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Corvex and Icahn to Mull Making a Bid for Energen
" Reuters (05/21/18) Herbst-Bayliss, Svea"

Keith Meister is teaming up with Carl Icahn and said in a regulatory filing that they may try to purchase oil and gas producer Energen Corp. (EGN). Corvex owns about 8.7% of Energen. The announcement comes approximately two months after Energen settled a fight with Meister's Corvex Management by agreeing to review its businesses and adding energy industry entrepreneur Jonathan Cohen and investor Vincent Intrieri, a longtime associate of Icahn's, to the board. Now Meister and Icahn have delineated a plan where they might step into the strategic review process and prepare to take over the company themselves. "The Reporting Persons believe the issuer's securities are undervalued and may, subject to due diligence, have interest in joining with other parties to acquire the Issuer as part of the strategic initiatives process or otherwise," the filing said. Corvex also sold 2 million shares in Energen to Carl Icahn for $64.84 per share and gave him an option to purchase another 2 million shares for $67.37 per share. Icahn may convert the shares any time between now and Nov. 18, 2018, the filing said.

Carl Icahn Files Lawsuit Against AmTrust, Controlling Family
" Reuters (05/21/18) Lahiri, Diptendu"

Carl Icahn on May 21 filed a lawsuit against AmTrust Financial Services Inc. (AFSI) and the family that controls the company, accusing them of trying to take the insurer private at the wrong time and at the wrong price. Icahn has a 9.38% stake in AmTrust. The company said March 1 that it would be acquired in a $2.7 billion deal by a group of shareholders including its founding family, CEO, and private equity funds. Icahn strongly opposes the move.

Aratana Therapeutics Appoints Craig Barbarosh and Lowell Robinson to Its Board of Directors in Cooperation Agreement With Engaged Capital
" PRNewswire (05/21/18)"

Aratana Therapeutics Inc. (PETX), a pet therapeutics company focused on the licensing, development, and commercialization of innovative therapeutics for dogs and cats, has announced the company has appointed Craig Barbarosh and Lowell Robinson to its board of directors in connection with a cooperation agreement with Engaged Capital LLC. Barbarosh will be a member of the board's Compensation Committee and Robinson will be a member of the Audit Committee. Rip Gerber, a member of the board, has resigned, and following these changes, Aratana's Board has been increased to 10 members. Following the new board appointments, Engaged Capital has agreed to withdraw its previously nominated slate of directors for election at the annual meeting as part of a mutual cooperation agreement. The full agreement with Engaged Capital will be filed in a Form 8-K with the Securities and Exchange Commission.

Land & Buildings Calls for Brookdale to Consider Selling Its Real Estate
" Senior Housing News (05/18/18) Nelson, Mary Kate"

Land & Buildings Investment Management is optimistic about the recent leadership changes at Brookdale Senior Living (BKD), according to a letter to the senior housing provider's board of directors and shareholders on Friday from Jonathan Litt, founder and chief investment officer of the investment manager. Litt praised the promotion of Lucinda Baier to president and chief executive officer, saying the move "brought a breath of fresh air to the company." But Litt also said Baier faces a significant challenge in turning around Brookdale after years of underperformance. Litt still believes Brookdale should consider selling its owned assets. Land & Buildings says that Brookdale's real estate portfolio is valued in the mid-teens dollars per share at undemanding valuations.

Brazil's Biggest Pension Fund Turns Into an Engaged Investor
" Bloomberg (05/21/18) Lucchesi, Cristiane; Marques, Felipe; Freitas Jr., Gerson"

Brazil's biggest pension fund has embraced shareholder engagement. Previ, with $50 billion in assets under management, has emerged as the winner in a two-month fight with BRF (BRFS) after the Brazilian food giant reported a record annual loss for 2017. In February, Previ, the second-largest shareholder of BRF, sent a letter demanding Chairman Abilio Diniz convene a shareholder meeting to remove the entire board, including himself. Investors voted in five new directors and replaced Diniz. Previ, which has created a governance rating to assess company performance, says it will stop participating in groups with controlling interests in a company, which limits its ability to exit investments whenever it wants. The pension fund plans to focus on companies that prioritize transparency, good governance, and respect for minority rights. Previ became the second-biggest investor in the initial public offering of Petrobras' (PBR) fuel unit in December, buying 10% of the amount raised, partly because the company agreed to be listed on Brazil's "New Market," which has a stricter set of governance rules. "Given our size and impact, we can help change Brazilian markets for the better," says CEO Gueitiro Matsuo Genso. "If big investors like us start to show they really demand good governance, management will be forced to deliver it."

Hyundai Motor Caves in to Elliott, Scraps $8.8 Billion Deal
" Bloomberg (05/21/18) Kim, Sohee"

Hyundai Motor Group has called off its proposed $8.8 billion restructuring, bowing to pressure from Elliott Management Corp. The collapse of the deal marks the biggest victory Elliott has had in Korea after it narrowly lost a proxy fight with Samsung Group about three years ago. In a letter to shareholders on Monday, the head of the group's Hyundai Mobis Co. unit said it withdrew a proposal to sell two of its most lucrative businesses to affiliate Hyundai Glovis Co. The company, which had originally planned to put the matter to a shareholders' vote on May 29, will seek approval for an updated restructuring plan at a later date. The move represents an unprecedented victory for shareholders in South Korea, while marking a setback for Hyundai's founding family, which was counting on the sale to be the centerpiece of a larger reorganization that could help pave the way for succession at the conglomerate. "This is a victory for shareholders," said Kim Joon-sung, an analyst at Meritz Securities Co. "It is a big change for Hyundai to acknowledge that it is hard to take actions that lack consensus among shareholders. I expect Hyundai to bring up a new or revised restructuring plan, which has better offerings to shareholders." Elliott had been waging a campaign since last month to oppose the transaction, and won the backing of Glass Lewis & Co. and Institutional Shareholder Services Inc.

Arca Capital to Work With Icahn to Oppose AmTrust Privatization Plan
" PRNewswire (05/21/18)"

Arca Capital, one of the largest shareholders of AmTrust Financial Services Inc. (AFSI), with a 2.4% stake, plans to work with Carl Icahn and other minority shareholders in opposing the proposed privatization transaction. Icahn owns a 9.4% stake in AmTrust. Arca Capital has long held the view that AmTrust Financial Services is a fundamentally strong business and has questioned the justification for its decline of over 50% since January 2017. During that 15 month period, the stock has declined from over $27 per share to under $13 per share amidst no significant changes to the business. While ordinary shareholders have lost retirement and college funds, Barry Zyskind and his in-laws are now trying to privatize the firm at what Arca believes is an absurdly low valuation. Arca Capital has led an advocacy campaign since March 2018, when the privatization plan was announced, on behalf of ordinary investors to oppose the transaction. "AmTrust Financial is a fundamentally strong company but actions by Mr. Zyskind and his allies have undermined it. Whether or not these actions were purposeful, the result was a significant stock devaluation that hurt ordinary investors but allowed the prospect of a cheap sale to the very same Barry Zyskind. At very minimum, AmTrust management took advantage of the uncertainty in the company's situation and the unfavourable market conditions to attempt to take AmTrust private on the cheap," said Pavol Krúpa, Chairman of Arca Capital. Krupa welcomed the involvement of Carl Icahn in the company.

Three Directors Quit as Takeover Fight for India's Fortis Drags On
" Reuters (05/21/18) Siddiqui, Zeba; Pal, Alasdair"

Three board members at India's Fortis Healthcare have stepped down amid shareholder pressure. Eastbridge Capital and Jupiter India—which together own about 12% of the hospital operator—had called for a shareholder vote on Tuesday to decide the directors' future, claiming they had not met their fiduciary duties. Harpal Singh, Tejinder Singh Shergill, and Sabina Vaisoha cited personal reasons for their resignations, stepping down before the vote. A fourth director, Brian Tempest, still faces a vote at Tuesday's meeting. Their departures raised new questions about the direction Fortis will take as it considers bids from five potential buyers. Fortis has received more than a dozen competing offers since it first agreed in March to a proposal from a consortium led by rival Manipal Hospitals Enterprises. Fortis then said in May it planned to accept an offer from Hero Enterprise Investment Office and Burman Family Office that valued the company at 90 billion rupees. The investors argued the directors had not satisfactorily exercised "their respective fiduciary duties towards shareholders and have failed to maintain expected levels of corporate governance," according to a filing made by Fortis last week. Indian proxy advisory firms have previously questioned the independence of the Fortis board. "Shareholders need a decision-making body that is objective, independent, and does have a historical association with the promoter group or their companies," Institutional Investor Advisory Services said in a note last month. Eastbridge and Jupiter reportedly believed that the four directors were not independent and had been appointed by Fortis' founders.

ISS Again Supports Land & Buildings’ Case for Change at Taubman
" Business Wire (05/18/18)"

Land & Buildings Investment Management, LLC announced Friday that Institutional Shareholder Services Inc. (ISS) has recommended shareholders of Taubman Centers, Inc. (TCO) back the election of Jonathan Litt to Taubman's board at the upcoming shareholder meeting on May 31. ISS also supports the investor's proposal to eliminate the dual-class voting share structure at Taubman. In its report, ISS said Land & Buildings made a compelling case that "the addition of an outside shareholder perspective is warranted at the board level." It also expressed concern about the outsized influence of the founding family, and said replacing COO William Taubman seems to be "a relatively lowcost means of gaining independent shareholder representation on the board." Finally, ISS recommended the nomination of Litt, stating, "Litt offers significant industry knowledge, including prior board experience at another public REIT, and remains well-positioned to provide an independent investor perspective."

ISS Sides Against Two Tesla Directors, Backs Split of Musk's Roles
" CNBC News (05/19/18)"

Institutional Shareholder Services (ISS) on Friday recommended that investors vote against Tesla (TSLA) directors Antonio Gracias and James Murdoch, increasing pressure on the automaker over their roles on its board.  In particular, ISS wrote that Murdoch is "overboarded" since he serves as CEO of Twenty-First Century Fox Inc. (FOXA) and on other boards. Additionally, the proxy adviser backed a couple of shareholder proposals to be voted on at the company's June 5 annual meeting, including one that would require it to separate the current chairman and CEO roles of founder Elon Musk.  An ISS statement read: "The complexity of large-scale manufacturing and the challenges of successfully commercializing new technologies and new manufacturing and marketing techniques suggest that shareholders would be better served by having Musk focus on running the company, and allowing an independent director to run the board."

United Technologies to Sell Ice Cream-Machine Manufacturer for $1 Billion
" Wall Street Journal (05/18/18) Al-Muslim, Aisha"

United Technologies (UTX) is selling the Taylor Co. to Middleby Corp. (MIDD) for $1 billion in cash, as the industrial conglomerate works to sharpen its focus on its core businesses. The deal comes as United Technologies works to close one of the biggest aerospace deals ever and considers a breakup, a move Pershing Square Capital Management LP and Third Point LLC have been urging the company to pursue. United Technologies agreed in September to purchase Rockwell Collins (COL) for $23 billion. The company has said it would conduct a portfolio review to examine a split, a process it expects to complete by year-end. Meanwhile, the Taylor sale is expected to close early in the third quarter, the companies said Friday. Middleby, a manufacturer of food-service equipment, said the acquisition of Taylor, which produces ice-cream and frozen-drink machines, will bolster its position in the commercial food-service industry.

RELEVANT ARTICLES

Nontraditional Board Candidates Made Headway in 2017
" Cooley PubCo (05/16/18) Posner, Cydney"

A new report from the EY Center for Board Matters reveals 54% of the 2017 class of directors of Fortune 100 companies served in non-CEO roles and 40% were female. More than half of the Fortune 100 added at least one independent director, slightly less than in 2016, but together, over the two-year period, more than 80% of the Fortune 100 added at least one independent director. Taking director exits into account, "nearly all of the companies experienced some type of change in board composition during this period." Moreover, EY suggests that boards are seeking more diverse candidates that offer "a range of functional expertise, including on complex, evolving areas such as digital transformation, e-commerce, public policy, regulation, and talent management," with the result that "boards are increasingly considering highly qualified, nontraditional candidates, such as non-CEOs, as well as individuals from a wider range of backgrounds." EY's study of proxy statements for the Fortune 100 for the 2017 class of directors revealed that 72% of companies identified gender, race, or ethnicity as a factor in identifying candidates (compared with 64% in 2016). The demographic is shifting younger, with the average age of the 2017 director class at 57, compared to 63 for incumbents and 68 for exiting directors. EY said the addition of a single new director is unlikely to dramatically alter board composition averages, so diverse perspectives may be slow to emerge.

CEO Pay Shrinks by $350,000 a Year Once Hedge Funds Move in, Study Finds
" MarketWatch (05/21/18) Linnane, Ciara"

Hedge funds such as those run by Carl Icahn, Bill Ackman, and Daniel Loeb can shave more than $350,000 off a CEO's remuneration within a year of taking a stake in his or her company, according to research from Warwick Business School at the U.K.'s University of Warwick, which compiled CEO remuneration data from 244 listed U.S. companies and analyzed it over seven years. Researchers looked at data for the three years before a hedge fund took an interest, the year it bought stock in the company, and the three years after that. They then compared the results with data on CEO pay from another 244 companies that were not engaged by a hedge fund but belonged to the same industry sector and were of a similar size and book-to-market value. The research found that both base pay and stock awards declined significantly once hedge funds engaged a company. CEOs received on average $329,344 more than their peers in total compensation in the two years before a hedge fund engaged their companies. One year later, that difference had contracted to $51,435 with CEO base pay now $27,704 lower than peers. The stock portion of total pay was reduced by $258,201 to just $63,090 more than peers. The study also found that CEO pay starts to increase again two years after the company is engaged and by the third year is $270,766 more than peers.

Why Bill Ackman Will Salvage Pershing Square
" Forbes (05/18/18) Schiefelbein, Luke"

In a recent interview, Garrett Arms, a portfolio manager at Moon Capital Management, discussed his long call on Pershing Square, the resilience of Bill Ackman, and his value investing philosophy. When asked whether several high profile losses and nearly $2 billion in redemptions will cause permanent damage to Ackman's and Pershing Square's reputations, he said he highly doubts it. "It is certainly not something that a couple of strong years of returns wouldn't cure and Ackman has a pretty good long-term batting average. The brevity of investor memory will allow the recent performance to get papered over, unless the mistakes keep compounding. And judging by the extent to which he has been crucified lately, the recent period of Ackman dismissal will probably turn out to be a good contrarian indicator for the fund," he said. As for how Ackman will emerge from this losing streak, Arms said, "I struggle to see Pershing's investing strategy changing much. At the margin, maybe Ackman keeps a lower profile for a few years." He added, "When you maintain such a high profile and exude that much confidence and things go poorly, by default, you are going to attract proportionately larger criticism. I heard one activist refer to it as the 'downside of what was the upside of being Bill Ackman.'"

AMP, CBA Scandals Threaten 'Cosy' Boardroom Club
" Australian Financial Review (05/18/18) Evans, Simon; Durkin, Patrick"

Boardroom culture in Australia has come under heavy criticism following scandals at AMP and CBA. Angry investors and the public are questioning how directors could miss major problems like the fee for no service misconduct that was going on at AMP. Critics say vast structural changes taking place in most industries mean boards must have deep knowledge of their sector and the inner workings of their company. As a result, critics say a seat on a board can no longer be a retirement or part-time job. Australia has a unique problem because a large number of directors have seats on other boards. Regulators and investors have raised their expectations of boards in recent years, telling them that they are responsible for culture. The rise of proxy advisers is having an impact and investors have been more willing to step up pressure on "overloaded" directors. Suncorp and NBN Chairman Ziggy Switkowski relinquished his Oilsearch board position after facing pressure from investors last year.

Spate of Company Scandals Taints Singapore's Clean Image
" Wall Street Journal (05/18/18) Watts, Jake Maxwell; Chaturvedi, Saurabh"

The Singapore Exchange plans to step up efforts to improve corporate governance at publicly listed companies. In January, regulators called for a public consultation on proposed changes to the corporate governance code intended to streamline rules and better enforce the impartiality of independent directors by limiting their terms. The move comes at a time when companies in Singapore have been rocked by a spate of police investigations and allegations of accounting irregularities. Critics say corporate governance and market regulation in the city-state is weak, while some investors allege that an "old boy's club" of independent directors and weak shareholder activism has failed to check company executives. Investment firm Keshik Capital has called for the resignation of executives at Declout over weak corporate governance. But challenging suspicious accounting in Singapore can be tough because strict defamation laws limit what people can say publicly. "It is fundamentally risky business to call out bad conduct," says Alex Turnbull of Keshik Capital. "Singapore is losing the confidence of investors," according to Ravi Murarka, an individual investor who has clashed with several companies over governance issues in the past few years.

JPMorgan and eBay Under Fire Over Shareholder Meetings
" Financial Times (05/16/18) Gray, Alistair"

U.S. companies have begun pushing back on corporate governance efforts that seek to make it easier for shareholders to call special meetings. Shareholders are filing formal proposals to lower the required level of investor support needed to call special meetings, but companies are now putting forward their own motions, which enable them to omit the shareholder proposals. JPMorgan (JPM) recently won support for a motion to retain its 20% requirement during a contentious vote. Capital One (COF) put forward a proposal at its annual meeting earlier this month, and eBay (EBAY) is seeking ratification for its existing 25% threshold at its annual meeting on May 30. The companies are engaging in "gamesmanship," says Rosemary Lally of the Council of Institutional Investors. "It's not a very democratic process when you do it that way." Special meetings are a powerful tool for investors who want to force changes at companies outside of the regular schedule of annual meetings. Shareholders have filed formal proposals to make it easier to call special meetings at a record 61 U.S.-listed companies this year, according to ISS Corporate Solutions.

Elliott Needs Pensioners' Help to Fight Auto Dynasty
" Bloomberg (05/17/18) Kim, Heejin; Kim, Sohee; Einhorn, Bruce"

Elliott Management Corp.'s proxy fight at a South Korean company is once again coming down to the country's $580 billion National Pension Service (NPS). The hedge fund is challenging Hyundai Motor Group's $8.8 billion merger plan between two units, three years after it opposed a reorganization plan by Samsung. In that battle, the deciding vote in favor of the conglomerate was cast by the NPS. The state-controlled NPS is once again at the center of this fight because of its combined $2.7 billion in holdings in the two Hyundai units. "If I were the NPS, I would abstain from voting," said Chang Park, an economics professor at Chung-Ang University in Seoul. "If the fund votes against Hyundai, local media would criticize it by saying it hates the chaebol. If it votes for Hyundai, local media would also criticize it for driving away foreign capital." Hyundai's founding family can hardly afford to lose the NPS' backing. The deal requires support from at least two-thirds of shareholders voting at a scheduled meeting May 29, and foreign investors last month held nearly half of Hyundai Mobis, according to data from the Korea Exchange. Meanwhile, Elliott owns more than $1 billion in Hyundai units. Glass Lewis & Co. and Institutional Shareholder Services Inc. agreed with Elliott that the proposed deal was unfavorable to Hyundai Mobis shareholders. The highest-ranking official to weigh in on the proxy fight is Kim Sang-jo, head of the Fair Trade Commission that oversees conglomerates, who has opposed Elliott's proposal. Caught in the middle is the NPS, which will ask an outside committee to decide next week on whether it should vote for the deal or not.


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