Marcato Likely to Pull off Win in Proxy War With Deckers
" Reuters (12/13/17) Herbst-Bayliss, Svea; Ganesan, Gayathree"
Deckers Outdoor Corp. (DECK) shareholders are expected to award three board seats to Marcato Capital Management at the UGG boots maker's annual meeting Dec. 14, according to a handful of investors who said they will or already have voted for Marcato. Marcato, which has an 8.5% stake in Deckers, is leading in the proxy battle, according to two sources familiar with votes cast by dozens of other shareholders. "There is no argument for not having a shareholder on the board in order to hold management accountable," says Ken Squire of 13D Activist Fund, which owns 0.51% of Deckers' outstanding shares. "I would be surprised if Marcato does not win." All nine Deckers incumbents are up for reelection, but Marcato wants to remove three of them: John Perenchio, John Gibbons, and Karyn Barsa. "The current board has demonstrated that they're not proactive enough in their corporate guidance," says a Deckers investor who is backing Marcato. Marcato has been critical of Deckers' retail strategy and urged management to consider a sale, slash costs, and improve its capital allocation. A sale never materialized, but Deckers pledged to buy back $400 million in shares through 2020, which a number of investors said would help boost the stock price significantly within the next year.
Neuberger Berman Delivers Letter To Nuance Communications Board Of Directors; Calls For Immediate CEO And Board Changes
" PR Newswire (12/12/17)"
Neuberger Berman and affiliates sent a letter to the board of directors at Nuance Communications, Inc. (NUAN) on Tuesday detailing its concerns about the publicly-announced CEO transition, corporate governance, and shareholder returns. Neuberger Berman—which owns about 1.6% of Nuance's outstanding stock—says that months of private discussions with the company have been fruitless, so it is now opting to make its engagement with the company public. In its letter, Neuberger Berman points to the "unusually longer period of time" taken for the CEO search, after it was announced last year that Chairman and CEO Paul Ricci would retire at the end of March 2018. The letter cited the lack of meaningful updates about this succession, and also noted the "significant shareholder opposition to long-tenured directors at each of the last three annual meetings." Neuberger Berman says these facts suggest that the board defers to Ricci, "who seems to have no intention to relinquish control of the company in March 2018, and may try to continue to exert influence as CEO, Chairman, or in another capacity." Given Nuance's flagging stock price and underperformance compared to peers, Neuberger Berman believes that "Ricci's continued active involvement in any role will be a negative outcome for shareholders" and calls for "an immediate severing" of the company's relationship with Ricci. The letter also urges the board to immediately point Bob Finocchio or Mark Laret, the only two directors who have served for less than 12 years, as Interim Independent Chairman, and for Finocchio to replace Katherine Martin as Chair of the Governance Committee. The letter says Martin should immediately recuse herself from any CEO succession discussion, given her lack of independence, shareholder support, and the fact she has served on the board for 19 years.
Qualcomm Merger Calculus Complicated by Investor
" New York Times (12/11/17) de la Merced, Michael J."
Elliott Management wants Qualcomm to raise its bid for NXP Semiconductors (NXPI). On Monday, the hedge fund, which owns about 6% of NXP, argued that NXP was worth $135 a share on its own—far more than the $110 a share that Qualcomm has offered for the company. By extension, Elliott argued that the proposed takeover—valued at $38.5 billion when it was announced—should be re-priced significantly higher. Elliott is hoping to persuade more investors to hold out. Qualcomm has argued that the NXP transaction was all but a done deal, but Elliott's announcement somewhat clouds the matter. Some analysts and investors had wondered whether trouble in the NXP deal could actually help Qualcomm fend off an unwanted advance from Broadcom, which officially went hostile in its pursuit of the company last week by proposing to replace its entire board. However, in a statement on Monday, Qualcomm suggested that it was not interested in using the NXP deal as a defensive measure against the hostile $105 billion takeover attempt by Broadcom, a fellow chip maker.
Qatar Backs LSE Chairman in Battle Against Investor
" Financial Times (12/12/17) Stafford, Philip"
The Qatar Investment Authority (QIA) has said it will back London Stock Exchange Group (LSE) Chairman Donald Brydon at an extraordinary shareholder meeting on Dec. 19, where shareholders will vote on the Children's Investment Fund's (TCI's) proposal to remove Brydon from the board. QIA is LSE's second largest shareholder, with a 10.37% stake. A person briefed on QIA's position said, "There wouldn't be a benefit to the LSE Group to change [the] chairman at this time." TCI, which holds a 5% stake, called the meeting over Brydon's handling of the departure of CEO Xavier Rolet at the end of November. ISS and Glass Lewis recently urged shareholders to back Brydon, indicating that TCI failed to present a compelling case for his removal. However, Egerton Capital, which owns a 2.8% stake in LSE, said it would support TCI.
Icahn Nominates Four Directors to Xerox's Board
" Reuters (12/11/17) Panchadar, Arjun; Chatterjee, Laharee"
Xerox Corp. (XRX) announced Monday that Carl Icahn has nominated four individuals to the board of directors. The move comes after a current Icahn-appointed director stepped down due to a difference of opinion with the board, ending a standstill arrangement between the company and the Icahn Group made in June 2016 and enabling Icahn to make his nominations, Xerox said. Jonathan Christodoro, a former managing director of Icahn Capital LP and a Xerox board member since June last year, informed Xerox's chairman in a letter that he was one of the four Icahn nominations. "Until the last few weeks, it appeared that the Board's decisions would be consistent with my views on the best interests of Xerox and our shareholders," Christodoro wrote in a Dec. 8 letter to Chairman Robert Keegan. "It now appears, however, that the Board will make decisions and take Xerox in a direction with which I strongly disagree." Christodoro did not offer further details on these decisions. In a statement, Xerox reiterated its full-year forecasts for adjusted operating margin, earnings per share, cash flow, and revenue and pointed out that its stock has risen almost 30% this year, outperforming the S&P 500. Icahn Associates Corp. is Xerox's top shareholder with a 9.7% stake as of September.
Reuters: Hong Kong Fund Tells Toshiba That Chip Unit Sale to Bain Group Not Necessary
" Reuters (12/11/17) Fuse, Taro; Yamazaki, Makiko"
Argyle Street Management Ltd. sent a letter to Toshiba Corp.'s board on Monday declaring the $18 billion sale of its chip unit to a Bain Capital-led group is no longer necessary after its recent capital injection. The Hong Kong-based hedge fund is inviting the more than 30 foreign investors who participated in Toshiba's 600 billion yen ($5.3 billion) new share issue to partner up, and is already in talks with at least three funds who agree. While the potential for funds to derail the deal will depend on how many join in opposition, Argyle's letter highlights the anxiety about Toshiba's recruitment of activist shareholders in its new share issue. Toshiba agreed in September to sell chip producer Toshiba Memory to the Bain consortium to cover billions of dollars in liabilities stemming from its embattled U.S. nuclear power unit Westinghouse. To ensure it remains listed, Toshiba also secured the $5.3 billion cash injection from overseas funds, which gives it enough funds to cover its liabilities. Argyle believes "there no longer is any urgency to undertake a sale of Toshiba Memory," it said in the letter seen by Reuters, and proposed a meeting with Toshiba's board in December or January. The deal "significantly undervalues the business," the letter said, adding that the board should instead weigh an IPO for Toshiba Memory. The new share issue included some big-name shareholders including Third Point LLC and Oasis Management Company. Argyle also said it thought Toshiba's U.S. nuclear unit Westinghouse still had value and it was confused as to why Toshiba had assigned zero value to its claims against Westinghouse.
KKR's Tender Offer for Hitachi Kokusai Succeeds by Slight Margin
" Reuters (12/08/17) Fujita, Junko"
U.S. buyout fund KKR & Co. LP (KKR)—under pressure from Elliott Management to boost its offer price—scraped a successful tender offer for the Japanese semiconductor equipment maker Hitachi Kokusai Electric Inc. KKR had sought at least about 24% of Hitachi Kokusai at 3,132 yen each in a tender offer that closed on Friday, and won 24.9%, company statements revealed on Saturday. Parent Hitachi Ltd. agreed to sell its stake of just over 50% back to Hitachi Kokusai at 1,870 yen per share as part of the $2.2 billion deal. KKR had sweetened its offer price twice to mollify Elliott, known for buying stakes in firms in the middle of takeovers. The first increase came after Elliott disclosed a stake in Hitachi Kokusai in September, and the final price was 25% higher than the initial offer of 2,503 yen. Elliott has since increased its holding to 8.59%. KKR said 26,242,364 shares were tendered, compared to the minimum 24,815,889 it was seeking. The tendered shares equal 25.5% of Hitachi Kokusai when excluding treasury shares.
Elliott Management Is Said Push for Changes at Alexion
" New York Times (12/07/17) de la Merced, Michael J."
Despite remaking its executive ranks over the past year after numerous problems under previous management came to life, Alexion Pharmaceuticals (ALXN) is being engaged by Elliott Management, which, according to sources, believes the biopharmaceutical company could do more to lift its stock price. The sources say Elliott could launch a proxy fight to claim seats on Alexion's board, among other things, if management does not take action. Elliott reportedly began investing in the company in April, and while the hedge fund has expressed support for Alexion's overall strategy, the sources say it also is calling for the new management team to further reduce costs, impose higher financial performance targets, and improve communications with investors and analysts. Furthermore, Elliott has argued that more changes to the board are necessary, including the addition of more biotech experts as directors, and it has cautioned against ambitious acquisitions outside of the company's core expertise.
Germany's Uniper Flags Higher Dividends to Fend off Fortum Bid
" Reuters (12/07/17) Steitz, Christoph; Käckenhoff, Tom"
German energy firm Uniper is urging shareholders not to tender their stock to Fortum in the Finnish group's 8.05 billion euro ($9.49 billion) takeover bid, pledging Thursday higher dividends in the future. Uniper's management argues the deal undervalues the company and lacks strategic sense given Uniper's large exposure to gas- and coal-fired power plants compared with Fortum's focus on clean technologies. Uniper said it would pay a total dividend of roughly 310 million euros for 2018, up 24% from this year, adding payouts would increase by a quarter on average through 2020. Uniper shares were trading around 25 euros per share on Thursday, above the 22 euros Fortum is offering and up more than twice since it was spun off from former parent E.ON and listed in September 2016. Under Fortum's takeover offer, E.ON can sell its remaining 46.65% stake in Uniper by Jan. 11, 2018, which is considered likely given a large fee it would have to pay if it fails to do so. All other shareholders can tender their shares by Jan. 16. Fortum on Thursday confirmed it would not raise its bid even after Elliott Management, known for buying into pending M&A deals to extract higher offers, acquired a stake in Uniper this week. The group emphasized it was largely focused on E.ON's Uniper stake, but would accept all shares.
Proxy Firm ISS Advises Shareholders to Back Marcato at Deckers
" Reuters (12/06/17) Herbst-Bayliss, Svea"
Institutional Shareholder Services (ISS) changed its position Wednesday to recommend shareholders of Deckers Outdoor Corp. (DECK) vote for Marcato Capital Management's slate of directors at the Dec. 14 annual meeting. The proxy advisory firm had signaled its support for Marcato last week but hesitated to fully endorse the dissident's campaign, considering its bid to replace all nine members of the board too harsh. After Marcato slimmed down its proposed slate on Monday to just three independent directors, the proxy advisor changed its tune, throwing its support fully behind Marcato. ISS declared Wednesday that the Deckers board has been sluggish in addressing problems at the company and that it was time for a shake-up. "Shareholders are therefore advised to directly support dissident nominees Fuller, Waterman, and Feldman by voting FOR their election on the dissident (GOLD) card," ISS wrote. Steve Fuller was previously marketing chief of L.L. Bean, Anne Waterman is a former Michael Kors (KORS) executive, and Kirsten Feldman is a former Morgan Stanley (MS) executive. The new ISS report commended the nominees' retail expertise. Meanwhile, proxy advisory firm Egan-Jones recommended Wednesday that shareholders vote for all of Deckers' incumbent directors, while Glass Lewis backed the company's directors last week. Marcato, which owns an 8.5% stake in Deckers, has already won one proxy contest at Buffalo Wild Wings (BWLD) this year and posted some of the hedge fund industry's strongest returns. Its flagship fund up was 24% through November.