Blackwells Issues Open Letter to Supervalu Board of Directors in Response to Continued Value Destruction and Entrenchment
" Business Wire (05/17/18)"
Blackwells Capital LLC, which has an approximate 5.2% ownership interest in Supervalu Inc. (SVU), has issued an open letter to the company's board in response to its continued refusals to engage in good faith over proposals to "reverse the continued destruction of shareholder value." The letter states, "In order to unlock value for all shareholders, as we have previously expressed, the Company must change fundamentally, beginning at the Board level. In March, we privately notified you that we intend to nominate six exceptionally talented, independent candidates, who each bring desperately needed experience in retail and wholesale grocery, logistics, sustainability, and corporate turnarounds, as well as fresh perspectives for your boardroom. Rather than enter into a constructive discussion, however, this Board preemptively publicized (only part of) our nomination notice, mischaracterizing our intentions and our rights as a shareholder." Blackwells adds that the company "has yet to give shareholders notice or set a record date for the Supervalu annual meeting, which typically occurs in mid-July." The letter continues, "Enter into constructive discussions about ways to strengthen this Board. Take the time to meet with each of our extraordinary board nominees. Fulfill your fundamental duties by scheduling an annual meeting. Procrastination, delay tactics, and defensive half measures are elements that got us to where we are, not to where we should be. Stop the value destruction for the benefit of all shareholders."
DavidsTea Co-Founder's Proxy Battle Goes Cyber With Launch of Website
" Canadian Press (05/17/18)"
DavidsTea's (DTEA) founder has launched a website, called savedtea.com, that summarizes its turnaround plan as part of its proxy fight to gain control of the Montreal-based beverage retailer. Rainy Day Investments Ltd., the holding company of co-founder Herschel Segal, had previously considered taking DavidsTea private, but said in March it will not proceed with plans for a privatization transaction and had no plans to sell its shares. The firm, which owns about 46% of the company's outstanding shares, has proposed a slate of seven nominees to the board. The fight will come to a head at DavidsTea's annual meeting June 14. Segal said in a news release that the current board, from which he resigned in March, is wasting time, resources, and shareholder money exploring strategic alternatives to sell all or part of the company. "Urgent action is needed now to put DavidsTea back on the path to growth and long-term success for the benefit of all shareholders," he said. The company contends Segal wants to take control of the board without paying shareholders a premium for that.
Barclays Investor Urges Trading Shutdown at Investment Bank
" Reuters (05/17/18) Cruise, Sinead; Martin, Ben; White, Lawrence"
Sources say Sherborne Investors' Edward Bramson wants Barclays (BCS) to end most trading activities at its investment bank in an effort to cut costs and increase returns. Bramson, who took a surprise 5% stake in the British lender in February, reportedly is taking aim at investment banking activities that do not directly serve corporate clients. This means Barclays would retain its M&A advisory business and equity and debt capital markets teams but eliminate its cash equities, currency, and fixed income trading desks, the sources say. According to one source, "The trading businesses lack scale, absorb too much risk capital, and deliver too small a return. There is a route back to success and respectability for this bank, and this is to focus on the retail bank, Barclaycard, and the good bits of the corporate and investment bank. Management just have to seize it."
KIC May Cancel $50 Million Contract With Elliott Over U.S. Fund's Disputes With Korean Government
" Korean Investors (05/17/18) Jae Yoo, Chang"
The head of Korea Investment Corporation (KIC) said Thursday it is investigating whether Elliott Management's recent move against the South Korean government represents a conflict of interest with the sovereign fund, and may cancel its $50 million entrustment contract with Elliott despite its strong performance. KIC is also closely following South Korean prosecutors' probe into allegations that Elliott violated disclosure rules during its purchase of Samsung C&T shares in 2015. Elliott is seeking compensation from the South Korean government, arguing that it suffered investment losses because of the government's intervention in the 2015 merger of two Samsung units. Elliott opposed the merger, but narrowly failed to block it. "If [Elliott] is involved in an issue which causes a conflict of interest of the South Korean government, or found to have violated a law, we will consider cancelling our contract," KIC's chief executive Heenam Choi said Thursday. KIC allocated $50 million to Elliott in 2010 when the sovereign wealth fund made its first investment in a hedge fund. It is among the world's top-performing hedge funds over the past eight years, said Shinwoo Kang, KIC's chief investment officer. Under the entrustment contract, KIC can terminate the agreement and Elliott must return the committed capital to KIC if the U.S. fund invests 5% or above of its fund's AUM in South Korean assets, it is involved in a conflict of interest with KIC, or it breaks a law.
Elliott Urges Israel's Bezeq to Appoint New CEO, Buy Back Shares
" Reuters (05/17/18) Scheer, Steven"
Elliott Advisors sent a letter to Bezeq Israel Telecom on Thursday calling for a new CEO and a potential share buyback program. Elliott, which owns a 4.8% stake in Bezeq, has been agitating for change at Israel's largest telecoms group following a securities probe into the company's management and owners. Bezeq shareholders last month voted to install a new board, removing the controlling shareholder's majority. In Thursday's letter to new chairman Shlomo Rodav, Elliott said that with the long overdue changes in governance achieved, it recommended the company immediately appoint a new CEO, develop a coherent new business strategy, and seek authorization to buy back shares and consider implementing a buy-back program. "Shares could be acquired from the market or, if feasible, from the (controlling shareholder) Eurocom Group," Elliott wrote. The investor said Bezeq should seek authorization to acquire up to 10% of its shares, which it said were trading below analysts' expectations. Elliott said it would be beneficial for Bezeq to repurchase its own shares and could be funded by a 500 million shekel ($140 million) real estate sale and modest loans. "We continue to believe that Bezeq is fundamentally a well-positioned and resilient business, where—following a sustained period of poor governance and management—a new leadership team can drive performance improvements and rebuild shareholder value," Elliott said.
Hyundai Motor Chief Pleads for Investor Support in Proxy Fight
" Financial Times (05/17/18) Jung-a, Song"
Hyundai Motor's executives are seeking shareholder support for a restructuring after two proxy advisory firms came out against the plan, aligning with Elliott Management. Lee Won-hee, CEO of Hyundai Motor, on Thursday asked for shareholder support for the $8.8 billion deal between two of the group's units. Lim Young-deuk, the president of parts-making unit Hyundai Mobis, made a similar plea to shareholders Wednesday. But many investors are not buying Hyundai's claim, saying the deal would benefit the controlling family at the expense of Hyundai Mobis shareholders. Elliott has said it will reject Hyundai's restructuring plan at Hyundai Mobis's general meeting on May 29, and Institutional Shareholder Service and Glass Lewis & Co. have also urged Mobis shareholders to reject the deal. Foreign investors, which own 49% of Hyundai Mobis, could block the deal if they were united, as it would require a two-thirds majority to pass. Hyundai's Chung family and the group's affiliates own roughly 30% of Hyundai Mobis. Analysts said the state-run National Pension Service (NPS), with a 10% stake in Hyundai Mobis, had the deciding vote. "Foreign shareholders are unlikely to go against the advice of proxy advisers," said Ryu Young-jae, head of Sustinvest, a local investment consultancy, predicting that up to 35% of foreign shareholders would reject the deal. "In that case, the NPS vote will probably decide the outcome of the proxy fight. The pension fund will probably vote against the deal, given its shareholdings in various Hyundai units."
Elliott Exits Cognizant With Big Gains
" Economic Times (India) (05/17/18)"
Elliott Management has sold its shares in Cognizant (CTSH) after successfully pressuring the IT services company to shake up its business and return billions of dollars to shareholders. The stock has risen almost 50% since Elliott disclosed a 4% stake in Cognizant in November 2016. At that time, its ADRs were trading at about $51 a share on Nasdaq; on Tuesday, the stock closed at $75.46 on Nasdaq. At their highest point in the last year, the shares traded at $85.10. In February 2017, the company agreed to Elliott's demands, including committing $3.4 billion in share repurchases and dividends over two years, installing new board members designated by the hedge fund, and pledging to return 75% of its U.S. free cashflow to shareholders either through share buyback or dividends by 2019. The hedge fund's moves at Cognizant triggered changes throughout the rest of the sector, with its peers following suit with multi-billion dollar share buybacks. A Cognizant executive said the company's strategy would not change following Elliott's exit. In its investment thesis, Elliott had said if Cognizant followed its instructions, its share price could rise to $80-$90+ per share by the end of 2017. "They made their money and left and they helped all IT shareholders as well by boosting returns. All the large companies followed Cognizant and announced major buybacks. But there is a concern that they exited because they thought they would not see further upside," said an analyst with a Mumbai-based brokerage.
Elliott Management Hunts Shale Bargains
" Australian Financial Review (05/16/18) Ker, Peter"
On May 16, Paul Singer's Elliott Management confirmed that it is the third-biggest shareholder in Vantage Energy Acquisition Corp. (VEAC), which has more than half a billion dollars to spend on oil and gas acquisitions in North America. Incorporated in early 2017, Vantage raised US$565 million through an initial public offering and the sale of warrants. It recently told the U.S. Securities and Exchange Commission (SEC) that it was "formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses." SEC documents indicate that Elliott holds two classes of stock in the acquisition vehicle, and Bloomberg data suggests that the hedge fund owns a 7.25% stake. This comes after Elliott publicly urged BHP (BBL) to demerge or divest its U.S. oil and gas assets in April 2017; Elliott is the third-largest holder of BHP's London stock. The hedge fund also has stakes in ExxonMobil (XOM), Energen Corp. (EGN), EQT Corp. (EQT), and Hess Corp. (HES).
Hedge Fund Tiger Sends Letter to GameStop Urging Retailer to Adopt a Turnaround Plan
" CNBC (05/16/18) Picker, Leslie"
Tiger Management has penned a letter to GameStop's (GME) board urging the video game retailer to conduct a strategic review amid a recent management shakeup. "We view the recent management departures and crisis of confidence as an unprecedented opportunity for the Board to launch a strategic review and revive shareholder confidence in the sustainability of the GameStop business model," the letter stated. Tiger Management noted that it plans to remain a passive shareholder. "To the extent that you fail to implement a turnaround plan, we merely intend to sell our shares and redeploy capital toward more attractive investment opportunities," Tiger Management said. GameStop shares have fallen roughly 45% over the last year, and the company recently announced that CEO Michael Mauler resigned abruptly just only three months on the job. In the letter, Tiger Management urged management to reiterate its commitment to pause acquisitions, which the investor says have historically "resulted in a significant destruction of shareholder capital." Tiger Management added that GameStop should analyze cost-cutting measures, especially surrounding administrative expenses. It also said GameStop should consider divestitures of secondary businesses, specifically Technology Brands, ThinkGeek.com and International segments. In addition, Tiger Management urged GameStop to communicate a capital allocation plan that restores investor confidence in the company.
Two More Funds Build Stakes in ADP
" Wall Street Journal (05/15/18) Lombardo, Cara; Benoit, David"
D.E. Shaw Group and Sachem Head Capital Management have acquired small stakes in Automatic Data Processing Inc. (ADP) and reportedly have not decided whether to push for changes at the company. The two hedge funds have met separately with ADP's management and are closely tracking its performance, according to sources. Both firms disclosed in filings Tuesday they owned about 0.4% stakes as of the end of March, worth around $250 million, not including derivatives. The investors, which are not working together, built their ADP stakes ahead of a key meeting for the company next month. The company plans to hold an analyst day in mid-June, where it is expected to detail its plans for new growth. Meanwhile, ADP earlier this month increased its revenue forecast for its fiscal year, which ends June 30, and its shares are up about 8% so far this year. D.E. Shaw and Sachem Head join William Ackman as ADP shareholders. Last year, Ackman's Pershing Square Capital Management LP—which owns about 7.2% of ADP, including derivatives—lost a proxy fight for three ADP board seats. Ackman had argued the company fell behind technology-focused startups and needed to boost its margins, which ADP insisted it was already doing. Other hedge funds also have looked at ADP recently, as some believe Pershing Square had the right ideas but slipped up in the proxy fight, sources said, but those funds so far have not gotten involved.
Pershing Square's Funds Are Up, Ackman Talks United Tech
" Reuters (05/15/18) Herbst-Bayliss, Svea"
Bill Ackman said on a call with investors on Tuesday that all his funds are now in the black for the year to date, buoyed by investments in Chipotle Mexican Grill Inc. (CMG) and Automatic Data Processing (ADP). That marks a welcome turnaround after three straight years of losses at Ackman's Pershing Square Capital Management. All funds are in "slightly positive territory" as of Friday, Ackman said. He added that his team was working on establishing a new position that will be substantial, but declined to name the company. The hedge fund manager and his partners also discussed United Technologies Corp. (UTX), a relatively new position that Ackman said he was trading at a discount. A regulatory filing Tuesday shows that Pershing Square owned 1.9 million shares at the end of the first quarter. Like fund manager Daniel Loeb, whose Third Point is also invested in United Technologies, Ackman said the conglomerate would do better by splitting into three separate businesses: aerospace, elevators, and climate-control units. "We think each business would trade at a very attractive valuation, and more importantly operate more effectively as independent companies," Ackman said. He also said he would not try to raise big amounts of new cash. "If we can run our business effectively and compound at a high rate over time, our capital base will grow at a very nice rate and that has worked well for us," he said.
Elliott Wins More Allies in Blocking Hyundai Motor's Revamp Plan
" Bloomberg (05/14/18) Deveau, Scott; Kim, Sohee"
Elliott Management Corp. has won vital backing from two proxy advisory firms in its opposition to an $8.8 billion deal between two Hyundai Motor Group units. Glass Lewis & Co. called the company's restructuring plan "profoundly unattractive" in a report on Monday, arguing the deal undervalues the assets being sold, lacks business logic, and seems designed to benefit Hyundai's founding family. Institutional Shareholder Services Inc. (ISS) said in its own report Tuesday that although the transactions are compliant with South Korean laws, the deal appears to be unfavorable for Hyundai Mobis Co. shareholders. Both advisers urged investors in the parts maker to vote against the plan. "The board has failed to articulate a clear business rationale for the transaction and has not provided any details in support of the purported synergies," ISS said. The advisors' recommendations may be crucial to the outcome of the Hyundai deal, as neither the founding Chung family nor Elliott have the votes to determine the outcome. Foreign investors' holdings in Hyundai Mobis surpassed 45%—more than enough to block the deal—as of April, according to data compiled by Bloomberg. The deal requires a two-third majority to pass in a vote slated for May 29. If it is blocked, it would mark a landmark victory for foreign investors in a country where all such campaigns have failed.
Xerox Investor Darwin Deason Wants Auction ASAP, Talking to PE Firms
" Bloomberg (05/14/18) Hammond, Ed; Chatterley, Julia; Fu, Scarlet"
Xerox Corp. (XRX) shareholders Darwin Deason and Carl Icahn want to launch an auction for the company and have already held discussions with several private equity firms about a possible deal. In an interview on Bloomberg TV, Deason said that new Xerox CEO John Visentin is immediately starting the auction for Xerox "to make sure anyone who has any interest in buying this company has the opportunity to look at it and has a fair opportunity to look at it—including Fuji." Deason, who together with Icahn owns about 13% of Xerox, added that a new deal with Fujifilm Holdings Corp. could be "the very best thing to do." The investors had waged a campaign against Xerox's deal to sell to Fujifilm for $6.1 billion, and won Sunday when the U.S. office equipment supplier said it would cancel the deal and replace its CEO, Jeff Jacobson. Deason had sued Xerox in February to block the proposal, accusing Jacobson of acting without authorization on a deal that saved his job at shareholders' expense. The lawsuit also alleged that the company's board breached its fiduciary duties. Deason said a U.S. court decision to prevent the takeover with an injunction was a "landmark" for shareholder rights. "It's going to help shareholders, I think, all over the country," he said.
Amazon Adopts New Policy to Promote Board Diversity
" Reuters (05/14/18) Vengattil, Munsif; Nagarkatti, Karan"
Amazon.com Inc. (AMZN) announced Monday it is adopting a new policy to promote diversity on its board of directors, and that women and minorities will be among the company's board nominees. Amazon's board has 10 members, all of whom are white, including three women. "We reached this decision after listening to your feedback as well as that from Amazon employees, shareholders, and other stakeholders about the Board diversity proposal," Amazon's vice president of public policy, Brian Huseman, wrote in a letter to the Congressional Black Caucus. The new policy follows a shareholder proposal submitted by the Master Trust of the Service Employees International Union and CtW Investment Group, which argued that Amazon's board has failed to commit to practical action on diversity. "Shareholders have long believed that embracing diversity will benefit companies by providing greater access to talent, harnessing existing talent more effectively, and improving decision making by reducing groupthink and similar psychological biases," stated the April 27 proposal.
Investors Smell Possible Victory in Hyundai Showdown
" Financial Times (05/13/18) Jung-a, Song"
Elliott Management intends to vote against Hyundai's restructuring plan at a unit's general meeting later this month. The plan to spin off the after-sales business of Hyundai Mobis and merge it into the logistics unit, Hyundai Glovis, is not fair to investors, according to Elliott, which has a 1.5% stake in Hyundai Mobis. The South Korean group says selling down the controlling family's 29.9% stake in Hyundai Glovis to buy more shares of Hyundai Mobis would end its circular shareholdings and boosts its competitiveness, but many investors view the move as an attempt to strengthen the family's control over key units. Elliott wants Hyundai to focus on improving the value of the automotive units by appointing more independent board members and raising dividends. Analysts say Elliott faces an uphill battle due to its small stake in Hyundai Mobis, but add the proxy vote could be close if other foreign shareholders side with the investment management firm. Some analysts predict that Seoul's National Pension Service, which holds a 10% stake in Hyundai Mobis, might vote against the restructuring, considering the public criticism it has faced for choosing to support a contentious merger of Samsung units in 2015.
Xerox Drops Fujifilm Merger Plan, Strikes a Deal With Icahn and Deason
" Wall Street Journal (05/14/18) Lombardo, Cara"
Xerox Corp. (XRX) confirms it will exit its merger deal with Fujifilm Holdings Corp., because it reached a new settlement with shareholders Carl Icahn and Darwin Deason. The printer and copier company has agreed to replace its CEO and overhaul its board of directors. This is Xerox's second settlement with Icahn and Deason. It had struck an earlier deal with the two to oust CEO Jeff Jacobson and flip the board. However, that accord abruptly expired earlier this month prior to receiving court approval. The new settlement marks a win for Icahn and Deason, who agreed to table their proxy fight after several months of conflict. They opposed the plan to combine with the joint venture Fuji Xerox, arguing it undervalued Xerox, and had planned to nominate their own slate of directors for Xerox's board. Xerox appointed five new board members, and five existing directors resigned—in addition to Jacobson. Icahn Enterprises CEO Keith Cozza, one of the new members, is expected to serve as chairman. The new Xerox board, the majority of which comprises directors supported by Icahn and Deason, will now start examining strategic alternatives.
ValueAct Environmental Push Adds Textiles-From-Bottles Maker
" Bloomberg (05/13/18) Deveau, Scott"
Jeff Ubben's ValueAct Capital Management has acquired a 5% stake in Unifi Inc. (UFI), a company that makes polyester and nylon textiles out of recycled plastic bottles, as part of its push into environmentally focused investing. "Unifi has a long history as a trusted partner to global brands," Ubben said. "Being a key part of the soft goods supply chain, the company has committed to making long-term investments toward satisfying increased consumer demand for recycled products and reducing environmental impact." Plastics recycling in the U.S. has dropped and Unifi's textiles offer a solution through its Repreve fiber products, Ubben said. Unifi CEO Kevin Hall said the company with its partners has already recycled 10 billion plastic bottles and intends to reach 30 billion by 2020. "We welcome ValueAct on this very important journey," he said. The investment is the latest for a new ValueAct fund focused on social and environmental investments. The hedge fund had originally sought to raise $100 million for the Spring fund, launched in January, but has more than doubled that goal. "We believe the opportunity could be enormous if we can prove out the valuation creation to this adapted form of active governance investing," Ubben wrote in a January letter to investors.
Investor Group Comments on ISS Recommendation at Destination Maternity
" Business Wire (05/11/18)"
Nathan G. Miller and Peter O'Malley, collective holders of approximately 9% of the outstanding common stock of Destination Maternity Corp. (DEST), have released a statement in regard to a recent report from Institutional Shareholder Services (ISS). "We are pleased that ISS agreed with our argument that the chronic underperformance at Destination Maternity is emblematic of a company not living up to its potential, and that change at the board level is warranted. However, we find it counterintuitive that while agreeing with these fundamental points, ISS refrained from recommending for our majority female slate, citing a lack of public board experience among our nominees as the primary justification. The reality is that Destination Maternity is a company where the absence of female board representation and leadership is in direct misalignment with the strategic goals, end customers, and product selection that will ultimately determine whether DEST becomes a successful turnaround story, or yet another cautionary tale of mismanagement and missed opportunity. Notably, before launching this proxy contest we proposed to the Company that they add to the Board two of our highly-qualified female nominees. They responded by adding two men. The share of women on S&P 500 company boards rose merely 1 percentage point last year to 22%. If the argument—a chauvinist trope—continues to be that qualified women executives should not be added to boards because they have not previously served on boards, this embarrassing problem will not get solved. Board diversity cannot remain a 'chicken or the egg' situation. As such, we believe that our highly-qualified nominees Holly N. Alden, Christopher B. Morgan, Marla A. Ryan, and Anne-Charlotte Windal should be added to the Board of Directors of the Company in order to bring about the level of change needed to reverse the years of mismanagement and underperformance the Company has suffered."
Third Point Seeks to Launch 'Blank-Check' Company - Sources
" Reuters (05/10/18) Franklin, Joshua; Herbst-Bayliss, Svea"
Daniel Loeb's Third Point LLC is in talks with investment banks about launching a "blank check" company that would raise money in an initial public offering (IPO) to pursue an acquisition, according to sources. The new investment vehicle, called a special purpose acquisition company (SPAC), would be the first of its kind to be raised by a hedge fund such as Third Point. A SPAC uses proceeds from its IPO, together with borrowed funds, to acquire companies that are typically privately held. Investors in the IPO do not know ahead of time which company a SPAC will buy, although many indicate what sectors they want to be active in. Third Point is in discussions with investment banks about arranging the SPAC's IPO later this year, which could raise hundreds of millions of dollars, the sources said. The SPAC is an effort by Third Point to diversify its revenue stream, as returns from its flagship hedge fund have slumped this year amid jitters in the stock market. SPACs usually let investors redeem their common stock at the IPO price if they disagree with a proposed acquisition. This has traditionally turned off long-term institutional investors but made them popular with hedge funds, willing to gamble on what a SPAC's deal could be. To address this, some SPACs now seek to launch with the backing of cornerstone investors who have pledged not to redeem their money if they disapprove of a proposed acquisition.
ValueAct Takes Stake in Wood Pellet Manufacturer Enviva
" Bloomberg (05/10/18) Chediak, Mark; Deveau, Scott"
ValueAct Capital Management has acquired a $20 million stake in wood pellet manufacturer Enviva Partners LP (EVA), making the investment through its new $250 million environmentally and socially focused fund. "With Enviva, I think we've found a jewel because it's still early days in using wood pellets to reduce coal plant emissions," ValueAct's Jeff Ubben said in an interview. Enviva produces wood pellets that can be burned in power plants as an alternative to coal. The company makes an attractive investment, Ubben said, because it has refined its technology to raise the burning temperature of pellets, enabling them to produce more energy. The company has also slashed costs by building facilities close to logging sites where it can collect scraps that sawmills cannot use. "We think the growth here is double digit on the dividend even though we're getting 9% today," Ubben said. These products remain controversial among environmentalists because they still emit carbon dioxide when burned, but Enviva requires its wood suppliers to commit to replanting trees and managing forests sustainably to offset emissions. "Biomass, looks to us, as a big opportunity as long as you're incentivizing the tree farmers to grow their trees," Ubben said. The ValueAct Spring Fund now has three public stakes, including in international power producer AES Corp. (AES) and education company Strayer Education Inc. (STRA). The fund has also made three undisclosed investments, Ubben said.
All Shareholders Aren't Equal, a Japan Inc. Elder Statesman Says
" Bloomberg (05/10/18) Redmond, Tom; Taniguchi, Takako"
Yoshihiko Miyauchi, the senior chairman of the $23.5 billion financial and leasing group Orix Corp. (IX), wants Japan to allow so-called class shares in order to keep voting rights away from investors who "buy today and sell tomorrow." Miyauchi—who has previously suggested taking voting rights from stockholders who have not owned shares for a certain period of time—says Japan should follow the example of the United States and Hong Kong by letting companies list different classes of shares. That way, control over a firm could be concentrated among people focused on its longer-term growth. Miyauchi's views contrast with those of many corporate governance experts, who say Japan needs to reduce its web of cozy stock ownership known as cross-shareholdings. Miyauchi is also critical of activist shareholders, who he says tend to be short-termist. Some shareholders active in the region strongly oppose Miyauchi's comments. They are "extraordinarily dramatic statements," says Seth Fischer, chief investment officer of Oasis Management Co., the Hong Kong-based hedge fund that has pressed for changes at companies including Nintendo Co. and Alpine Electronics Inc. "And I disagree with all those statements." Fischer says there are different types of activists operating in Japan today. He says almost none of Oasis' campaigns in Japan have been about calling for dividend payments, and that Oasis has companies' long-term interests at heart. "In all of our cases, we're talking about how to create a better company," Fischer says.
Xerox Board Seeks Better Terms From Fujifilm, Will Resume Talks
" Reuters (05/09/18) Rai, Sonam; Panchadar, Arjun"
Xerox Corp.'s (XRX) board announced Wednesday it planned to continue merger talks with Fujifilm Holdings, seeking a sweetened deal to terms reached in January that have spurred a proxy battle. Carl Icahn and Darwin Deason—who own 15% of Xerox—have been seeking to thwart the deal and unlock more value from the company. Arguing the Fujifilm deal values Xerox at just $28 per share, the investors said this week they would consider an all-cash bid of at least $40 per share. Analysts say the extended battle for Xerox could ultimately push higher any offer price from Fujifilm or other interested parties. Fujifilm said Thursday it has not yet received a new proposal from Xerox and believes the current deal provides the best value for all shareholders. Although some Tokyo-based analysts believe Fujifilm would be better off investing in its non-copier and printer businesses, others argue that the Japanese firm, which depends on the joint venture for nearly half of its revenue, should bow to the shareholders' demands. Xerox had at one point reopened the deal talks with Fujifilm, but those discussions were suspended after Deason won a temporary court order blocking the deal. However, the judge said that Xerox was not restricted from exploring other transactions with Fujifilm. Xerox said Wednesday that it will pursue an appeal of the lower court's ruling in the Deason lawsuit. Fujifilm is also pursuing an appeal.
Tesla Urged to 'Raise Its Game'
" Bloomberg (05/09/18) Hull, Dana"
CtW Investment Group is waging a campaign against the re-election of three board members at Tesla, claiming the electric-car maker has veered off the path to profit. The firm—which is working with union pension funds that are Tesla investors managing more than $250 billion—blasted the board members' ties to Chairman and CEO Elon Musk, their lack of industry experience, and their poor track records of independent board service. "Tesla has failed to hit critical production milestones and has consequently seen its past progress toward profitability sharply reverse," Dieter Waizenegger, CtW's executive director, wrote in a letter filed Wednesday with the Securities and Exchange Commission. "But instead of recognizing the need for independent and effective board leadership, Tesla has re-nominated three directors who exemplify the company's failure to evolve." The firm urges shareholders to vote against the three individuals at Tesla's June 5 annual meeting: Antonio Gracias, a private-equity investor and Tesla's lead independent director; Kimbal Musk, Elon's brother; and James Murdoch, CEO of Twenty-First Century Fox Inc. Waizenegger writes that the Tesla's prospects for continued success are "more tenuous than ever" and that the board needs to "raise its game." The letter raises concerns with matters including Musk's combative earnings call with analysts last week, safety issues at Tesla's California assembly plant, deadly crashes involving the driver-assistance system Autopilot, and litigation related to the company's controversial acquisition of SolarCity Corp.
FTSE Chairman Andrew Page Feeling the Pressure as Both Cote and Northgate Come Under Fire
" City A.M. (05/08/18) White, Lucy"
Crystal Amber penned a letter to fellow Northgate shareholders accusing Chairman Andrew Page of being a "hindrance," as the commercial vehicle hire company's share price has failed to recover after a string of profit warnings. Page has come under pressure from investors after three of the companies he currently presides over—including Carpetright, where he is senior independent director, and restaurant chain Cote, where he is chairman—have fallen into trouble. For example, Cote announced Tuesday it might have to shutter stores across its Limeyard and Jackson & Rye brands, while Carpetright last month closed 92 outlets in a desperate effort to stave off administration. In its letter, Crystal Amber accused Page of being "responsible for Northgate's self-defeating lack of transparency." The investor referred to incidents such as an event held exclusively for sell-side analysts such as investment bankers and stock brokers, which excluded shareholders and barred them from hearing management pronouncements and publicly raising questions. Crystal Amber also questioned why certain performance yardsticks, such as Northgate's average fleet age, had been dropped.
Land & Buildings Sends Letter to Taubman Centers Shareholders
" Business Wire (05/08/18)"
Land & Buildings Investment Management LLC sent a letter to the shareholders of Taubman Centers Inc. (TCO) on Tuesday in relation to its nomination of Jonathan Litt for election to the board of directors at the annual shareholder meeting on May 31 and its request that the board eliminate the dual-class voting share structure. Land & Buildings notes that the company's performance has not materially improved since this time last year, and says this stagnancy comes down to four main issues: "severe operational missteps and lost opportunities; an appalling lack of true director experience, the refusal to evolve past the outdated dual-class share structure, and the chronic underperformance driven by the preceding factors." In the letter, Litt writes that if elected, he would introduce the following actions on his first day in the boardroom: "Motion to split the Chairman and CEO roles; motion to form a special committee of independent directors to evaluate the elimination of the dual-class voting share structure; motion to form a capital allocation committee to evaluate ways to improve performance at Taubman, including strategic alternatives, capital allocation, and operations; and motion to sell assets to take advantage of the arbitrage between private and public markets given the substantial discount the shares trade at to Net Asset Value." Land & Buildings has also released a supplemental investors presentation detailing the operational issues, underperformance, and case for change at Taubman.
Icahn, Deason Want Bid of at Least $40 Per Share for Xerox
" Reuters (05/07/18) Chatterjee, Laharee; Yamazaki, Makiko"
Xerox Corp. (XRX) shareholders Carl Icahn and Darwin Deason—who oppose a $6.1 billion deal with Fujifilm Holdings—announced they would consider an all-cash bid of at least $40 per share. That represents a 43% premium to the Japanese firm's current offer, which values Xerox at about $28 per share. In an open letter to shareholders, Icahn and Deason said they are "confident other potential buyers are waiting in the wings," and they see the possibility of similar or better value in a standalone Xerox. They also lambasted Xerox's board for going back on an agreement to settle their dispute. In setting a minimum price on Xerox, the investors have thrown the ball back into Fujifilm's court while also gaining time to court other investors after Xerox failed on Monday to gain a quick appeal to a temporary court order blocking the deal. Although some analysts say Fujifilm would be better off putting its money into its non-copier and printer businesses, others argue that the Japanese firm—which relies its joint venture with Xerox for nearly half of its revenue—should bow to the investors' demands. "It's not cheap, for sure," said Masahiko Ishino, an analyst at Tokai Tokyo Research Center. "But for Fujifilm, it's still better than a complete collapse of the deal, which could mess up Xerox in a major way. Fujifilm shouldn't waste this opportunity." Icahn and Deason together own roughly 15% of Xerox.
Icahn Warns Danger of Bankruptcy in Fuji-Xerox Deal
" Nikkei Asian Review (Japan) (05/08/18) Nakayama, Shuji"
Carl Icahn is warning shareholders that a proposed takeover by Japan's Fujifilm could lead U.S. printer maker Xerox (XRX) into bankruptcy. In a written response to questions from Nikkei on Monday, Icahn said it was "absurd" for Xerox shareholders to accept the current offer to merge the U.S. company into existing joint venture Fuji Xerox. "Based on the ongoing accounting scandal that appears to grow in size and scope every quarter, combining Xerox with Fuji Xerox could possibly lead to bankruptcy," Icahn said, noting: "In that case, we run the serious risk that the only money we will ever see is the one-time $9.80 cash dividend." He also said that Fujifilm's proposal "dramatically undervalues Xerox and overvalues Fuji Xerox." He added that "no one from Fuji has ever even reached out to us. It's sort of laughable." The two sides have made little progress toward resolving their differences, raising the likelihood of a proxy battle. Icahn told Nikkei: "We've been through this countless times over the past four decades, and we believe there's very little chance we lose this proxy fight. Every shareholder we've spoken to has been extremely supportive of and grateful for our efforts. They want to see the proposed Fuji deal terminated, new leadership brought in at Xerox, and a real strategic alternatives process conducted." When asked if he would push for dissolving all financial ties with Fujifilm once the proxy fight was won, Icahn said, "Once our slate of directors is elected and the proposed Fuji deal is terminated, every option will be on the table."
Telecom Italia Reappoints Genish as CEO After Elliott Coup
" Reuters (05/07/18) Flak, Agnieszka; Jewkes, Stephen"
Telecom Italia (TIM) announced Monday its board had unanimously backed Amos Genish's reappointment as CEO. The move comes after U.S. fund Elliott triumphed in a battle for board control at the phone group last week, winning a shareholder vote to appoint 10 independent directors—or two-thirds of the board—and thus loosening the grip of top shareholder Vivendi. Genish is close to Vivendi but is also respected by Elliott, the Italian government, and investors. The 58-year old had previously said he would only continue in his role if the new board backed his plan, which emphasizes a digital transformation of the company, fixing its finances, and getting back an investment grade credit rating. Vivendi said Monday it welcomed the appointment of Genish and reaffirmed its long-term commitment to TIM. The French media group said it would ensure the company's plan was "coherently implemented in its entirety" and that measures taken to improve profitability continued. Five of Vivendi's candidates, including Vivendi CEO Arnaud de Puyfontaine, will be on the board, so the two sides will have to find a way to work together to help the company reduce debt and become more competitive.
Paul Singer's Elliott Makes All-Cash Offer for Athenahealth of $160 a Share
" CNBC (05/07/18) Moyer, Liz"
On May 7, Elliott Management made an all-cash deal worth $160 a share for athenahealth (ATHN). The hedge fund run by Paul Singer took a stake of 9.2% in the healthcare technology company about a year ago, but that stake now stands at 8.9%. In a letter to management, Elliott said it has had constructive discussions with management, "and we greatly appreciate how much time the management team, led by [CEO] Jonathan [Bush], and the Board have invested in evaluating our perspectives as well as the perspectives of our fellow shareholders." The letter went on to say, "Unfortunately, we are faced now with the stark reality that athenahealth as a public-company investment, despite all of its promise, has not worked for many years, is not working today, and will not work in the future. Given athenahealth's potential, this reality is deeply frustrating."
Telecom Italia Seen Reappointing Genish as CEO After Elliott Win
" Reuters (05/07/18) Flak, Agnieszka"
In the wake of Elliott gaining board control from Vivendi, Telecom Italia (TI) is expected to reappoint Amos Genish as CEO as the company enters a new phase. On May 4, Elliott won a shareholder vote to appoint 10 independent directors, or two-thirds of seats, to the board at Telecom Italia. Sources say the first name on Elliott's slate, Fulvio Conti, a former manager at Telecom Italia, is seen as a front-runner to become chairman. Elliott, the Italian government, and investors respect Genish despite his closeness to top shareholder Vivendi. However, Genish has said he will continue only if the new board backs his plan, which focuses on a digital transformation of the company, fixing its finances, and getting back an investment grade credit rating. Elliott has a 9% stake in the company, while Vivendi owns 24%.
Barclays Ready to Fend Off Radical Proposals by Sherborne
" BT (British Telecom) (05/07/18)"
Barclays (BCS) CEO Jes Staley and finance director Tushar Morzaria are expected to sit down with Ed Bramson, whose fund Sherborne is the investment bank's fourth-largest shareholder with a stake of about 5.4%, to inform him that shareholders do not have the appetite for a major overhaul. Bramson has not yet made any specific demands, though some believe he will push for an overhaul at Barclays to deliver bigger returns for investors. Following a lengthy period of restructuring, one board member believes "shareholder support for the current strategy is there." However, the board member added that, "Generally as a board we're focused on the three- to five-year picture of where we can go, and frankly we'd all like to get there as fast as we could. If there are sensible things to do, then why not?" Meanwhile, observers do not believe Bramson will ask for a spot on the Barclays board, as it could generate backlash from regulators who would prefer stability over a shake-up at one of Britain's biggest lenders.
Crescent Point Shareholders Reject Dissident Slate of Directors but Vote Against Say-on-Pay
" Canadian Press (05/04/18)"
The head of Crescent Point Energy Corp. (CPG) is pledging to work harder to address complaints after shareholders rejected four directors nominated by Cation Capital Inc. at its annual meeting on Friday. Scott Saxberg acknowledged that the company has faced questions for years from investors critical of its spending, debt levels, executive pay, and share performance, but insisted the company has already made changes and is willing to do more. All 10 of CPG's nominees were elected at the annual general meeting in Calgary. However, 61% of shareholders rejected a "say-on-pay" motion asking them to endorse the way Crescent Point pays its executives. The company also lost a similar motion at its 2016 annual meeting. Former investment banker Thomas Budd, one of the four defeated dissident nominees, said the action by Cation has drawn attention to the many problems at Crescent Point. "Basically, the board has let Scott do whatever he’s wanted for three years," he said after the meeting, adding the CEO's pay has not reflected the company's sagging share price. He also indicated that he owns more stock than the re-elected directors. Saxberg said he thinks the compensation rejection was more of a vote on its share price, which declined almost 40% in the 12 months before Cation launched its proxy contest in early April.
Third Point Calls for Otis Elevator Owner United Technologies to Split Into Three
" CNBC (05/04/18) Cheng, Evelyn"
Third Point's Dan Loeb said on May 4 that United Technologies (UTX) should split into three companies. The hedge fund, which took a "significant stake" in the company in the fourth quarter, wrote, "To reverse its years of underperformance and realize the full potential of its franchise assets, we believe UTC should split into three focused, standalone businesses: Otis [Elevator Company], [UTC Climate, Controls & Security], and an aerospace company ("Aerospace RemainCo") encompassing UTAS and Pratt & Whitney." The company responded with a statement reading, "While UTC disagrees with several of the assertions contained in the Third Point letter, the company is always open to the input of shareholders." According to Third Point, it has initiated conversations with United Technologies' board, and CEO Greg Hayes has indicated the board is reviewing the company's portfolio.
KKR to Ditch Partnership Structure and Become Corporation
" Wall Street Journal (05/03/18) Gottfried, Miriam; Rubin, Richard; Cumming, Chris"
KKR & Co. (KKR) on May 3 announced plans to convert on July 1 from a partnership to a corporation, a structural change that many publicly traded private-equity firms have been considering following changes in U.S. tax legislation. The partnership structure, which features multiple share classes and special tax-reporting requirements, has long limited the pool of investors willing or able to own shares of private-equity firms. KKR officials are hopeful the change will make the stock more attractive to institutional investors, most of which do not invest in publicly traded partnerships—a lack of demand that has depressed KKR's stock price. Scott Nuttall, KKR's co-president and co-COO, states, "It became clear to us that we've been fishing in a small pond with a slow leak and wondering why we weren't catching anything." KKR will become the second among its peers to convert. Ares Management LP became a corporation on March 1. Blackstone Group LP, Apollo Global Management LLC, Carlyle Group LP and other peers have voiced caution, referencing the expected hit to their profits. "We're monitoring carefully all aspects of the issue. We're not in a hurry," said Blackstone CFO Michael Chae on a recent earnings call. "This is a race that does not necessarily go to the swift, and you have one shot at making a thoughtful decision." ValueAct Capital Management LP, which owns approximately 6% of KKR shares, has called for the structural change. "This conversion will help to further expose a great business to a broader universe of potential investors, and increase long-term value for all shareholders," stated Mason Morfit, chief investment officer of ValueAct, in an email.
Jana, ConAgra End Standstill as Pinnacle Foods Comes Under Pressure to Sell
" Reuters (05/04/18) Brumpton, Harry; Roumeliotis, Greg"
ConAgra Brands Inc (CAG) announced Friday it had terminated a standstill agreement with Jana Partners LLC, the hedge fund angling for a sale of Pinnacle Foods Inc (PF). The end of the deal, which began in 2015 when ConAgra and Jana agreed to appoint two new mutually agreed directors to ConAgra's board, enables Jana to more freely agitate both ConAgra and Pinnacle Foods to explore a combination. ConAgra held talks to acquire Pinnacle Foods last year, but could not close a deal due to price disagreements, sources said at the time. Last month, Jana revealed a 9.1% stake in Pinnacle Foods and said it would speak to the company about it participating in industry consolidation by exploring a sale. ConAgra said its standstill agreement with Jana ended by mutual agreement. Pinnacle Foods shares were up 4% at $63.16 on Friday, giving the company a market capitalization of $7.5 billion. ConAgra shares were up 2.7% at $36.80, giving it a market capitalization of $14.7 billion.