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Featuring all breaking news and in depth articles and editorial press coverage pertaining to shareholder activism and corporate governance.

Macy's Reliance on Stores for E-Commerce Weighs on Mulled Split
While Shell Resists Breakup, Rivals See Opportunity From Spinoffs
BHP a Step Closer to Scrapping Dual Listing After Board Approval
IPE Conference: Strong Sustainability a Proxy for Good Company Mgt
Present but Not Accounted for: NYSE Amends Treatment of Abstentions in Certain Shareholder Votes
ExxonMobil's Governance Structure Fails the Energy Transition: Engine No. 1
Asset Value Investor Vows to Continue Third Point Fight as Loeb's Vehicle Slams 'Self-Serving' Investor
U.K. Pharma Services Firm Clinigen Gets Possible Takeover Proposal
Glencore Widens Review of Assets, Defends Coal Decarbonization Stratrgy
Goldman Sachs Ups Diversity Targets as Demographic Data Improves
Gold Miners Must Justify Environmental Impacts, Veteran Investor Says
Disney Appoints Woman as Chair for First Time in 98-year History
Kaisa Loses Control of Nam Tai’s Board in Revolt Led by Shareholder IsZo
ExxonMobil Declares New Goals for Carbon Emissions Per Barrel
Trial to Determine if Requiring Women Board Members Is Legal
Saint-Gobain Considers Acquisition of GCP Applied Tech
Dan Loeb Fends Off Rivals at London-Listed Third Point Fund
Glencore Faces Call From Investor to Sell Coal Assets
Jana Partners Urges Zendesk to Ditch Deal for SurveyMonkey Parent
ISS Releases Proposed Benchmark Policy Changes for 2022
Microsoft Shareholders Force Company to Disclose Sexual Harassment Data
Box Delivers Strong Quarterly Results in Wake of Shareholder Vote
Letter From Gatemore Capital Management LLP to DX Group Plc
SEC Guidance Opens the Door for More ESG Proxy Proposals
Twitter CEO Jack Dorsey to Step Down
U.S. SEC Issues Guidance on Corporate Share-Based Executive Compensation
Elliott Releases Statement on Leadership Change at Twitter
Comtech Addresses Outerbridge’s Claims
Ackman SPAC Will Need New Law to Beat Lawsuit, Investor Says
Icahn Seeks TRO in Del. for Southwest Gas Stock Sale Plan
Ancora Urges Berry Global to Explore a Sale
Omicron Can Boost Equities if Symptoms Are Mild, Ackman Says
GSK Ready for Human Trials of HIV Cure as CEO Mounts Fight-back Against Investors
Proxy Firms Back Shell's Plans to Move HQ to London
U.K. Looks to Compete on Financial Regulation
Post-Dispatch Owner Adopts 'Poison Pill' as It Weighs Alden Offer
Bill Ackman's Pershing Square SPARC Files for New York Listing
U.K. Software Firm Blue Prism Agrees to Vista's $1.63 Bln Final Takeover Offer
Japanese Financier Scores Big Win in Battle for Shinsei Bank
KKR Has Wiggle Room to Sweeten Telecom Italia Bid
Transparency of ESG Investment Ratings Faces Regulatory Scrutiny
Advent, Centerbridge to Buy Aareal Bank in $2 Billion Deal
Newpark Resources Pressed to Separate Units by Investor
Outerbridge Issues Presentation Detailing the Need for Board Refreshment at Comtech
Pershing Square Tontine Holdings: Huge SPAC With Great Sponsor And Upcoming Catalysts To Re-Rate
Shell Launches Shareholder Talks to Win Backing for HQ Move, Sources Say
Elliott Wins the Athenahealth Battle (Again)
Griffon Investor Voss Capital Pushes for Board Seats, Possible Breakup
Dollar Tree Hikes Prices 25%. Most Items Will Cost $1.25
Commentary: Glencore Gets a Dirty Holiday Gift From Anglo American
Opinion: Revisiting the SEC's Proxy Advisor Rule
The Hot New Trend for Hedge Funds Is—Finally—Female Founders
With Industrial Assets in High Demand, 55M SF Warehouse Portfolio Eyed by Land & Buildings
Corporate Issuers Rate Satisfaction With Virtual Shareholder Meeting Services, Proxy Solicitors, and ESG Consultants
Commentary: A Shadow Hanging Over Blue Prism
The Scramble for EV Battery Metals Is Just Beginning
ESG Continues to Find its Way Into Incentive Compensation Plans
Charlie Penner, the Investor Reshaping Exxon From the Inside
Coal Remains King for Glencore as Shareholders Resist Investor Pressure
Commentary: BP Needs a Big Deal to Become Britain’s Wind Power Champion
Ackman SPAC Can't Lean on SEC to Beat Suit, Investor Says
Commentary: Glencore's Investor Is Misguided but Not Unhelpful
Kansas Regulators Worry Investor's Influence at Evergy Could Raise Your Electric Rates
Recent Shareholder Engagement Trends
EY Study: Three-Quarters of Institutional Investors Say They May Divest From Companies With Poor Environmental Track Records
BlackRock Decision to Give Investors Voting Powers Could be More Bark Than Bite
Macy's in a Black Friday Breakup Bind
Bill Ackman’s $1 Billion Inflation Bet
The Sustainability Board Report 2021
2021 Annual Corporate Directors Survey
The Poison Pill, Long Hated by Investors, Gets New Love in Japan

12/3/2021

While Shell Resists Breakup, Rivals See Opportunity From Spinoffs

Wall Street Journal (12/03/21) Dummett, Ben

Royal Dutch Shell Plc (RDS.A) is standing firm against Third Point’s call for a breakup of the oil giant to retain and attract investors. But that isn’t stopping Eni SpA (E) and other European energy conglomerates from targeting similar moves to boost shareholder returns. Shell has defended its integrated strategy by saying its legacy oil-and-gas assets are needed to fund its investments in lower-carbon energy. But Daniel Loeb’s Third Point says the structure is too unwieldy to value Shell. Instead, the U.S.-based investor suggests the company, which plans to consolidate its dual British and Dutch structure and relocate its headquarters to London, should consider separating its legacy operations from its renewables investments to boost returns and accelerate carbon-dioxide-emission reductions. The standoff shows the challenges energy companies face maintaining their record of dividend payouts while managing the more recent pressures of reaping full value for their increasing investments in green energy. Eni’s solution is to spin off a minority stake of its retail energy and renewables business next year through an initial public offering. The move isn’t as extreme as the breakup Third Point is pushing for at Shell, but the aims are similar: Simplify the company’s structure, in this case, to attract a higher valuation and a lower cost of capital. That will allow the spun-off company to raise money more cheaply to expand the alternative energy business as more investors bet on growing demand for low-carbon assets over fossil fuels like oil and gas. Analysts and investors say it is too early to know if Eni’s IPO strategy will succeed over the longer term. It has paid off so far, with the stock outperforming Shell and other European rivals BP PLC BP) and TotalEnergies SE (TTE) since the plan’s approval in October.

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12/3/2021

BHP a Step Closer to Scrapping Dual Listing After Board Approval

Brisbane Times (Australia) (12/03/21) Danckert, Sarah

BHP Group’s (BHP) move to unify its corporate structure and make the ASX its primary listing has opened the door for the mining giant to push for the loosening of historic federal regulations designed to preserve its status as the ‘Big Australian.’ The world’s largest mining company this week unanimously voted to scrap the dual listing structure established when it merged with UK-based Billiton in 2001. Under the ‘DLC’ structure, separate BHP securities with the same economic rights have traded on the ASX and on the London Stock Exchange. The structure, which was established for tax purposes, has been heavily criticised by some investors, most notably Elliott Management. With a market capitalization of about $200 billion, BHP is the most valuable company on the ASX, and the second most valuable company on the London Stock Exchange. Analysts and investors welcomed the decision to scrap the London or ‘Plc’ shares, which will save the company costs and make it easier for BHP to fund takeover deals. BHP shares on the ASX ended 2% higher at $40.50, their highest closing level since September. In 2001 former Treasurer Peter Costello imposed a series of conditions on BHP’s merger with Billiton, amid claims the Keating government had not put in place enough safeguards when Rio Tinto established a similar dual listed structure a few years earlier. The regulations include a requirement that BHP’s chief executive and chief financial officer be based at its Australian headquarters in Melbourne, and also that the company hold the majority of its board meetings on Australian soil. Mining industry sources say BHP will now push for the government to remove the conditions, which no other company in Australia is faced with. While the company has no plans for its most senior executives to be based offshore, the requirement that board meetings be held in Australia has proved challenging for the company, which has operations spanning the globe. The miner expects to complete the unification of its corporate structure by Jan. 31, 2022, if it wins regulatory approval. Its ASX-listed shares will still be offered to investors in Johannesburg, New York, and London. The structure needs to be approved by shareholders in both Australia and the UK, and will also require approval from regulators in both countries and South Africa.

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12/2/2021

Present but Not Accounted for: NYSE Amends Treatment of Abstentions in Certain Shareholder Votes

National Law Review (12/02/21) Brown, Gary M.; Scott, Wes; Varrasse, Troy

The Securities and Exchange Commission (SEC) recently approved an amendment to Section 312.07 of the NYSE Listed Company Manual, eliminating the requirement that listed companies include abstentions as "votes cast" in matters on which the NYSE requires shareholder approval. NYSE-listed companies are now required to tabulate abstentions in accordance with their governing documents and applicable state law. Among other things, the amendment will impact shareholder votes on equity compensation plans and material revisions to those plans, certain issuances of common stock and securities convertible into common stock to related parties, certain non-public issuances of common stock and securities convertible into common stock exceeding 20% of total voting power or common stock outstanding pre-issuance, and issuances leading to a change of control of the listed company. The amended rule does not affect any votes required by state law. Listed companies would be wise to review the voting standards set forth in their governing documents, the voting standards that are mandated under applicable state law, and the description of the voting standards included in their proxy statements to confirm that they describe the voting standards consistent with their governing documents and applicable state law.

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12/2/2021

ExxonMobil's Governance Structure Fails the Energy Transition: Engine No. 1

Reuters (12/02/21) Desai, Pratima

Engine No. 1 founder Chris James said a failing governance structure that lacked a clean energy transition strategy spurred the hedge fund to bring independence to ExxonMobil's (XOM) board. "This is a company that has lost its social license," he stated. "It needs to look at the energy transition as an opportunity to be part of the solution instead of the problem." Three of four people with backgrounds in energy transition nominated by Engine No. 1 joined ExxonMobil's board earlier this year. James said ExxonMobil wasted capital by investing in new projects in the oil and gas sector that should not have been sanctioned, noting that the company had some of the most skilled engineers in the world. "Management has prevented these engineers from unleashing the power they have to create value in the energy transition," he declared, adding that ExxonMobil had outperformed Chevron (CVX) since Engine No. 1's intervention. The company's shares are up around 60% since November 2020 when the hedge fund purchased them compared with about 30% for Chevron. ExxonMobil replied to a request for comment with the statement: "We evaluate our investments across a range of scenarios-including net-zero pathways—and we look forward to sharing more details in the coming months. There is significant growth potential in the low-carbon opportunities where we can leverage our competencies in technology, engineering, and project development. This gives ExxonMobil an advantaged position irrespective of the pace of the energy transition." James said tying sustainability to profitability is a theme extending through Engine No. 1's portfolio, which motivated the fund to acquire a stake in General Motors (GM), whose board fully supports management's plans. "Japanese automakers have made a bet that plug-in hybrid electric vehicles are the future, not battery electric vehicles, and we believe that is a mistake by the Japanese automakers and an opportunity for GM and Ford [F]," he noted. "During my lifetime, GM haven't had the opportunity to gain as much share as they will have in the next 10 years."

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12/2/2021

Asset Value Investor Vows to Continue Third Point Fight as Loeb's Vehicle Slams 'Self-Serving' Investor

Evening Standard (U.K.) (12/02/21) Williams-Grut, Oscar

Asset Value Investors (AVI) has been lobbying Third Point Investors, a London-listed feeder fund of Dan Loeb's Third Point, to roll out reforms to narrow the gap between the fund's share price and the value of underlying assets. Third Point has opposed doing so and instead formulated its own proposals. AVI proposed a resolution to oust Loeb's board representative, Joshua Targoff, but that resolution was defeated, with 75% of votes cast backing Targoff. Third Point said it hoped AVI would "now cease in its attempts to impose its self-serving agenda," but AVI pledged to continue the push, arguing that Third Point's portrayal of the vote was "misleading." Forty-percent of Third Point shares are held by a structure known as VoteCo, with three independent directors overseeing the VoteCo stake. VoteCo voted against AVI's resolution. AVI Director Tom Treanor called VoteCo a "puppet" and argued that an "overwhelming majority" of independent shareholders backed its ideas. However, AVI's motion was opposed by shareholder advisory groups like Glass Lewis and ISS. In a Dec. 2 letter, Treanor and other AVI directors wrote, "It is in no one's interest that this dispute plays out any longer in public, and we very much hope that the board will now be willing to enter into discussions with us privately to find a solution."

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12/2/2021

Glencore Widens Review of Assets, Defends Coal Decarbonization Stratrgy

Reuters (12/02/21) Denina, Clare; Shabalala, Zandi

Glencore (GLNCY) said it was in the process of selling 10 additional holdings, putting another 15 under review and considering acquisitions as it refocuses its portfolio on what it termed "commodities of the future." Glencore, which owns more than 150 operating sites, has sold seven assets thus far, including some Bolivian zinc mines and an Australian copper-gold mine. The firm has 10 sales processes underway across its portfolio and 15 further assets under review which may not align with its long-term strategy. "Those assets that are not fit for purpose or subscale we would look to move out of our portfolio," declared CEO Gary Nagle. "It's not a one-size-fits-all approach...each asset will be looked at on its own merit." The company's share price closed down 4.1%. Glencore steered toward an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $21.7 billion in 2022, below analysts' projections. RBC Capital Markets had predicted an adjusted spot EBITDA of $27 billion for next year, while Jefferies forecast $23.7 billion. Glencore added that it would temporarily raise its net debt to $16 billion for potential mergers and acquisitions, noting it does not have short-term targets. "There is nothing cooking," said Chief Financial Officer Steve Kalmin, explaining that targets would be "commodities of the future," without specifying. Nagle defended the company's decarbonization strategy to phase out coal mines by the mid-2040s, after Bluebell Capital Partners urged Glencore to spin off the unit and help buttress the "undervalued" stock. About 94% of Glencore's shareholders voted for its plan to hit net-zero carbon emissions by 2050. The company is seeking a 15% reduction in Scope I and II emissions by 2026 compared to 2019, and 50% by 2035, from a previous goal of 40%. Thermal coal prices have recently risen on power shortages in China and a European gas squeeze, partly helping Glencore stock to appreciate more than 50% this year.

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12/1/2021

Kaisa Loses Control of Nam Tai’s Board in Revolt Led by Shareholder IsZo

South China Morning Post (12/01/21) Yiu, Enoch

Kaisa Group Holdings Ltd. (1638) has lost control of a New York-listed property affiliate after a shareholders’ revolt, in a boardroom defeat that adds to the developer’s woes amid its asset sales plan to stave off defaults. Nearly 60% of Nam Tai’s shareholders, most of whom are unaffiliated with Kaisa, voted to eject six Kaisa-appointed directors and replaced them with executives nominated by the third-largest shareholder IsZo Capital Management. U.S. billionaire Peter Kellogg, the second largest shareholder with a 19% stake, will stay on at Nam Tai, while Mark Waslen will extend his tenure as director, a position he has held since 2003. The vote ended IsZo’s effort since May 2020 to oust Kaisa over claims of fiduciary mismanagement and business strategies that hurt shareholders’ interest. The New York-based shareholder, owning 15% in the Shenzhen developer, had questioned Nam Tai’s strategy, noting that its stock price had lost 70% in value while the company’s board was under the control of Kaisa, which owns 24% of Nam Tai. Following the shareholders’ vote, IsZo would revamp Nam Tai to enhance its “corporate governance, establish a credible capital allocation policy, and take steps to unlock the significant value within its real estate portfolio,” said IsZo’s founder and managing member Brian Sheehy. The company’s share price has since recovered from US$3.99 in May 2020 to the peak of US$36.9 in June this year, before falling back to about US$17.91 on Tuesday.

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12/1/2021

Saint-Gobain Considers Acquisition of GCP Applied Tech

Bloomberg (12/01/21) David, Ruth; Porter, Kiel; Nair, Dinesh

French building materials maker Cie. de Saint-Gobain (CODYY) is reportedly among suitors considering a potential acquisition of GCP Applied Technologies Inc. (GCP). Saint-Gobain has been studying a deal for the U.S. company, which makes specialty construction chemicals, the people said. GCP Applied could also attract takeover interest from other rivals including RPM International Inc. (RPM), according to people familiar with the matter. Shares of GCP Applied increased as much as 25% Wednesday before closing up 14% in New York trading, giving the company a market valuation of about $2 billion. Saint-Gobain fell 1.2% at 12:15 p.m. in Paris. Starboard Value, which owns about 9% of GCP Applied, succeeded last year in a push to revamp the company's board. GCP Applied conducted a strategic review in 2019 but failed to find a buyer. Standard Industries Inc. is GCP Applied’s largest shareholder with a 17% stake. For Saint-Gobain, an acquisition of GCP Applied would build on its recent purchase of Chryso, a French construction chemicals business, for 1 billion euros ($1.1 billion). Other suitors could also emerge for GCP Applied, and there's no certainty the deliberations will result in a deal, the people said. Saint-Gobain earlier this month said it would invest more than $400 million in the United States in the next four years to expand roofing, insulation, and gypsum production capacities in four locations.

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12/1/2021

Dan Loeb Fends Off Rivals at London-Listed Third Point Fund

Financial News (12/01/21) Oliver, Joshua

Third Point's (TPNTF) Dan Loeb has successfully trounced dissident investors at his London-listed investment company Third Point Investors (TPIL) in scoring a critical shareholder vote. His opponents have expressed resentment over a valuation discount between the main fund at Third Point and the London fund. Lead insurgent investor Asset Value Investors (AVI) had called on TPIL shareholders to oust Third Point general counsel Josh Targoff from the London fund's board in a sign of support. The Wednesday vote defeated this motion. "The board expects that AVI will now cease in its attempts to impose its self-serving agenda," TPIL stated. AVI said the results indicated it had "emphatic backing" from independent shareholders, but Loeb, TPIL's biggest shareholder, helped tip the balance with his votes. "It is in no one's interest that this dispute plays out any longer in public, and we very much hope that the board will now be willing to enter into discussions with us privately," TPIL said. The tension between Loeb and AVI focuses on measures to shrink the gap between TPIL's share price and its net asset value, which consists of exposure to Third Point's main fund in the Cayman Islands. Shareholders favored the board's plan, which will try to narrow the discount through a share exchange facility with the Third Point fund. TPIL routes investors' money through to Third Point, which oversees $20 billion in assets and is known for tough skirmishes with big public companies. Metage Capital CEO Richard Webb in October said Loeb's actions to the dissident investors' campaign were "in stark contrast to the views frequently expressed by Dan Loeb when an investor himself." Loeb for his part dismissed AVI's challenge as a nuisance on Twitter, writing, "Describing [AVI's] antics as infantile is an insult to crying babies." No. 3 TPIL shareholder and hedge fund manager John Armitage defended Loeb, lauding the company's management and saying "shareholders who are unsatisfied should sell their positions rather than distract the company by their futile stunts." The discount between TPIL to Third Point has shrunk to 13%, and the board hopes to narrow the gap further by encouraging new buyers, but on Wednesday said, "potential new shareholders...have expressed hesitance in purchasing shares whilst this distracting drama continues."

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11/30/2021

Glencore Faces Call From Investor to Sell Coal Assets

Wall Street Journal (11/30/21) MacDonald, Alistair

Investor Bluebell Capital Partners has called on Glencore (GLNCY) to divest its thermal-coal operations. While the company has said it plans to phase out that business by 2050, it remains committed to the fuel in the meantime, which Bernstein analysts expect will generate 17% of Glencore's earnings this year. In its request that Glencore separate its coal business, discard non-core assets, sell its stake in Canadian agricultural company Viterra, and improve governance, Bluebell said such actions would help raise its share price. "They have clearly a long tail of assets and we are asking this company to be fully focused on what they are good at," which is future-facing metals like cobalt and copper, said Bluebell partner Giuseppe Bivona. The fund claimed Glencore's coal exposure prevents many investors from buying in, dragging its stock valuation below that of its peers. Bivona added that valuing Glencore's mining operations, excluding coal, means the company trades at a roughly 30% discount relative to peers that have eliminated coal. New Glencore CEO Gary Nagle has already vowed to streamline the company and has started selling non-core assets, while the enterprise has also said it is exploring options for its 50% stake in Viterra. "Closing a few plants when you have 150 mining and production assets" is insufficient, Bivona said. He continued that 14 of Glencore's assets account for 90% of the company's earnings before interest, taxes, depreciation, and amortization, by Bluebell's calculations. "We are confident that our business model is uniquely placed to produce, recycle, and market the materials needed to decarbonize energy, whilst reducing our own emissions and delivering value for stakeholders," a Glencore spokesman stated in response to the fund's demands. Bernstein analyst Danielle Chigumira thinks Glencore should retain its coal assets. "Coal is a hefty chunk of Glencore's value; so the method of exit is important and I don't see how they could achieve it without destroying some value," she said.

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11/30/2021

Jana Partners Urges Zendesk to Ditch Deal for SurveyMonkey Parent

Wall Street Journal (11/30/21) Lombardo, Cara

Jana Partners is urging Zendesk (ZEN) to immediately drop a deal to buy Momentive Global (MNTV), parent of Web-survey company SurveyMonkey, rather than wait months for a shareholder vote that appears likely to fail. Zendesk in late October agreed to acquire Momentive in an all-stock deal that was then worth about $4.1 billion. Zendesk, valued at about $11.5 billion, helps companies with customer communications, while SurveyMonkey enables the design and implementation of Web-based surveys. The firms have said a merger could help companies receive better feedback from customers. Investors and analysts have doubts. Zendesk's shares were down 20% since the announcement as of the close on Monday, despite better-than-expected third-quarter revenue and fourth-quarter forecasts issued when the deal was announced. Momentive shares were down about 15% over that period. Jana said the transaction "lacks financial merit, has questionable strategic logic, and introduces a high degree of execution risk for Zendesk shareholders," adding that it would also reduce what Jana thinks would be buyer interest in Zendesk. The investor said it would vote its shares against the issuance of Zendesk stock required to pay for the deal and could call for the ouster of board members. Momentive shareholders will receive 0.225 Zendesk share for each Momentive share. The deal is worth around $3.2 billion based on Monday's closing prices, or $21.40 per share versus $28 when it was announced. Both sets of investors must sign off on the deal.

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11/30/2021

Box Delivers Strong Quarterly Results in Wake of Shareholder Vote

Silicon Angle (11/30/21) Wheatley, Mike

Box Inc. (BOX) announced strong financial results Monday in its first earnings call since shareholders failed in a bid to oust co-founder and Chief Executive Aaron Levie. The company reported third-quarter earnings before certain costs such as stock compensation of 22 cents per share on total sales of $224 million, up 14% from a year ago. That was better than expected, as Wall Street had been looking for earnings of 21 cents per share on $218.6 million in revenue. “Our strong third-quarter results show the continued momentum of our long-term growth strategy, as more customers are turning to the Box Content Cloud to deliver secure content management and collaboration built for the new way of working,” said Levie. The results may give Levie more breathing room as he tries to take the company forward after winning a crucial shareholder vote in September. Box has been embroiled in a dispute with investors at Starboard Value LP, which owns an 8.4% stake in Box. Starboard believes the company isn’t living up to its potential and had pushed for Levie’s removal from its board of directors after failing in a bid to force through a number of changes it wanted to be made. Starboard nominated four directors to Box’s 10-person board, and argued that Box hadn’t been aggressive enough in capitalizing on enterprise trends driven by the coronavirus pandemic. In the September vote, Levie and fellow directors Peter Leav and Dana Evan were re-elected onto the board by a comfortable margin. Despite losing, Starboard Managing Director Pete Feld promised he isn’t going away. “As we have repeatedly stated, our only goal has been to help Box perform better and adopt best-in-class practices across operating performance, financial results, governance and compensation in order to create long-term value for the benefit of all stockholders,” Feld said at the time. “We will continue to monitor progress at Box, and we hope to see the company embrace the changes catalyzed by our involvement and create long-term value.”

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11/29/2021

SEC Guidance Opens the Door for More ESG Proxy Proposals

Pensions & Investments (11/29/21) Croce, Brian

In response to recent guidance from the U.S. Securities and Exchange Commission (SEC), more shareholder proposals with a focus on environmental and social issues likely will make it onto company proxy statements next year. In a Nov. 3 legal bulletin, the SEC's division of corporation finance rescinded its last three legal bulletins related to Exchange Act Rule 14a-8 concerning shareholder proposals, and outlined changes in the division's views on what constitutes "ordinary business" and "economic relevance" when it determines whether a shareholder proposal should be excluded from a company's proxy statement. Sean Donahue of Goodwin Procter LLP said, "It's pretty clear that the goal of this, whether it's stated or implicit, is to allow more E and S proposals to end up in company proxy." According to data from Institutional Shareholder Services, the SEC granted no-action relief to a record 77 environmental and social proposals during the 2021 proxy season as of June 30, up 14% from the 2020 season and above the previous high of 74 in 2017. Tom Quaadman of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness said, "By repealing longstanding guidance about treatment of shareholders proposals, the SEC has stated its preference to turn boardrooms and shareholder meetings into political debate societies on issues the SEC admits have no nexus to the actual business of the company." However, Danielle Fugere, president and chief counsel at the Berkeley, California-based shareholder group As You Sow, noted that "shareholders are sending a strong signal that they expect action from companies on climate, they expect companies to be transitioning, along with the rest of the economy toward net-zero, and taking advantage of the opportunities that exist so companies that are not changing or not being responsive are less likely to be successful down the road."

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11/29/2021

U.S. SEC Issues Guidance on Corporate Share-Based Executive Compensation

Reuters (11/29/21) Johnson, Katanga

The U.S. Securities and Exchange Commission (SEC) on Monday published guidance to listed companies concerning how to properly identify and disclose share-based compensation arrangements made to executives prior to company earnings and other releases. "Companies should not grant spring-loaded awards under any mistaken belief that they do not have to reflect any of the additional value conveyed to the recipients from the anticipated announcement of material information when recognizing compensation cost for the awards," the SEC stated. Spring-loaded awards are share-based compensation agreements in which a company grants stock options or other awards right before announcing market-moving information like an earnings release with better-than-expected results or the disclosure of a significant transaction. The SEC cited non-routine, spring-loaded grants as demanding especial attention from those overseeing compensation and financial reporting governance at public companies. The regulator aims to resuscitate a rule left incomplete from the 2007-2009 global financial crisis that would have U.S.-listed companies implement a plan to recover executive compensation should they have to correct financial statements due to compliance failures. The guidance is also part of a broader SEC campaign to rein in corporate malfeasance by enhancing its demand for more disclosure. "It is important that companies' accounting and disclosures reflect the economics and terms of these compensation arrangements," said SEC Chair Gary Gensler.

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11/29/2021

Ackman SPAC Will Need New Law to Beat Lawsuit, Investor Says

Bloomberg (11/29/21) Schneider, Joe

Bill Ackman’s Pershing Square Tontine Holdings Ltd. (PSTH) will need to make a new law to defeat investors’ claims that it’s operating illegally, George Assad, who sued the SPAC, said in a court filing Monday. Assad asked the judge to deny Ackman’s request that the suit be thrown out. The lawsuit could have wide-ranging implications for the financial industry if a court determines that SPACs more generally should be regarded as investment companies subject to the 1940 Investment Company Act, which requires registration with the Securities and Exchange Commission (SEC) and places restrictions on fees charged for investment advice. “Defendants cannot cite any authority in which the SEC or the courts have knowingly authorized any issuer to offer redemption rights in a pool of securities comprising 100% of its assets with no operating business for two and a half years without becoming an investment company,” Assad said in the filing. PSTH is the world’s largest SPAC, having sold 200 million IPO units for $20 each, valuing it at $4 billion, according to the filing. The blank-check company abandoned plans for a deal with Universal Music Group and still has no operations or business, according to the filing. Ackman denied Assad’s claims after the lawsuit was filed in August. “PSTH has never held investment securities that would require it to be registered under the Act, and does not intend to do so in the future,” Ackman said in a statement at the time. “We believe this litigation is totally without merit.” He urged the judge to throw the lawsuit out last month. The case is Assad v. Pershing Square Tontine Holdings, Ltd., 21-cv-06907, U.S. District Court, Southern District of New York (Manhattan).

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11/27/2021

U.K. Looks to Compete on Financial Regulation

Wall Street Journal (11/27/21) Clark, Simon

The U.K. government stated that its top financial regulators will be required to help boost growth and international competitiveness in the financial sector as secondary mandates to existing tasks such as maintaining financial stability and consumer protection. The changes would in effect give regulatory agencies a freer hand to rewrite rules on topics such as initial public offerings, green finance, and cryptocurrencies. The U.K. Treasury said the proposals "will facilitate the repealing of the majority of retained EU financial services law," leaving it up to the regulators how to act, with a nudge toward rules that encourage London's financial scene to grow. Requiring regulators to compete internationally will restrict them from introducing rules that are too onerous, according to Nicholas Edge, a policy adviser at the London-based Investment Association. Brexit has hampered London's ability to serve EU companies, with requirements that some EU business, such as share trading and sales of some financial products, take place inside the EU's borders. However, some see the departure as a chance for the United Kingdom to reset its financial rules to become more competitive, akin to the 1980s changes under Prime Minister Margaret Thatcher known as the "Big Bang." Changes being pushed by the industry include revamping rules inherited from the European Union on areas such as banker compensation and bonuses, private-equity firms, hedge funds, and insurance, according to Barnabas Reynolds, partner at law firm Shearman & Sterling LLP. However, so far many of the changes being proposed are tweaks rather than major overhauls.

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11/24/2021

Japanese Financier Scores Big Win in Battle for Shinsei Bank

Bloomberg (11/24/21) Uranaka, Taiga

Japanese financier Yoshitaka Kitao racked up a key victory in his campaign to take over Shinsei Bank (SKLKY). The bank canceled a Thursday shareholder vote on a poison pill defense against a takeover bid from Kitao's SBI Holdings (SBHGF), and assumed a neutral position on the offer. SBI restated that it will not alter the price offered to enlarge its Shinsei stake to 48%. The change comes one day after sources said the Japanese government, Shinsei's biggest shareholder, planned to withhold support for the poison pill. Kitao has publicly taken Shinsei's managers to task, and vowed to oust them once SBI's tender offer is accepted. A takeover fight broke in September when SBI floated a rare unsolicited tender offer to boost its position to a level that would grant it effective control of the lender without going through additional regulatory processes. Shinsei's shares closed up 3.4% in Tokyo on Wednesday. Shinsei had said it would approve the bid if SBI raises its offer and ditches a ceiling on the number of shares it will buy, so that all holders could tender. SBI balked, and the lender proposed the poison pill, calling it the best option for ensuring better terms for existing investors. In doing so, "Shinsei management saves face from what would have been a likely rejection of its poison pill tomorrow," said Morningstar (MORN) analyst Michael Makdad. "More importantly, the government can escape the dilemma of being in the middle of a hostile takeover in which it can't be seen to favor one side or the other, but had no way of staying neutral." In a note issued before Shinsei dropped the poison pill, SMBC Nikko Securities analyst Masahiko Sato said even if the measures were rejected, SBI might not be able to gain enough shares to reach the 48% stake if dissident shareholders and certain passive funds do not tender their shares. Shinsei intends to hold an extraordinary shareholder meeting in February to vote on SBI's proposed director candidates, and the bank said its current managers will resign if shareholders approve.

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11/24/2021

KKR Has Wiggle Room to Sweeten Telecom Italia Bid

Reuters (11/24/21) Jucca, Lisa

KKR (KKR) may need to raise its 33 billion euro bid for Telecom Italia (TIAOF) to gain buy-in from investors Vivendi (VIVHY) and Cassa Depositi e Prestiti (CDP), and it can probably up its offer without wearing down CDP with debt. Its 0.505 euros a share offer has so far met no objection from the Italian government or unions, but Vivendi did not respond well. Vivendi owns 24% of Telecom Italia's ordinary stock, and paid on average 1 euro per share. CDP, which owns 10%, likely paid closer to 0.70 euros per share. The implication is that KKR may have to pay more than the 10.8 billion euros currently on offer, but the Italian telecom market and Telecom Italia's debt load, equivalent to about 3.5 times 2021 EBITDA according to Refinitiv, means KKR cannot leverage excessive borrowing to fund the deal. It its favor is the fact that most of Telecom Italia's bonds lack change of control clauses, so they do not need to be refinanced when the deal closes. Should KKR increase its offer to 0.70 euros a share, Telecom Italia's equity will be valued at roughly 15 billion euros and the company, including debt, at just over 37 billion euros. KKR could raise maybe 9 billion euros of extra borrowing, while still keeping gearing at five times 2021 EBITDA, or some 32 billion euros. The private equity group would still need to raise nearly 6 billion euros of equity. Although a hefty sum, it would be less of a depletion if other funds joined in. KKR would also be able to quickly lower the debt by selling Telecom Italia's stake in Inwit (IFSU) and raise at least 1.5 billion euros, or reduce its 67% stake in its Brazilian unit, valued at about 3.6 billion euros. KKR, which is investing through its infrastructure fund, may ultimately choose not to use so much debt.

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11/23/2021

Advent, Centerbridge to Buy Aareal Bank in $2 Billion Deal

Bloomberg (11/23/21) Comfort, Nicholas; Kahl, Stephan

Advent International and Centerbridge Partners offered to buy Aareal Bank AG (AAALF), the German commercial real estate lender that has been under pressure from activist investors. The private equity firms offered 29 euros per share, valuing the company at 1.74 billion euros ($1.96 billion), Aareal said. The bank’s management and supervisory boards support the offer “on the basis of an investment agreement for a long-term partnership.” Aareal has been criticized by investors including Petrus Advisers and Teleios Capital Partners for high costs and lack of a sustainable strategy, with the investment firms pushing for a potential separation of the bank’s software arm, called Aareon. Aareal complied with some demands but resisted a full divestment of the unit after selling a minority stake to Advent last year. The bidders see themselves as longer-term investors and have no intention to break up Aareal Bank, according to people familiar with the matter. Teleios on Tuesday voiced opposition to the offer by Advent and Centerbridge. “This furtive offer process is yet another attempt by Aareal’s supervisory board to cut corners, to their shareholders’ detriment,” co-founder Adam Epstein said in a written statement to Bloomberg. “Teleios will seek to ensure that the board fulfills its fiduciary duty by staging a professional, structured sale process in the new year,” it added. Petrus declined to comment. Aareal, whose advisors include Perella Weinberg, said investments for growth will be financed via retained profits and that its dividend payment proposal will be withdrawn from the agenda of its shareholder meeting scheduled for next month. The bank said it could increase its lending portfolio to as much as 40 billion euros over the next five years or so by broadening its business in traditional asset classes and property types, as well as by tapping other areas with the support of investors.

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11/23/2021

Newpark Resources Pressed to Separate Units by Investor

Reuters (11/23/21) Herbst-Bayliss, Svea

Newpark Resources (NR), a provider of drilling fluids systems and composite matting systems used in oilfields, is being pushed by an activist investor to separate its industrials systems and fluids business, according to a letter seen by Reuters. Bradley Radoff, a private investor who previously worked as a portfolio manager at Daniel Loeb's Third Point hedge fund, has approached Newpark's board and is pushing for the separation. He argues that the two segments lack synergies, appeal to different investor bases, and boost excessive corporate costs. "The Company's own disclosures and investor presentations highlight that the Industrial Solutions segment is a high-margin business on a growth trajectory, while the Fluid Systems segment is an unprofitable business operating at the opposite end of the energy transition spectrum," Radoff wrote to the board. Newpark undermines its ability to have "a credible environmental, social and governance story" by keeping the two segments together, Radoff wrote. A majority of the Newpark's board members are oil and gas industry veterans. The company's stock price closed at $2.72 on Monday. Five years ago, the stock was trading at $7.80. Radoff, who sits on independent energy company VAALCO Energy's (EGY) board and has successfully pushed for changes at Tetra Technologies, where the company agreed to add a diverse director and appoint a new chairman, is urging Newpark to split at a time a number of other companies are breaking apart.

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11/23/2021

Shell Launches Shareholder Talks to Win Backing for HQ Move, Sources Say

Reuters (11/23/21) Bousso, Ron

Royal Dutch Shell (RDS.A) has begun talks with investors to secure support for its idea to relocate its headquarters from the Netherlands to Britain, sources said. Shell said this month it would scrap its dual Anglo-Dutch share structure and move its head office to London from the Hague due to the Dutch tax system and after a court ruling over its strategy to reduce greenhouse gas emissions. The company also looks to move its tax residence to Britain and drop “Royal Dutch” from its name to become Shell Plc. Shareholders will vote on the changes at a special general meeting on Dec. 10 where the resolution needs to secure more than 75% of votes cast. To secure the high threshold, Shell's management has in recent days set up more than 100 meetings with leading investors, two sources close to the process said. "We believe this is a very shareholder-friendly proposition and we're working hard and engaging with many of our shareholders to explain all of the benefits of this move and encourage them to vote," a Shell spokesperson said. Proxy advisory Glass Lewis recommended shareholders vote in favor, in a note seen by Reuters. The simplified structure would allow "an acceleration in distributions by way of share buybacks, as there will be a larger single pool of ordinary shares that can be bought back," Glass Lewis said. It would also strengthen Shell's ability to manage its energy transition, it added.

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11/23/2021

Griffon Investor Voss Capital Pushes for Board Seats, Possible Breakup

Bloomberg (11/23/21) Deveau, Scott

Voss Capital, a top-10 investor in Griffon Corp. (GFF) has nominated three directors to the company’s board and is calling on the manufacturer to explore all available alternatives to improve its performance, including a breakup. Voss Capital owns a 2.1% stake in Griffon. It said in a letter to the company’s board Tuesday that it believes the company has very attractive assets but that they are being undervalued because of Griffon’s poor corporate governance, excessive executive compensation and outdated structure. Travis Cocke, Voss’ chief investment officer, said he agrees with the company’s own estimates that its shares could be valued at more than $50 apiece if it were to remove its conglomerate discount. “Now is the optimal time for a committee of truly independent directors to conduct a comprehensive strategic review of all potential paths for unlocking shareholder value and we are highly confident there are several suitors who would be interested in a transaction for each of the three segments,” Cocke said in the letter. Voss’ nominees include Gerry Bollman, H.C. Charles Diao, and Leviathan Winn. Shares in Griffon have gained about 29% year-to-date. Griffon operates three businesses, including a division that builds landscaping and gardening tools, one that produces garage and rolled steel doors, and a defense electronics division that provides intelligence, surveillance, and communications products. Griffon said last week it plans to implement measures to improve its governance, including de-staggering its board over the next three years so that all of its directors stand for re-election annually instead of just a few at a time, among other measures. While Cocke said the review of Telephonics was a step in the right direction, the governance moves are too little and should have been immediately implemented rather than waiting years. He criticized the board for its lack of diversity, arguing it is stacked with Kramer’s allies, who lack the necessary independence and experience. He also called for the immediate removal of current directors Victor Renuart and Robert Harrison, whose military expertise he says will be irrelevant at the business once Telephonics is sold. Cocke also cited the $60 million in compensation that Kramer has been awarded over the past five years, which he said is more than the CEOs of some of the world’s largest and most profitable businesses.

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11/23/2021

Dollar Tree Hikes Prices 25%. Most Items Will Cost $1.25

CNN Business (11/23/21) Meyersohn, Nathaniel

Dollar Tree, Inc. (DLTR) said Tuesday it will raise prices from $1 to $1.25 on the majority of its products by the first quarter of 2022. The change is a sign of the pressures low-cost retailers face holding down prices during a period of rising inflation. Dollar Tree said in a quarterly earnings release that its decision to raise prices to $1.25 permanently, however, was "not a reaction to short-term or transitory market conditions." Selling goods strictly for $1 hampered Dollar Tree, the company said, and forced it stop selling some "customer favorites." Raising prices will give Dollar Tree more flexibility to reintroduce those items, expand its selection, and bring new products and sizes to its stores. Dollar Tree also said that hiking prices will help the company increase its profit margins by "mitigating historically high merchandise cost increases," including freight and distribution costs, as well as wage increases. Dollar Tree had started moving away from only offering goods for $1 in recent years, in part as a response to pressure on Wall Street to raise prices. Dollar Tree has lagged Dollar General and other discount chains. In September, Dollar Tree said it planned to begin selling items at $1.25 and $1.50 at some stores for the first time. It also said it would add $3 and $5 items to more stores, expanding on a prior strategy to offer these prices at select locations. Since that announcement, Mantle Ridge built a stake in Dollar Tree and has tapped a former Dollar General CEO to push for changes at the company. Although Dollar Tree said its decision to permanently raise prices was not a reaction to short-term inflation, one analyst was unconvinced. "The pace of rollout, along with [the] engaged investor, Mantle Ridge, clearly suggests otherwise," Kelly Bania, an analyst at BMO Capital Markets, said in a note to clients Tuesday.

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12/3/2021

Commentary: Glencore Gets a Dirty Holiday Gift From Anglo American

Bloomberg (12/03/21) Bryant, Chris

July Ndlovu, the head of Anglo American Plc ( NGLOY) coal spin-off Thungela Resources Ltd. (TNGRF), did his rival Glencore Plc (GLNCY) a big favor earlier this year, according to Bloomberg columnist Chris Bryant. When Thungela began trading as a separate company in June, Ndlovu said he wanted to increase output of the fossil fuel: “I didn’t take up this role to close these mines.” Glencore is the last of the large listed miners committed to retaining a big footprint in thermal coal. It’s long taken the position that simply spinning off those assets does nothing to help the climate and might actually make the problem worse. Ndlovu, then, was proof that the London-listed mining and commodity trader’s warning wasn’t just hot air to avoid spinning off a coal business that at the current high prices accounts for almost 30% of its earnings before interest taxation, depreciation and amortization. Glencore’s alternative plan is to cap coal production and manage the decline of those assets to reach net zero emissions by 2050. It will leave some of its coal resources in the ground. So, when shareholder Bluebell Capital Partners Ltd. this week demanded a separation of Glencore’s coal activities to boost the commodities giant’s valuation, new boss Gary Nagle had an argument ready. At an investor event on Thursday, Nagle pushed back against Bluebell’s thesis. The message was simple: Glencore won’t exit coal unless its major shareholders decide they want that. And right now, they’re fine with the way things are. At this year’s annual meeting, 94% of shareholders approved Glencore’s climate plan, which involves cutting emissions 15% by 2026 compared to 2019 levels; the goal is a 50% reduction by 2035 and to reach net zero by 2050. Management said none of its large investors were demanding a coal-spin off. Bryant says Bluebell’s frustrations are understandable: Glencore is valued at a miserable seven times estimated earnings. Though Glencore says it knows of only one large investor, Norges Bank, that won’t invest for climate reasons, mining coal makes its other ESG arguments ring rather hollow. And given the corruption investigations it’s facing in several jurisdictions, Glencore could do without another reason for shareholders to shun the company.

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12/3/2021

Opinion: Revisiting the SEC's Proxy Advisor Rule

Harvard Law School Forum on Corporate Governance (12/03/21) Rose, Paul; Walker, Christopher J.

The Securities and Exchange Commission's (SEC's) decision to essentially suspend the proxy advisor rule raises concerns about the stability of the SEC's rules and rulemaking process, the potential for politicization of the SEC, and the role of the SEC's professional staff in developing and implementing its rules, Ohio State University law professors Paul Rose and Christopher J. Walker write in an opinion piece. There is no data suggesting the rule created unexpected burdens or unanticipated consequences because it is not yet in force. The most dramatic change is the shift away from the 65-year-old interpretation of the term "solicitation." The final proxy advisor rule was years in the making and was primarily drafted by the SEC's professional staff, who act as independent protectors of investors, and not the political appointee commissioners. The SEC seems to be exploring a blanket nonenforcement policy. Agencies have broad enforcement discretion, but there is a difference between a context-specific, case-by-case nonenforcement decision and a blanket policy announcement of not enforcing a legal mandate. The legal challenge of the SEC's decision would give courts another chance to explore whether a blanket nonenforcement policy that has not gone through notice-and-comment rulemaking is an acceptable means to unwind a prior rule.

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12/2/2021

Corporate Issuers Rate Satisfaction With Virtual Shareholder Meeting Services, Proxy Solicitors, and ESG Consultants

Yahoo! Finance (12/02/21)

Group Five, a corporate services research company, has released the results of its first annual study of corporate opinions of the services provided by transfer agents, virtual shareholder meeting providers, proxy solicitors, and environmental, social, and governance (ESG) consultants. The results are based on survey data from more than 500 U.S. public companies representing over 25 million registered shareholders. Issuers' overall satisfaction with their transfer agents is 87% favorable. EQ has the highest overall satisfaction rating at 94% favorable. Loyalty, measured as Net Promoter Score (NPS), was 46 across the industry. EQ received the highest loyalty rating with an NPS of 54. Expert service to issuers and excellent telephone support for shareholders delivered at a reasonable cost are the keys to satisfied and loyal issuers in the transfer agent industry. Issuers' overall satisfaction with virtual shareholder meeting providers is 87% favorable with an NPS of 53. Issuers' willingness to recommend their virtual shareholder meeting provider is driven by the responsiveness of client support, ease of access for shareholder participation, and the quality of post-meeting reports. A service provider's responsiveness and their ability to customize the online platform are important drivers of issuers' willingness to renew their contract in 2022. Issuers' overall satisfaction with proxy solicitors is 91% favorable with an NPS of 59. Professionalism and proactiveness of the proxy firm's representatives are drivers for willingness to recommend. Helpfulness, along with expertise on current governance issues and trends, drives issuers' willingness to renew their contract in 2022. As the demand for ESG consulting continues to grow, the study this year began collecting data on ESG consulting firms. Issuers' overall satisfaction with their ESG consulting firm is 73% favorable with an NPS of 19. The study revealed that ESG consulting firms offer issuers the most value by providing peer benchmarking, helping issuers to understand ESG reporting requirements, and building an ESG program.

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12/2/2021

Commentary: A Shadow Hanging Over Blue Prism

The Times (London) (12/02/21) Osborne, Alistair

Britain has plenty of technology champions, notes The Times columnist Alistair Osborne, meaning Blue Prism now does business in an increasingly crowded arena. With the advent of artificial intelligence, Blue Prism has morphed into more complex areas. As companies look to cut costs, the sector has ballooned, with Blue Prism’s 2,000 clients including Barclays (BCS), Shell (RDS.A), and the NHS. Blue Prism's board, led by executive chairman Jason Kingdon, has just recommended a £12.75-a-share cash bid from U.S. hedge fund administrator SS&C: a 53.2% premium to a price that values the group at £1.24 billion. It tops a £12.50 private equity offer from Vista Equity Partners: the firm that got the takeover battle going in September with a bid at £11.25. One reason Blue Prism is now getting taken over is that far better capitalized rivals have left it behind, even as it has tapped investors for a total £240 million equity. The market leader, Romania’s UiPath, has raised more than $3 billion, and is now valued on Nasdaq at $25 billion. Kingdon has blamed the London market for Blue Prism's lower valuation. In January, he proposed a U.S. listing. However, a 35% vote against his re-election at March’s annual general meeting put paid to that. "Investors told him to sell Blue Prism," concludes Osborne. "And at least the SS&C bid beats his initial effort, rightly decried by Coast Capital as 'low-ball.' But Panmure Gordon still has its £13.75 target price. If selling up is the best the London market can come up with, it’s yet to get top dollar."

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12/1/2021

Charlie Penner, the Investor Reshaping Exxon From the Inside

Bloomberg (12/01/21) Kishan, Saijel

The idea that turned Charlie Penner into one of Big Oil’s most effective gadflies crystallized for him as he was jogging across the Manhattan Bridge when he stopped to dictate his thoughts into his iPhone: Maybe Exxon (XOM) believed it unrealistic that electric vehicles, renewable energy, and improved energy efficiency would threaten growth in the fossil fuel business. “But we think it equally unrealistic to expect humanity to wipe itself out without at least attempting major shifts,” Penner said. Eighteen months later, those ideas culminated in the election of the new board members, over the objections of Exxon management. Pushing those candidates was part of Penner’s broader aim: to get Exxon to treat climate change as a threat not only to the planet but also to its bottom line. As a shareholder in Exxon, Engine No. 1 argued that a fresh set of directors could help the company find alternatives to its heavy investment in fossil fuel production and increase its share price in the process. The title “head of active engagement” may sound unassuming, but Penner was at the helm of the Exxon fight—essentially the campaign manager for the insurgents. Engine No. 1 held only 0.02% of the shares in Exxon. Penner built his case around value for investors, and his argument found a receptive audience at Exxon’s top three shareholders—the giant fund managers BlackRock (BLK), State Street (STT), and Vanguard. Penner said “aggressive” spending was piling on debt and producing diminishing returns while leaving the company unprepared for a future in which governments take a harder line on pollution that heats the planet. “Engine No. 1 hit the top of the top of corporate America with a strategy that merged a company’s financials with the environment,” says Luigi Zingales, a finance professor at the University of Chicago. Early in his career, Penner joined Jana Partners. In 2017 he started a drive to push some companies on social issues, with the idea that it could also improve long-term returns. In one campaign, Jana pressed Apple Inc. (AAPL) to help prevent kids from getting addicted to iPhone and iPad screens. Apple later introduced controls. It was at Jana that Penner first got interested in Exxon. In spring 2020, Penner accepted an offer from hedge fund manager Chris James to join his new firm, which was named after an old San Francisco fire station.

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12/1/2021

Coal Remains King for Glencore as Shareholders Resist Investor Pressure

The Telegraph (U.K.) (12/01/21) Foy, Simon

Ivan Glasenberg, the former boss of Glencore (GLNCY) and still its second largest shareholder, argues that there is no environmental benefit at all from shareholders pushing miners to sell or separate coal mines from their other activities. “Those mines are going into the hands of other players who have no intention of reducing scope three emissions and if anything it gives them a free hand to start producing more,” says Glasenberg. Bluebell Capital Partners disagrees. In a letter to the company earlier this month, the hedge fund urged Glencore to “chart a new future” without coal, demanding it spin off its thermal coal business, divest non-core assets, and improve corporate governance. Signed by Bluebell’s partners Giuseppe Bivona and Marco Taricco, the letter said: “Due to its coal business, Glencore is not an investable company for investors who place sustainability at the heart of their investment process. A clear separation between carbonized and de-carbonized assets is needed to increase shareholder value.” Bluebell has a stake in Glencore but it has not yet disclosed its size. Glencore has received backing from 94% of its investors for plans to keep running its mines with capped production until all coal has been removed by 2050. In response to the letter, Glencore said: “We are confident that our business model is uniquely placed to produce, recycle, and market the materials needed to decarbonise energy whilst reducing our own emissions and delivering value for stakeholders.” But Bluebell argues this strategy is “morally unacceptable and financially flawed.” The letter said that “a clear separation between carbonised and decarbonised assets is needed to increase shareholder value.” While Glencore has embarked on an internal shake-up, Glasenberg’s remaining influence means it will be difficult for Bluebell to effect change. The South African businessman owns a 9.2% stake, while several other former managers also have big holdings. In June he was replaced as chief executive after nearly two decades by Gary Nagle, while a new chairman was also brought in. Aside from spinning off assets, Bluebell wants to see improvements in corporate governance at the company.

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12/1/2021

Commentary: BP Needs a Big Deal to Become Britain’s Wind Power Champion

The Telegraph (U.K.) (12/01/21) Marlow, Ben

SSE Plc's (SSE) latest investment in wind power serves as a reminder of the power generator's unresolved future. Faced with demands from Elliott Management to split itself up, the £17 billion Scottish company is keen to demonstrate that it has a bright future in its current form. Elliott believes SSE is essentially a lethargic outfit that would be worth far more if its highly promising windfarms and hydro power operations were turned into a standalone business. That would require them to be carved away from the heavily regulated distribution arm that delivers electricity into millions of homes. Analysts at Bernstein estimate SSE is worth 50% more on a sum-of-the-parts valuation, equivalent to approximately £8 billion on top of its stock market valuation. The SSE board is resisting Elliott’s calls, however, and last month made a fresh case to keep the current structure intact. On the back of forecasting-beating results, it laid out plans for a jump in capital expenditure from £7.5 billion to £12.5 billion over the next five years, including a 2.5-fold jump in renewables investment from £1.8 billion to £5 billion for day one. However, SSE's share price fell 5% in response to the plans, as investors reacted to proposals to rein in dividend payments to fund the step-up in investment. This commentary suggests there may be an alternative solution that satisfies all sides. One idea circulating is for BP Plc (BP) to buy SSE’s wind farms and other low carbon energy assets. It makes sense for BP as it walks the same tightrope of trying to build a renewables business of real scale from scratch without starving investors of their cherished dividend payouts. For BP the attraction of such a deal is obvious. Its chief executive Bernard Looney is committed to building a “world-class wind business” but has so far spun more lines than turbines. By comparison, SSE’s plans put it on track to deliver more than a quarter of Britain’s 40GW target by 2030.

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11/30/2021

Commentary: Glencore's Investor Is Misguided but Not Unhelpful

Reuters (11/30/21) Cropley, Ed

Emboldened by its recent success at Danone (DANOY), Bluebell Capital is trying its luck at Glencore (GLNCY). However, this commentary suggests that with coal prices near record highs, the "fund has chosen an unfortunate moment to argue that investors would be better served spinning off the group’s extensive holdings of the pollutant. The intervention isn’t entirely unhelpful, though." With just 200 million euros under management, Bluebell is tiny compared with the $63 billion Swiss commodity firm. "Yet its defenestration of Danone Chief Executive Emmanuel Faber means it cannot be taken lightly, especially given heightened climate sensitivity after COP26," the piece notes. "As the world’s biggest exporter of thermal coal, the worst climate polluter, Glencore is undeniably problematic." However, it’s hard to see its arrows piercing the defensive shield Gary Nagle has built. Glencore shareholders are currently a relatively happy group. Approximately 94% of them just voted in favor of the company’s plans to hit net-zero carbon dioxide emissions by 2050 by running down its coal mines gradually instead of spinning them off. Its shares are up 56% this year, comfortably outperforming iron ore specialists Rio Tinto (RTNTF) and BHP Group (BHP). Bluebell argues that without coal, investors will put a more favourable 3.8 times valuation multiple on the $13 billion of EBITDA that Glencore is likely to get from “future-facing” metals like copper, cobalt, and nickel. According to Bluebell's sums, the non-coal division trades on around 2.6 times, pointing to a potential $15 billion boost in enterprise value. The author suggests Bluebell's efforts may not be wasted. Glencore has already brought forward an interim emissions target by five years. But its 2050 shutdown is a decade beyond when the International Energy Agency says even developing economies need to quit using coal. "Pressuring Glencore into further accelerations is still worth doing," the opinion piece concludes.

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11/30/2021

Kansas Regulators Worry Investor's Influence at Evergy Could Raise Your Electric Rates

Flatland (11/30/21) Grimmett, Brian

State and federal regulators are worried about how the growing relationship between Kansas' No. 1 electric utility, Evergy (EVRG), and investor Elliott Management could impact ratepayers. State regulators launched an investigation over a year ago after Evergy disclosed an $8 billion plan for eliminating and replacing fossil fuels with wind and solar power. It called for a sharp increase in investments for clean energy generation and upgraded transmission lines, but Evergy still has not allayed all regulators' concerns and might end up making its rates the highest in the region. "It's important for Elliott and other investors to remember that all investments in operations must be aligned with customer interests," said Kansas Corporation Commission Chair Andrew French. He told Evergy that any investment made mainly to satisfy shareholders would elevate the risk of the commissioners disallowing them from earning a return when the plan is officially proposed during the company's next rate case. Regulators also raised issues over Elliott's role in developing the plan. "This company [Elliott] has a track record of interference on behalf of the shareholders," said Commissioner Susan Duff. "Our responsibility is to the ratepayers." Evergy officials claim the plan is necessary to continue providing reliable service at a reasonable rate, adding that Elliott does not have excessive influence over company operations. Federal regulators requested Evergy disclose more information about recent board changes. Shortly after Elliott went public with its demands and Evergy organized the plan for phasing out fossil fuels, the investor garnered two board seats. Elliott also sits on a newly established finance committee that was granted broad oversight of business operations and financial strategies. The regulators want to ascertain if Elliott should be designated an affiliate of Evergy and face greater regulation and scrutiny. Communications Workers of America researcher Hudson Munoz said Elliott is following a strategy used at other energy companies that inflate utility bills. "They do what they can to increase the price, the valuation of the company, they extract cash usually through buybacks and dividends and then they move on to their next target," he noted. Public Citizen has joined the union in its filing with federal regulators, saying Elliott has more sway at Evergy than it publicly reports, and avoids regulation by staying under a 10% ownership threshold. "That allows them to operate with far more flexibility and far more harm to the public interest," said Public Citizen Energy Director Tyson Slocum. Federal regulators have not signaled whether Evergy's response to their questions was sufficient, or if they will probe the matter further.

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11/24/2021

BlackRock Decision to Give Investors Voting Powers Could be More Bark Than Bite

ETF Stream (11/24/21) Gordon, Jamie

BlackRock Inc.’s (BLK) decision to offer institutional investors the chance to vote directly with companies has been hailed by many as a great step forward for engagement, but the reality might be a little more muted. The initial announcement from BlackRock came in early October, with the firm saying those invested in some 40% of its $4.8trn equity index assets would be able to vote at shareholder meetings, effective January 1, 2022. Demand for voting rights has been particularly strong among clients invested in passive products incorporating ESG and climate metrics, with many concerned about asset managers’ tendencies to vote largely in line with companies’ management. Skeptical on the degree of impact the measures will have, Douglas Chia, founder and president of Soundboard Governance LLC, argues that BlackRock’s decision to expand proxy voting rights makes it appear a good corporate governance actor by furthering shareholder democracy, but also means it can deflect criticism it normally receives for not using its large voting power in more activist ways. Chia concludes the move may not end up having much of an impact on proxy voting outcomes, given many clients will likely take the option of continuing to defer to BlackRock’s discretion during voting processes. “Similar to not having to actively manage investments in individual portfolio companies, part of the attraction of investing in index funds is leaving the decisions and mechanics on hundreds of proxy votes to the asset manager, all at very low cost,” says Chia. “While the largest asset owners have dedicated personnel to analyze and make voting decisions at individual companies, the rest cannot incur that cost. BlackRock may be giving its clients options that most will not use.”

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11/24/2021

Macy's in a Black Friday Breakup Bind

Bloomberg (11/24/21) Tse, Crystal

Black Friday may look a little different in 2022—for retailers at least. As department stores prepare for the year’s biggest shopping event, they’re also at a strategic crossroads, with activist investors increasingly calling for a breakup of their brick-and-mortar and online businesses. Macy’s (M), with two activist investors in its stock, said this month that it’s working with an adviser, AlixPartners, to explore a potential spinoff of its e-commerce business. The move would, at least on paper, unlock value in the asset-light, higher growth online business–a basic financial engineering exercise. But many are still skeptical if a deal will happen. “If you spin off online, what do you have left?” said Hoai Ngo, a retail analyst at Bloomberg Intelligence. Macy’s minus its online business, which is the key driver of growth, consists of mostly real estate that is probably not enough to support current valuations, he said. A split could also hurt Macy’s top line, as e-commerce is a big part of its customer acquisition. And doing any kind of spinoff under the watch of public investors adds complexity. Shoppers prefer a hybrid retail experience, where they can shop online and return or pick up their products in store. While that'll still be possible, maintaining that model could create new fixed costs for the businesses, with fees streaming from online to offline. It’s not the first time Macy’s has been in the defensive position. Starboard pushed the retailer to separate its real estate assets in 2015 before exiting its position two years later. Macy’s as a company remained little changed. Even if nothing materializes from Macy's exploration, investors like the idea of action. Macy’s shares have rallied 45% since activists first put out a letter suggesting the split in early October.

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11/23/2021

Bill Ackman’s $1 Billion Inflation Bet

Institutional Investor (11/23/21) Celarier, Michelle

After making $2.6 billion on his big Covid-19 short in 2020, this year another macro short of Bill Ackman's is panning out: a $170 million bet on inflation that is now worth $1 billion. “The world is kind of catching up to our view on inflation,” the hedge fund manager told investors in a quarterly call last week. He noted that his firm, Pershing Square Capital, has notched a six-fold increase on the bet, which was placed in all three of its hedge funds.  By January, Ackman said he and his team were concerned about a cascade of trends, including the “compounding effects of extremely forward-leaning and aggressive fiscal policy, combined with the most aggressive monetary policy.” At the same time, the economy was feeling the effects of a stimulus from the vaccine as well as the effects of  people emerging from lockdown with both savings and a desire “to have fun.” Pershing Square made its bet with options, taking a notional short position principally in shorter-dated maturities of U.S. Treasuries, as well as some longer ten-year dated debt, Ackman said. “We were able to set up a bet like that on an out-of-the-money basis very, very cheaply — very much like credit default swaps; but in this case, not swaps but options,” he explained. “Never before in history have we had a 0% monetary policy with the effects that are taking place now,” he added. “And I think part of that relates to the fact no one was alive for the perspective that one would have in the last pandemic and the impact it has [had] economically.” He suggested that the current environment is akin to the 1920s. Pershing Square Holdings (PSHZF) is up 26.1% this year through November 16.

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11/23/2021

The Poison Pill, Long Hated by Investors, Gets New Love in Japan

Bloomberg (11/23/21) Reidy, Gearoid; Lee, Min Jeong; Taniguchi, Takako

The poison pill, one of the corporate world’s most controversial takeover defenses is winning some unexpected fans. It has long been criticized as a tool to keep bad management teams in place and deny existing shareholders the right to profit from buyouts. But a takeover battle in Japan is now spurring endorsements for the tactic by corporate governance experts and influential proxy advisers, and even making some activist investors consider giving it support. Tokyo-based Shinsei Bank Ltd. (SKLKY) had asked shareholders to approve on Thursday its plan to use a poison pill defense against a proposed stake increase by SBI Holdings Inc. (SBHGF). “Poison pills generally are not terribly good for shareholders,” said Jamie Rosenwald, a co-founder and portfolio manager at Dalton Investments, a $3.4 billion U.S. money manager that owns about 3% of Shinsei for clients. But if the aim is to secure a better deal for investors, that would be a “reasonable reason,” he said. The bank wound up canceling the shareholder vote on a poison pill defense, and assumed a neutral position on the offer. Even so, the case shows how takeover defenses are evolving as companies become more sophisticated about the strategies. Institutional Shareholder Services Inc. said it was backing the defense plan, arguing it was being used to help shareholders. Glass Lewis & Co., the other major proxy adviser, also supported the Shinsei pill, pointing to SBI’s partial offer as its chief reason. “This is not a typical ‘Just say no’ takeover defense situation,” said Nicholas Benes, who heads the Board Director Training Institute of Japan. “This may be one of the only cases in Japan’s history where a poison pill was used for the purpose that poison pills were designed for: to enable the target company to get negotiating power and time so as to get a higher price for all shareholders,” he said. Even activist investors who seek to profit from such bids haven’t ruled out voting for Shinsei’s plan. Oasis Management Co. said the bank’s directors would have to come up with “substantial value-creating actions” to get its support.

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