As the number of listed companies declines, Nasdaq supports multiple share classes as a path to going public. According to Nelson Griggs, head of global listings at the Nasdaq Stock Market, it supports companies seeking to go public with a dual-class share structure, so long as investors are aware. The issue was pushed to the forefront when Snap (SNAP) went public in March without giving all shareholders voting rights. Companies tend to use multiple share classes, each with different voting rights, to help founders and CEOs maintain control or as a tool to fend off activists. Griggs said, "In the U.S., if companies disclose that they have multiple share classes, then investors can make a decision on whether they want to be a financial owner. We think it's in the best interest of companies to have that option." The exchange is calling for several reforms to make it more attractive to be a public company, including fighting back against some activists aiming only to boost a stock's price in the short term, he said. Griggs noted that the number of companies listed on the Nasdaq with A and B shares has jumped to 10% from 2% over the past decade. "If companies have the ability to set that up, they have more control over their long-term approach," he added.
Akzo Nobel NV has ended its longstanding feud with Elliott Management Corp., with a promise to add three new directors. The deal follows a months-long battle over Elliott's attempt to force the Dutch chemicals company into talks with U.S. rival PPG Industries Inc. (PPG) over its $28 billion takeover bid. The two sides announced Wednesday that they reached an agreement on Akzo's strategy to fully separate its specialty-chemicals business, following a disagreement on whether it should be sold or listed. The deal would "normalize the relationship" between Akzo and its shareholders and suspend all litigation for a minimum of three months. Akzo also announced two new nominations to its supervisory board, supported by Elliott, and intends to nominate a third supervisory board member, in agreement with major shareholders including Elliott. The hedge fund will back the appointment of new Akzo CEO Thierry Vanlancker to the board. Elliott's campaign revolved around its desire for Akzo to participate in sale talks with PPG. Akzo had rebuffed the offer, preferring its plan to boost dividend payouts and spin off its specialty-chemicals business, but the Elliott-led group argued Akzo could not make that decision until it first engaged with PPG. Elliott had also sought the removal of Akzo Chairman Antony Burgmans as part of its plan to push for sale talks. Last week, it lost a legal challenge to remove the executive at a shareholder meeting taking place in September, but the court left the door open for the hedge fund to pursue that goal in the future.
Elliott has elevated its stake in BHP Billiton's (BBL) London stock to 5%, empowering it to call a general meeting of British shareholders at any time. Although the hedge fund continues to run its "Think Smart" campaign against BHP, it has displayed a more conciliatory attitude toward the resources giant of late, expressing "confidence" that Chairman-elect Ken MacKenzie is listening to shareholders. Elliott acknowledged in a statement Wednesday that BHP appears to have taken good steps and indicated that it supports the continued progress. "With new leadership, shareholders fully expect the true value of their company to be unlocked—something which we are confident BHP's chairman-elect has firmly in mind as he takes the reins," Elliott said. "At the same time, our increased shareholding leaves us well placed to monitor BHP's progress and hold it accountable for delivering results." The investor continues to push for BHP to sell its interests in the U.S. shale sector, review its larger petroleum business, improve capital returns through increased buybacks and dividends, and scrap its dual-listed company structure. Although some expected Elliott to propose directors ahead of BHP's annual meeting later this year, that prospect may be fading. Insiders said Elliott, which would need to nominate directors by Aug. 23, had not decided whether it would propose new candidates; and the fund was prepared to give MacKenzie time to renew the board. Elliott's new ability to call a general meeting also reduces its need to propose directors as soon as next week.
Sabra Health Care REIT's (SBRA) proposed merger with another skilled nursing company, Care Capital Properties Inc. (CCP), won shareholder approval on Tuesday, receiving more than two-thirds of the votes. The result is a blow for some Sabra shareholders—specifically hedge funds Eminence Capital LLC and Hudson Bay Capital Management LP—that had attempted to thwart the deal. The investors, which own 3.9% and 3.4% of the real-estate investment trust, respectively, published open letters in July questioning the merger. They warned that a major tenant of Care Capital—Signature Healthcare—is suffering financially and could file for bankruptcy protection. Hudson Bay has also declared that Sabra CEO Richard Matros' incentives are not aligned with shareholders' interests, and that the proposed deal could inflate his compensation by an estimated 37%. "We believe that Mr. Matros's annual bonus compensation structure is set up in a manner to potentially perversely incentivize him to do transactions like this one, which are focused on maximizing his annual bonus rather than maximizing shareholder value," Hudson Bay wrote to Sabra shareholders in July. Proxy advisory firm Institutional Shareholder Services Inc. urged shareholders to vote against the deal, while Egan-Jones Proxy Services and Glass Lewis & Co. recommended voting for it.
Barry Rosenstein, founder and managing partner at Jana Partners, has come out against EQT's (EQT) proposed $6.7 billion acquisition of Rice Energy (RICE), accusing EQT of putting executive compensation ahead of shareholder value. The deal would create the nation's largest natural gas producer. Earlier this year, Rosenstein said it would cost more than the savings EQT would achieve by combining its exploration and production and pipelines businesses with Rice's operations. In an Aug. 14 letter to EQT's board filed with the Securities and Exchange Commission, Rosenstein alleged that EQT may be pursuing the "value-destructive acquisition" in order to enrich its executives. He wrote, "EQT's perverse compensation structure in fact incentivizes management to pursue this suboptimal, dilutive acquisition, no matter the cost to EQT shareholders." He claims the proposed deal would help EQT executives achieve the type of production growth they need to deliver in order to receive their maximum annual payout. Rosenstein, whose firm owns a 5.8% stake in EQT, believes that a spinoff of EQT's midstream business would better benefit shareholders but that management is opposed to this option because it would remove a "large, stable, and growing" driver of cash bonuses paid out to management for hitting annual earnings targets.
M&G Investment Management Ltd. on Monday pressed Canada's Gibson Energy to initiate a strategic review process to slash costs and improve returns. London-based M&G, Gibson Energy's top shareholder with a 19.4% stake, released an open letter outlining its views of the company and the steps it could take to maximize value, including being sold. The oil and gas infrastructure company has been suffering due to the extended slump in global crude prices. Its share price has fallen more than 55% since late 2014. M&G's letter said the fund had been trying to apply "significant pressure" on Gibson's management for over two years to drive change but it was disappointed by the pace of progress. "It is clear to us when we communicate with industry analysts, the company's competitive peer group, and other investors that there is confusion around the long-term strategy for the company," M&G Global Dividend Fund manager Stuart Rhodes wrote. The letter urged Gibson Energy to focus on its terminals in the Alberta storage hubs of Edmonton and Hardisty, and sell off its 19,000-barrel-per-day Moose Jaw, Saskatchewan, refinery, and all parts of its trucking business not associated with core assets. M&G said it also wants Gibson Energy to make progress in reducing its cost structure before beginning a strategic review process with the help of an independent investment bank.
Elliott Advisors has launched a counter-campaign against BHP Billiton (BBL) on billboards across Sydney, Melbourne, Brisbane, and Perth. In a play on BHP's new "Think Big" advertising slogan, the investor has broadcast the words "Think Smart," and "Tell BHP it's time for CHANGE." The move is Elliott's latest salvo in its attempt to get the world's largest mining company to switch its strategy. Craig Evans of Sydney-based investment firm Tribeca backs Elliott's plan to engage retail investors with its billboards—one of which sits on a main road in Melbourne, in full view of BHP executives commuting to work. "There's definitely an acknowledgement from investors that they're frustrated and would like to see something change," he says. Elliott has met with fellow investors in Australia and won some public support from institutions that traditionally have aired concerns behind closed doors. But Elliott's tactics have evolved, demonstrated by its shift from courting institutions to the Australian "armchair" investor. BHP has roughly 600,000 retail shareholders in the country, some of whom are passionate defenders of their mining champion, and wary of what some have portrayed as a "vulture" fund. Speculation is growing that Elliott—which owns 4.1% of BHP's London shares—will seek board representation, but it is unknown whether it can convince other shareholders that its interests align with theirs. Elliott must decide by Aug. 23—the day after BHP reveals full-year results—whether to push for a nomination to the board. It will need the support of 51% of investors to win a seat.
Sources say there are at least seven companies looking to buy renewable energy assets from NRG Energy Inc. (NRG): NextEra Energy Inc. (NEE), Global Infrastructure Partners, Blackstone Group LP (BX), GIC Pte, Borealis Infrastructure Management, John Hancock Life Insurance Co., and KKR & Co (KKR). NRG is under pressure from Paul Singer's Elliot Management Corp. to streamline. In response to calls from Elliott and Bluescape Energy Partners to sell assets, reduce debt, and cut costs, NRG is looking to divest as much as $4 billion of assets, including its stake in solar and wind farm owner NRG Yield Inc. However, the sources say a transaction may still be months away.
In an unprecedented move, Unifi Capital, a significant minority shareholder in Alembic Ltd., moved to appoint Murali Rajagopalachari to the board as a "small shareholders' director." However, in a filing to the Bombay Stock Exchange late Friday, the Alembic board rejected Unifi's application, citing "nexus and direct conflict" between Rajagopalachari—an employee of Unifi—its group companies, and 914 small shareholder applicants who together hold 3.75 lakh shares in Alembic. This warrants a closer examination of the nuances of this special minority right in the context of this Indian corporation with concentrated shareholdings. Alembic's complaints include allegations of conflict of interest. The board also questioned the genuineness of 320 out of the 914 small shareholders since these shareholders had only been "created" in the last five days before the application. Alembic accused Unifi of having misused Section 151 of the Companies Act, 2013 by manufacturing small shareholders to support the application. However, this requirement to establish genuineness goes beyond the mandate of Section 151 since unlike directors, who are shackled by fiduciary duties to the company, shareholders owe no duty to their fellow shareholders or the company. Finally, Alembic felt there is "no justification to appoint a small shareholders' independent director." While the jury is still out on the implications of Alembic's rejection, it remains to be seen whether Unifi will fire a legal salvo and challenge Alembic's decision. If litigated, the courts will have the unique opportunity to interpret Section 151, which will not only fill in some of the legislative gaps but also perhaps serve as guidance for activist investors.
Bain Capital and Cinven's second attempt to take over Stada Arzneimittel AG could fall apart unless investors shake off their complacency and tender more shares ahead of a make-or-break deadline next week. According to the bidders' proxy adviser, Georgeson, "There are a significant number of rumors and Chinese whispers circulating [about the volume of shares that need to be submitted]. A reduced number of acceptances this time round (given the summer holidays), the high number of passive holders that will do little or nothing and the excessive levels of borrow for your fancy back-end shenanigans leaves little room for error." Bain and Cinven said on Aug. 10 that their second attempt to buy the German drugmaker has been accepted by investors representing 31% of the shares. They need 63% of shares by midnight Frankfurt time on Aug. 16 for the deal to be successful. They missed the initial threshold by just 2% in June during their first offer. Stada shareholders have been offered 66.25 euros a share, or about 5.4 billion euros ($6.3 billion), for the company, up from the previous offer of 66 euros a share and representing a premium of nearly 50% from Stada's share price in December before talk of a takeover emerged. The first time around, about 16% of retail investors refused to sell their shares, but Bain and Cinven hope to rally shareholders this time through online ads targeting retail investors. Meanwhile, Elliott Management Corp. has built a stake in Stada, having bought up shares as the initial tender offer started to unravel.
Regulatory delays have caused hedge fund manager Crispin Odey to rethink his support for Twenty-First Century Fox's (FOXA) attempt to take over Sky, saying the £11.7 billion ($15.20 billion) offer undervalues the British pay TV broadcaster. Odey's change of heart comes as Rupert Murdoch's attempt to take full control of Sky faces more delay, after the British government said Tuesday it had asked communications regulator Ofcom to re-examine the deal. "The truth is, the longer this goes on the more that I would be quite happy if it failed," Odey told Reuters, adding that Fox is "getting it at what now looks like quite a cheap price." Odey, whose 1% interest makes him Sky's 15th-largest shareholder, originally said he would back Fox's bid for the 61% of Sky it does not already own. His view of the deal is changing, however, because he believed Sky's prospects were improving. Sky shares dropped Tuesday following the announcement that Ofcom had been asked to do more analysis on the deal, closing Wednesday at the lowest level since news of the deal broke in December. A source close to Sky said that at the current share price, Fox's offer remained competitive, but also acknowledged that the longer the deal takes the higher the risk that shareholders may change their views on the valuation.
BHP Billiton Ltd. (BBL) has launched a new TV advertisement in the latest part of its "Think Big" advertising campaign, with the goal of directly targeting millions of superannuation investors. The star of the TV spot is a BHP worker who says: "If you have money in a super fund, chances are you have money in BHP." As the camera later pans over suburban households, text on the screen says "over one in three Australians have BHP shares in their super fund." The BHP worker then says: "So while you're planning where you want to be in 10, 20, 30 years from now, so are we." The latest advertisement in the $10 million "Think Big" campaign comes amid the contest for the loyalties of BHP shareholders, as the company attempts to ward off Elliott Management, which is campaigning for an overhaul of BHP and has actively courted retail investors. Elliott wants BHP to end the dual-listed company structure; a "unified BHP—incorporated, headquartered, and listed in Australia;" and improved dividend returns. The Think Big advertising campaign has been described by company leaders as BHP's first significant advertising campaign in about 30 years. The latest BHP advertising theme will also emerge in newspaper and digital advertisements next week. BHP closed 11¢ higher on Wednesday, at $26.21, continuing its upward trajectory of the past seven weeks.