Associates, an independent inspector for contested elections, will first compose its own estimates; then the two sides will likely choose to move onto the review and challenge period—the snake pit. P&G has an unusually high retail proportion, accounting for roughly 40% of its shareholders. Individual investors are more likely to submit paper cards than voting over the phone or digitally; and shareholders can vote multiple times, with only the latest vote counted. There are estimated to be some 200,000 paper ballots, each of which will be scrutinized by IVS. A final, certified result is expected to take about eight weeks.
Ager-Hanssen Plans to Oust Johnston Press Chairwoman at EGM
" Prolific North (10/16/17) Austin, Simon"
The second-largest shareholder in Johnston Press is planning to call an emergency general meeting to force out the company's chairwoman. Norwegian billionaire Christen Ager-Hanssen acquired a 12.6% share in the newspaper publisher over the summer and says he is "very confident" about getting enough support to remove Camilla Rhodes as chairman. "Johnston Press is like a horse without a jockey. The executives get well paid but are doing nothing to build the company," Ager-Hanssen said, describing the board as "fee suckers." Richard Bernstein, head of Crystal Amber, has indicated he could support Ager-Hanssen. "Clearly we are frustrated with the lack of progress," Bernstein said. "We have been engaging with the company for a year." Crystal Amber is the company's top shareholder, with an 18% stake. Ager-Hanssen intends to install himself as chairman to spur a sweeping shake-up of management and strategy. He has proposed Steve Auckland, a veteran newspaper executive, to oversee print operational changes alongside digital development of Johnston Press. Auckland also plans to join the board as a non-executive director. Ager-Hanssen's investment fund, Custos, intends to refinance the company's bond debt with new, cheaper borrowing from Chinese investors. Custos reportedly is seeking to further boost its stake by buying out other major shareholders.
Fox Defends 'Transformation' in Reply to Call for Board Shake-Up
" Bloomberg (10/14/17) Sakoui, Anousha"
21st Century Fox (FOXA) is in the process of defending the internal changes it has made following a shareholder call for a board shakeup after a sexual-harassment scandal at its news division, according to a letter from the entertainment group to Dieter Waizenegger, executive director of CtW Investment Group. Viet Dinh, the chair of Fox's nominating and corporate governance committee, stated in the letter that the company had moved to bolster its human-resources efforts and governance. The move counters the shareholder's call for a board overhaul—including the hiring of more women as well as new human resources and control measures. The letter was issued prior to a shareholder meeting in Los Angeles next month and amid Fox's efforts to convince U.K. regulators that it has sufficiently robust standards in place to acquire broadcaster Sky Plc. "The transformation of Fox News is proof that our long-held commitment to a diverse workplace is a key driver of success throughout 21st Century Fox—where, incidentally, women serve as the Chair and CEO at the film studio, the television studio, and television network," Dinh noted. The board has begun a process to boost diversity by adding more independent directors. "The magnitude of the sexual and racial harassment crisis demonstrates a tone at the top that is permissive of unethical behavior and a troubling lack of attention on the part of the Board to the company's human capital management practices, as well as the associated risks to the company's reputation, operations, and long-term value," Waizenegger wrote in a letter to Dinh on Oct. 12. CtW also wants board changes, including the resignation of Australian businessman Roderick Eddington; the addition of two new directors with HR experience; more independent directors; a decrease in the number of insiders; and greater gender diversity at board level, up from the current 8% of female representation.
Destination Maternity Highlights ISS Support of Company's Nominees and Equity Plan Proposal
" PRNewswire (10/13/17)"
Destination Maternity Corp. (DEST), a maternity apparel retailer, has issued a letter to stockholders in connection with the annual meeting of shareholders on Oct. 19, 2017. The letter encourages Destination Maternity investors to follow the recommendation of Institutional Shareholder Services and vote "FOR" the company's slate of nominees. They also are urged to cast their ballots "FOR" approval of the proposed amendment to Destination Maternity's equity incentive plan; and in favor of the other proposals recommended by the board of directors. The company also advises shareholders to ignore a dissident's campaign. In the letter, the company asks, "Why hasn't [French children's clothing retailer] Orchestra-Prémaman submitted any director nominations? It is impossible to discern why OP would behave in this irresponsible manner. Despite having multiple opportunities to do so, not once did Orchestra suggest a stockholder proposal or recommend a board nominee. Now, instead of providing an alternative vision for the Company and our Board, they propose to inject unnecessary risk and uncertainty into the Company's corporate governance. ... Orchestra's stock price has fallen by more than 60% in less than one year, and in 2016, its net income dropped by 250%. We can only wonder if Orchestra's resources would be better spent working to reverse its own underperformance with its own directors."
21st Century Fox Pressed by Investment Group to Overhaul Board
" New York Times (10/12/17) Steel, Emily"
CtW Investment Group sent a letter to the board of Rupert Murdoch's 21st Century Fox (FOXA) on Thursday calling for sweeping corporate governance reform, following sexual and racial harassment scandals at its Fox News division. CtW, which advises several union pension funds with holdings in 21st Century Fox, accused directors of failing to effectively address a "longtime ethics crisis" at Fox News and risking the company's reputation and long-term value. "If the board was aware of the settlements and refused to investigate and mitigate the risk, instead allowing the problem to fester, then it failed in its risk oversight function and facilitated a tone at the top that permits unethical behavior by high performers," the letter stated, referring to payoffs to women at Fox News who leveled sexual harassment allegations. "If the information of the settlements did not reach the board, then it failed to ensure that the proper corporate controls were in place," it added. CtW called specifically for the removal of Roderick Eddington, lead director and chairman of the audit committee. The group also wants 21st Century Fox to add two new directors with backgrounds in human resources, appoint more independent directors, and increase the number of female directors from just one currently. Some argue the broader corporate governance issue at 21st Century Fox is the company's dual-class share structure, which gives the Murdoch family about 40% of the voting stock. Shareholders are expected to vote at the company's annual meeting next month on a proposal that would end the dual-class share structure in favor of giving each share of common stock one vote.
Investor Says Weibo Backer Sina Could Fetch $190 a Share in a Sale
" Bloomberg (10/12/17) Deveau, Scott"
Aristeia Capital figures Sina Corp. (SINA) could command as much as $190 a share in a sale, a 67% premium to its current price. The investor—which unveiled a 4.2% stake last month—has proposed two board nominees and is pressing the company to explore ways to unlock shareholder value, including a potential sale. "Sina's insular and opaque governance policies, which deviate radically from standard practices for public companies listed in the U.S., have consistently eroded shareholder value and hindered the company from seizing shareholder-friendly opportunities," Aristeia said in a presentation Thursday. It also is urging the company to spin off all or part of its stake in Chinese Twitter-like service Weibo Corp. (WB). It called on the company to immediately deliver 30 million shares in Weibo to Sina shareholders, which it said would unlock $38 a share in value. "This distribution would allow Sina to maintain control of Weibo and continue as its largest economic owner without compromising any of the strategic options listed above," Aristeia said. The investor additionally is pressuring the company to consider a reverse merger by which Weibo would acquire Sina for cash and stock that could realize $162 a share in value, and it is pushing for a buyback of $500 million to $1 billion in stock with cash on hand. "These options and others are unlikely to receive full and fair consideration without fresh, independent viewpoints on Sina's board," Aristeia said. Sina fired back in its own presentation Thursday, declaring that Aristeia's nominees lack experience and that its proposals would not work and could actually diminish shareholder value.
Investor Takes Large Stake in Babcock & Wilcox, Calls for Changes
" Charlotte Business Journal (10/12/17) Downey, John"
VIEX Capital Advisors has acquired a 6.4% stake in Babcock & Wilcox Enterprises (BW) and is calling for "a credible plan on cost reductions and asset divestitures" to revitalize the embattled company. The investor says if the board does not produce such a plan with B&W's third-quarter financial report due next month, they "may seek to reconstitute the board" at the annual shareholders meeting in March, according to a filing with the Securities and Exchange Commission. A B&W spokesman said the company is in contact with VIEX, but did not comment on whether B&W is planning to sell parts of its business or introduce a new round of cost-cutting measures. B&W Enterprises has struggled since spinning out of The Babcock & Wilcox Co. The plan was to expand through strategic acquisitions, reduce B&W's dependence on the design and manufacturing of coal-fired power technology, and focus on its renewable segment's waste-to-energy business. But the new company immediately began reporting problems with those waste-to-energy projects. It has recorded nearly $260 million in losses on renewable energy projects, and its stock has lost nearly 80% of its value. A shareholder suit, filed in March and amended last month, accuses the company, CEO, and CFO of fraud and intentional misrepresentation. It claims they intentionally withheld information about the severity of problems in the renewable segment to inflate the value of the stock. The lawsuit also argues that cost-cutting efforts contributed to the financial issues because they left the company without the resources needed to support the expansion of its renewable energy business.
Murdoch Re-Elected as Sky Chairman With Independent Support
" Bloomberg (10/12/17) Mayes, Joe"
Sky Plc announced Thursday that Chairman James Murdoch secured 78% support at the annual general meeting, narrowly winning backing from individual investors despite concerns about his independence amid a takeover bid from the Murdoch family's 21st Century Fox Inc. (FOXA). Those votes included the roughly 40% of Sky owned by Rupert Murdoch's Fox, where James is CEO. He won about 51% of the independent shares, said a source. The win removes one obstacle for the Murdochs to complete Fox's proposed $15.5 billion takeover of Sky. While the stake held by Fox ensured that James Murdoch would be re-elected, the Institute of Directors had urged the board to replace him if he did not secure a majority of shares cast that were not affiliated with Fox. "The significant size of the opposition should serve as an indicator to the board that concerns over his position remain," Stephen Martin, director general of the institute, said in an email. Mutual fund firm Royal London Asset Management had said it would oppose his re-election, while advisory firm Institutional Shareholder Services (ISS) expressed concerns over board independence at Sky and a conflict over James Murdoch's dual role within the family empire built by his father. Royal London and ISS also criticized the amounts paid to top Sky executives, who are poised to benefit if the Fox deal is completed. Independent shareholders agreed, and voted against the company's remuneration report. With the help of Fox's votes, it passed with 71% overall support. "I think the board lacks independence," independent shareholder Hugh Lawson said at the meeting. "Fox is getting a very sweetheart deal out of this, and mainly I think it's because of the lack of independence on the board."
Elliott Again Ups Hitachi Kokusai Stake, KKR Raises Offer Price
" Reuters (10/11/17) Kim, Chang-Ran; Uranaka, Taiga"
Elliott Management Corp. has increased its stake in Japan's Hitachi Kokusai Electric from 7.11% to 8.59%, according to a regulatory filing, just one day after KKR & Co. LP sweetened its offer price for the Hitachi Ltd. unit. KKR improved its bid from 2,503 yen a share to 2,900 yen ($25.80) after a third-party committee reporting to Hitachi Kokusai said it did not support the initial terms. Elliott—which has a history of investing in companies during takeovers and seeking better deals for shareholders—is now Hitachi Kokusai's No. 2 shareholder after Hitachi Ltd., which owns slightly more than 50%. Since Elliott first unveiled its stake on Sept. 11, Hitachi Kokusai's share price has climbed 5% and is now roughly 20% above KKR's first offer. Elliott gradually acquired more shares each day over the past two weeks, the filing indicates, upping its position on Wednesday after reports of KKR's plan for a higher offer. Elliott has said the purpose of owning Hitachi Kokusai shares was "investment," but it has also said it would "discuss matters such as important proposals depending on situations."
Bill Ackman Explains Why He's Not Impressed by ADP's Triple-Digit Return
" Yahoo Finance (10/11/17) La Roche, Julia"
Automatic Data Processing (ADP) shares have yielded triple-digit returns over recent years while also outperforming the S&P 500, yet Bill Ackman—head of Pershing Square Capital Management—believes the company is "vastly underperforming its potential." ADP has said its total shareholder return under CEO Carlos Rodriguez is upwards of 200%, but Ackman calls that an exaggeration. "They say the stock is up 200% since he's been CEO. The answer is it's up 140%," he told Yahoo Finance. Moreover, he estimated, the company has underperformed the industry by more than 25% over the same period. Ackman noted that while human capital management industry stocks have outperformed as a whole, ADP has been lagging its peers. "The way you benchmark a company—you don't look at the absolute performance," he explained. "The absolute level of the performance has been good. You look at the potential." He also pointed out that ADP used a high intraday price as the endpoint for the total shareholder return calculation—where recent gains likely were influenced by Pershing Square's investment—and argued that ADP should have accounted for its CDK spinoff differently in its stated return. Ackman also compared the company to rival Paychex (PAYX). "If you look at Paychex, over the last six years, Paychex has gotten more and more profitable and productive," Ackman said. "Their margins are up to 41% versus ADP's on a like for like basis—ADP's core employer services business is at a 19% margin—so basically less than half a direct competitor for a big part of ADP's business. And we said, 'Wow, this doesn't make lot of sense.'"