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13D MONITOR ACTIVIST MEDIA CENTER
Breaking news and more: Your media center for shareholder activism and corporate governance.

Menhaden catcher and processor Omega Protein (OME) is facing growing pressure from Wynnefield Capital Partners, which recently upped its stake to 7.9%. In a filing with the SEC on April 28, the firm disclosed its intention to send shareholders proxy ballots to consider electing three new directors to Omega’s board. A vote on board members would likely occur at Omega’s annual meeting, but Wynnefield has said the lack of a meeting date is a deliberate act. “Indeed, in keeping with its anti-shareholder bias, Omega’s board unilaterally amended and restated its bylaws for the sole purpose of entrenching the board and management, by placing additional burdens on the ability of shareholders to nominate and elect directors of their choosing, including by giving the current board the ability to delay or reschedule the company’s annual meeting, which the board has yet to set,” Wynnefield said. The firm has not yet filed an official proxy statement, but has indicated that it intends to.

Carl Icahn has sold his portfolio of Apple (AAPL) stock, citing concerns about the company's uncertain future in China. The move is a significant about-face for Icahn, who at the end of 2015 owned almost $5 billion of Apple stock. Icahn reportedly made close to a $2 billion profit on his stake. Apple on Tuesday reported its first quarterly fall in revenue in 13 years, and revenue from China, Hong Kong, and Taiwan declined 26% to $12.49 billion. Apple CEO Tim Cook Tuesday cited Hong Kong's currency appreciation as the primary difficulty for Apple in the Greater China region. Icahn Thursday lauded Cook and said Apple has a "tremendous future."

TiVo (TIVO) has accepted a takeover bid from the Rovi Corporation (ROVI)—a deal propelled in part by Glenn W. Welling of Engaged Capital—the two companies announced on Friday. The roughly $1.1 billion transaction will give Rovi access to analytics about viewing habits and add 10 million TiVo-served households to its own 18 million households using television guides. The deal came together when, after claiming two seats on Rovi's board last year, Engaged Capital pressured the company to merge with TiVo. The combined entity is expected to generate about $800 million in revenue this year, on a pro forma basis, and the two companies anticipate savings of about $100 million in annual costs. “By working together, Rovi and TiVo will revolutionize how consumers experience media and entertainment, and at the same time build value for our stockholders,” said Rovi CEO Thomas Carson, who will lead the new company.

At a Senate hearing on Wednesday, William Ackman told U.S. lawmakers he would advise the board of Valeant Pharmaceuticals (VRX) to lower the cost of four life-saving medications. “My recommendation is going to be to reduce the prices,” he testified, adding that Valeant's board would hold a conference call Thursday to discuss the matter. After acquiring heart medications Isuprel and Nitropress in 2015, Valeant inflated the prices by about 720% and 310%, respectively. The company spiked the prices of Cuprimine and Syprine—used to treat a genetic disorder that causes copper buildup in the body's organs—by 5,878% and 3,162%, respectively. Following the hearing, the investor expressed confidence in the future of Valeant. “There is not going to be any bankruptcy of Valeant,” Ackman said. “We were in a death spiral, and we have taken steps to deal with the banks. We are going to file our 10K on time. We brought in a new CEO.”

Marcato Capital Management LP is angling for a new board at Epiq Systems Inc. (EPIQ), citing lackluster shareholder returns. The firm released a presentation for Epiq shareholders that criticizes the company's poor track record on fulfilling stated financial goals; consistent over-promising and under-delivering; and unconstrained expense growth. Marcato argued the board does not hold management accountable—CEO compensation rose annually despite deteriorating performance—and has ignored shareholder efforts to install new directors. The hedge fund has a 4.8% holding in the provider of services and technology solutions for the legal profession. Marcato said shareholders now have a unique opportunity to change the course for Epiq by nominating highly qualified directors. “Marcato believes board change would drive management accountability and maximize shareholder value,” the hedge fund wrote to Epiq shareholders. Marcato is the third large shareholder to come forward about board changes: Villere & Co. and P2 Capital are pushing for new directors as well.

Sources say Valeant Pharmaceuticals International Inc. (VRX) likely will announce Friday that five of its directors are leaving the board to accommodate new nominees. Four new directors have been tapped and are expected to come largely from traditional drug firms, according to the sources. Valeant is seeking to restore credibility after drawing much criticism from both politicians and investors over its management and drug-pricing practices. Major shareholder William Ackman spoke about the coming transition during his recent testimony at a Senate committee hearing. "A lot of the board is going to turn over," he speculated. Ackman also pledged there would be quick changes made to the cost of many Valeant pharmaceuticals.

Abstract News © Copyright 2016 INFORMATION, INC.

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The Latest Activist Investor at Bank of America: A Ninth-Grader
" Wall Street Journal (04/28/16) Rexrode, Christina"

Natalie Clark, a 15-year-old shareholder in Bank of America Corp. (BAC), is questioning the company about its efforts to up the share price. At the annual meeting on Wednesday, Clarke asked CEO Brian Moynihan about the bank's efficiency, a metric that trails behind peers. “You and I are both looking at some pretty bad numbers,” she told Moynihan. The teenager owns 5,000 shares, given to her in about 2002 when the stock traded at an average of nearly $34; on Wednesday, the share price fell seven cents to $15.02. Clarke's questions at the meeting were echoed by other investors discontent with shareholder returns. CLSA analyst Mike Mayo, also in attendance, suggested the bank may need a more drastic Plan B—such as splitting into smaller firms—and later said Clarke's questions had captured the concerns of other investors. Clarke has attended three consecutive Bank of America shareholder meetings, where she has voiced concerns including the bank's compensation for women compared to men.

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Why Activist Investors in the Boardroom Is Not Cause for Celebration
" MarketWatch (04/27/16) Chang, Sue"

The performance of activist hedge funds has lagged the S&P 500 for several years while assets managed by activists have surged, according to a new report from Fundstrat. Firms tracked by Hedge Fund Research’s activist index posted a cumulative return of 113% since 2005 compared with the S&P 500’s 115%, said Fundstrat research analyst George Gianarikas. Since hedge funds typically charge investors a 2% fee and collect 20% of profits—with the promise to outperform benchmarks—the numbers are not good. However, investors remain undeterred: from 2010 to 2015, assets managed by these funds have nearly tripled from $56 billion to $174 billion. According to Gianarikas, an important aspect of activism is the shift to long-term commitment through board representation. “As a result of the board change sought, the activist campaign is likely not single-issue related but more attempting to affect broad management change,” he said. “These types of hands-on activist campaigns lend themselves to longer-time horizon investments—counter to the short-termism generally assumed of activist intentions.” Though activism has become an important investment strategy, the report suggests it may not always benefit hedge funds or companies.

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Starboard Is Keeping the Active in Activist
" Wall Street Journal (04/27/16) Benoit, David"

In April alone, Starboard Value LP has installed seven directors on two boards; initiated a campaign to oust an entire board at a third company; selected a new CEO at a fourth; and left the board of a fifth that has markedly improved performance. In what has been a turbulent year for activism, Starboard is the epitome of success. On Wednesday, the hedge fund reached a settlement at Yahoo (YHOO), its largest prospect yet, where it is getting four nominees on an 11-seat board. Starboard also will take a lead role in the company's effort to sell itself and, along with two directors Yahoo added last month, the majority of the board will be completely new. At Marvell Technology Group (MRVL), Starboard installed three nominees on the board—including one of its partners—and will later nominate a fourth. Starboard's Peter Feld will lead the search for a new CEO. Starboard has often touted its ability to work constructively in the board room—which can encourage companies to approve the hedge fund's appointees. It has one final fight ahead, at Depomed (DEPO), where it launched a campaign earlier this month to remove the company's entire board.

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Many Techs Facing Active, Agitated Shareholders
" Investor's Business Daily (04/25/16) Kontzer, Tony"

In its Shareholder Activism 2015 report issued last November, Moody's found that 33% of the 178 shareholder activism cases it had tracked through Oct. 15 of last year focused on tech firms, far more than any other industry. Analysts say the sector’s growth potential attracts the hedge funds and equity investors that are less inclined to sit docilely on the sidelines. "You really have to have a stomach for it," says Gerry Granovsky, an analyst at bond rating firm Moody's Investor Service. "A lot of it is confrontational. You have to not be afraid to ruffle feathers." Many tech firms instead have been targeted for not sharing their riches enough. Granovsky points out that as the tech sector has demonstrated historic stability over the past 10 years, it has enjoyed growing access to debt. Meanwhile, as scores of tech firms have grown into thriving global businesses, many have amassed massive amounts of cash overseas and have chosen to keep it there rather than pay U.S. tax rates. It’s that cash, and companies’ explanations for hording it, that often attracts the attention of shareholder activists more than anything.

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In China, Yum and McDonald's Likely Need More Than an Ownership Change
" Nikkei Asian Review (04/24/16) Ho, Joyce"

Sovereign wealth funds including China Investment Corp. and Temasek Holdings are pursuing stakes in fast-food brand Yum China. Meanwhile, McDonald's plans to begin selling its North Asian businesses within the next month. Potential buyers include state-owned China Resources, U.S.-based Bain Capital, and MBK Partners of South Korea. Franchising is viewed as strategy to stabilize both flailing companies, but experts warn that new ownership may not be enough to rejuvenate the brands. China has become a more challenging environment for Westerners, and some observers are skeptical they will extract much of a profit. However, Joel Silverstein—president of restaurant and hotel investment advisory East West Hospitality Group—says Yum could easily purchase another company and continue to grow, pointing to its 2011 acquisition of the Little Sheep hotpots operation. A main driver behind the expected spinoff, he believes, is shareholder activism—which in the United States has successfully extracted value from underperforming restaurant chains.

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Hedge Funds Are Intervening at Gigantic Companies
" Business Insider (04/21/16) Bryan, Bob"

The number of activist campaigns focused on large or mega-cap companies has spiked in recent years, according to data from FactSet. “Macy’s, Qualcomm, and AIG. What do these companies have in common? Each of them is a large and well-established firm that has been the target of an activist campaign in the past year,” wrote analyst Andrew Birstingl in a note to clients. “These three examples of activist investors targeting larger and well-known companies are not anomalies. This is a growing trend within the shareholder activism space.” According to Birstingl’s data, 2015 saw 30 activist campaigns aimed at companies with a market cap larger than $10 billion. In contrast, there were only six such campaigns in 2009. At massive firms, the increase in activist engagement is even more apparent, Birstingl noted. “The average market value of the firms involved in the 262 activist campaigns in 2012 was $2.7 billion. In 2015, the average market cap of targeted companies was $4.7 billion, 73% higher than the 2012 value.” Even small funds have demonstrated this trend: SpringOwl Asset Management initiated a campaign at Viacom, and Altimeter Capital Management intervened at United Continental airlines. Activist involvement at large firms occurred regardless of a company's stock performance, Birstingl observed.

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Starboard Value's Jeff Smith: May Need to 'Pick Up the Pieces' of Yahoo
" CNBC.com (04/19/16) Rosenfeld, Everett"

Jeff Smith, CEO of Starboard Value, said Tuesday he is preparing to potentially pick up the pieces of a broken Yahoo (YHOO). Speaking from 13D Monitor's Active-Passive Investor Summit in New York City, Smith explained that he has launched a proxy fight for Yahoo in case its board is unable to do what needs to be done. "They're going to feel the pressure to make sure they're doing the right thing for the shareholders in order to not get to the result of a change of board members," Smith said. "But we need to protect ourselves because if we get to the annual meeting and the company has not moved forward as they're supposed to — there's a question here as it relates to capability and credibility of the board members and management team in terms of running the process. If we get to the end, and they haven't been successful as it relates to getting the company sold — the core business sold — well we're going to need to pick up the pieces," he added. The ideal outcome for Yahoo, Smith stated, is for its core business to sell for "the highest possible price that they can get," but he declined to say how much he thought that should be. Smith has said he sees "a lot of opportunity" in Yahoo.

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U.S. Activist Investors Finding Fewer Opportunities; Compromise More Common
" Reuters (04/19/16) Herbst-Bayliss, Svea; Delevingne, Lawrence; Flaherty, Michael"

At a prominent activist investor conference on Tuesday, panelists appeared less optimistic about upcoming corporate board contests and focused on current holdings rather than presenting bold, new investment opportunities. “We have stopped holding our breath waiting on new activist campaigns,” Don Bilson, head of event-driven research at Gordon Haskett, said in a note ahead of the 13D Monitor Active-Passive event in New York. Hedge fund managers in attendance discussed the usual complaints about complacent boards and underperforming companies but seemed to acknowledge the increased difficulty in finding new opportunities. According to 13D Monitor data, the amount of money invested by activists in the first quarter dropped by more than 75% to $1.4 billion, down from $6 billion a year ago. Lawyers and executives from proxy advisory firms also agreed that proxy contests are increasingly settled ahead of a vote. “There are still about 30 to 40 votes but there are so many more fights” that are resolved with some concessions, said Okapi Partners President Bruce Goldfarb. The HFRI Event Driven Activist Index, a sector benchmark, is down 4.26% for 2016 through March. It gained just 1.15% for 2015 after rising 6.57% the previous year.

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Carl Icahn Protege's Big Energy Deal Win Is Now a Major Loss
" Fortune (04/19/16) Wieczner, Jen"

Pipeline operator Williams Companies (WMB) has turned into a surprising dud for Corvex Management founder Keith Meister. At the 13D Monitor Active-Passive Investor Summit on Tuesday, the former Carl Icahn protégé acknowledged that shares in Williams are “worth less today than when we invested.” The stock currently trades at $18; Corvex paid about $35 per share when it bought them. “Any way you slice it from that perspective, it hasn't been successful,” Meister said. “Williams has failed to live up to our expectations despite the company doing lots of wonderful things.” Corvex's investment at first appeared promising: the hedge fund launched its campaign in 2013 and the stock price surged 57% by mid-2015. Meister also convinced Williams to accept a nearly $33 billion takeover offer from Energy Transfer Equity (ETE) in September, but he said the transaction has since entered “deal purgatory” as Energy Transfer reportedly seeks a way out of the merger. Meanwhile, Williams' stock price is down 30% so far this year due to sagging oil prices. Although the stock has become more volatile than expected, Meister said he is not giving up on energy stocks entirely. He believes oil prices, currently about $40 per barrel, could reach $65 in the next year. “I don't think it's unrealistic,” he declared.

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Starboard's Smith Warns a Full Board Sweep Is Not Always Possible
" Reuters (04/19/16) O'Donnell, Carl"

Starboard Value’s Jeffrey Smith says replacing an entire board is often the best way to revive a struggling company, but that tactic is not always possible. A full sweep of a board “seems to work really well,” Smith said at 13D Monitor's Active-Passive Summit. He added that it helps activist investors earn trust with management, and lays the foundation for a true partnership. Starboard is currently angling to oust the entire board at Yahoo Inc. (YHOO), a feat it accomplished two years ago at Darden Restaurants Inc. (DRI). Smith just stepped down from Darden's board after 18 months of working to turn around the business. While a full sweep often works best, Smith said, he acknowledged that companies are much more ready to find solutions so they can avoid the embarrassment and disruption of a costly proxy fight. In addition to Yahoo, Starboard is pursuing six board seats at Depomed Inc. (DEPO), frustrated that the company rejected a takeover bid. “We are in the process,” Smith said. He added that Starboard may start other contests, but gave no further hints. “It will be a case-by-case basis.”

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Starboard's Smith Warns a Full Board Sweep Is Not Always Possible
" Reuters (04/19/16) Herbst-Bayliss, Svea; Flaherty, Michael"

Starboard Value’s Jeffrey Smith says replacing an entire board is often the best way to revive a struggling company, but that tactic is not always possible. A full sweep of a board “seems to work really well,” Smith said at 13D Monitor's Active-Passive Summit. He added that it helps activist investors earn trust with management, and lays the foundation for a true partnership. Starboard is currently angling to oust the entire board at Yahoo Inc. (YHOO), a feat it accomplished two years ago at Darden Restaurants Inc. (DRI). Smith just stepped down from Darden's board after 18 months of working to turn around the business. While a full sweep often works best, Smith said, he acknowledged that companies are much more ready to find solutions so they can avoid the embarrassment and disruption of a costly proxy fight. In addition to Yahoo, Starboard is pursuing six board seats at Depomed Inc. (DEPO), frustrated that the company rejected a takeover bid. “We are in the process,” Smith said. He added that Starboard may start other contests, but gave no further hints. “It will be a case-by-case basis.”

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Abstract News © Copyright 2016 INFORMATION, INC.

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Activist Profile View a detailed analysis of the activist histories of the 40+ top activists – updated and expanded on a continuous basis. Get detailed analysis on: (i) the returns for each activist investor, including: (A) which activists have outperformed the S&P500 on their individual and aggregated 13D filings, (B) how their returns on live filings compare to their returns on exited filings, and (C) how their returns on filings change when they take significant activist measures; (ii) the average holding periods for each activist investor on all filings, exited filings, live filings and filings where they have taken significant activist measures; and (iii) what activist measures were taken, when they were taken and how the underlying stock reacted to the filing.

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