Media Center

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

Premier Foods Drops Plans to Sell Dessert Brand Ambrosia
After Review, Brookdale Will Not Split Company in Two
Carl Icahn Builds 10% Stake in Caesars
Exclusive: Portugal Government Sees Elliott's Plan for EDP Brazil as 'Unfortunate'
PG&E Governance Brownout Calls for a Jump Start
Nestle Cuts the Meat in Bid to Build Healthier Food Giant
PPG to Shutter Automotive Coatings Facility in Michigan
Carl Icahn to Push Casino Operator Caesars to Consider Selling Itself
Prominent Investors Stock Up on eBay, Then Hedge Funds Flex Muscle
Italian State Bank Weighs Doubling Stake in Telecom Italia
Ebay Restructures Regional Operations, Lays Off a Percentage of Its Workforce
Billionaire Bolloré to Step Down From Vivendi Board in April
Stock Spirits Executives Survive Boardroom Coup by Western Gate
Brussels Rejects Plea for Dual-Listed London Shares Trading
Elliott Proposes 'Superior' Plan for Portuguese Utility EDP
Yelp Reads Its Own Reviews
Bill Ackman Is Making a Comeback With His Hedge Fund up More Than 24% So Far This Year
PG&E Shareholder Has Chosen Its Own Board Nominees
Here Are the Biggest Holdings of Bill Ackman, Who Is Doubling the Return of the S&P 500 This Year
AEP to Buy Sempra Renewables for $1B, More Than Doubling Wind Assets
Companies Pushed to Reveal Their Median Gender Pay Gap
Akzo Confident of Meeting Takeover Defense Pledge
Lyft Founders to Tighten Grip With Supervoting Shares in IPO
Interserve Rescue Plan: Shareholder Rebellion Grows as Dissenting Hedge Fund Recruits Another Supporter
Video: Pernod Open to Dialogue With Investors Including Elliott, CEO Says
Pernod Is No Takeover Target, Says CEO After 'Constructive' Elliott Talks
Thyssenkrupp Bows to Investor by Simplifying Organization
Just Eat Takeaway Merger Talk Sounds Like Too Much of a Mouthful
Apogee Enterprises and Engaged Capital Enter Confidentiality Agreement
Donald Trump Ally Tom Barrack Examines Shake-up of Real Estate Firm
Sachem Head Pushes Zayo to Explore Sale - Sources
Starboard Proposes Dollar Tree Change Its Pricing
Calls for New Barclays Boss to Shake Up Stale Board
Elliott Questions Pernod’s New Goals
Shareholder Asks Hard Questions of Rock Company CRH
Nielsen Could Be the Next Big Leveraged Buyout, Sources Say
Arconic to Split Into Two After Rebuffing Apollo Offer
Pernod Hits Back at Elliott as Stock Hits Record High
Cevian Eyeing €1Bn CRH Stake
Gaylon Lawrence Jr. Requests Two Seats on CapStar's Board
Elliott Management Emerges as Biggest Shareholder Activist in 2018
Digital First to Attempt an Overhaul of Gannett Board
Premier Foods Says CEO Darby Will Get at Least 1 Million Sterling Exit Deal
Diversity in the 'Man Cave': Boardrooms Gain Women as Minorities Lag
Small Companies Face Added Pressure to Put Women on Boards
The Rise of Women in Corporate Boardrooms
The Road Ahead for Shareholder Activism
Want a Better Board? Look to Private Equity
Institutional Investors Looking More Closely Into Companies, Boards – Morrow Sodali
Pernod Gets the Gentle Treatment From New York Hedge Fund
Charting the Rise of Europe's Investors
A Wary Welcome for Investors' New Tactics
A Rarity On Wall Street: A Female- and Minority-Led Activist Hedge Fund
Funds Turn Attention to Banks as New Merger Wave Sets Up
CEOs Are Opening Their Boardrooms to Hedge Fund 'White Squires' to Keep Other Investors Out
Foreign Funds Set Their Sights on Japan's Smaller Companies
Opinion: Will the Departure of Arconic’s CEO Derail Its Turnaround Plan?
The Long View: The Role of Shareholder Proposals in Shaping U.S. Corporate Governance (2000-2018)

2/15/2019

After Review, Brookdale Will Not Split Company in Two

Nashville Business Journal (02/15/19) Stinnett, Joel

Brookdale Senior Living Inc. (BKD) on Feb. 14 said it will not spin off its company owned real estate into a separate investment trust, rejecting repeated calls from investors to do so. Brookdale CEO Cindy Baier made the announcement during the company's fourth quarter earnings call, saying the management team came to the decision after a "comprehensive review." She said tax, valuation, capital, and existing lease concerns were all factors in Brookdale's decision not to spin out a separate REIT. She said Brookdale was assisted in the review by an outside financial adviser who was suggested by an investor that has called for the company to spin off its real estate. "Ultimately ... we simply did not see a path to unlocking value through implementation of this type of transaction at this time," Baier said. "The best way to create shareholder value is through executing our operational turnaround strategy. ... The reality is that we are a senior living health care operator that intentionally owns real estate." Land & Buildings Investment Management LLC Chief Investment Officer Jonathan Litt has been the most vocal proponent publicly urging Brookdale to sell off or spin out its real estate holdings. Litt's firm has a 3.2% stake in Brookdale. Litt has sent numerous letters addressed to shareholders with ideas to boost shareholder value and calls for structural change at the company. Bloomberg in December said that Litt approached Brookdale's management team with the notion of splitting the company into a separate REIT and senior-housing operator. Litt said moving the company's premiere properties into a separate REIT would add value to Brookdale's share price but no agreement was reached on whether to seek a split, according to Bloomberg. It's not clear whether Litt was the investor who recommended the outside financial adviser that aided with the review.

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2/13/2019

Bill Ackman Is Making a Comeback With His Hedge Fund up More Than 24% So Far This Year

CNBC (02/13/19) Franck, Thomas

Bill Ackman's Pershing Square is up 24.7% in 2019 through Feb. 12, according to the hedge fund's website. The fund has made many headlines in the past year for new stakes in Starbucks (SBUX) and Hilton Worldwide Holdings (HLT). Ackman explained in his latest shareholder letter that the recent positive performance has been fueled by investments in ADP (ADP), Lowe's (LOW), Starbucks, and Chipotle (CMG). Pershing Square in the third quarter of 2018 dissolved its stake in Mondelez (MDLZ) and took a stake in Starbucks at an average cost of $51 per share. That means the hedge fund is already up about 37% on the investment. The fund also realized success on its bet on Chipotle, which is up more than 136% over the past 12 months at $593.66 per share. Ackman first purchased Chipotle stock in 2016 at an average price of $405 per share. Ackman helped Chipotle install Brian Niccol as the company's CEO early last year and has backed innovative menu and delivery choices. Pershing also made $100 million in profit from a stake in Nike (NKE) it sold last year. The success comes after a period of negative returns. By early 2018, the hedge fund's assets had been sharply reduced from their peak above $20 billion in 2015. Some of the fund's challenges over the past few years included a $4 billion loss on its stake in Valeant Pharmaceuticals (BHC). Further, Ackman's short of Herbalife (HLF) was costly not only in money lost, but also in reputation due to the spotlight on the fight over the company with Carl Icahn.

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2/13/2019

Here Are the Biggest Holdings of Bill Ackman, Who Is Doubling the Return of the S&P 500 This Year

CNBC (02/13/19) Franck, Thomas

Pershing Square Holdings' investments have been lucrative this year. Chipotle (CMG) boosted Pershing Square's gross returns by 6.2% in 2018, and it is up more than 38% in 2019. Pershing's Bill Ackman helped bring aboard Brian Niccol as the company's CEO in March. Niccol has been advocating digital and marketing investments to return the company back to consistent growth. "Brian and his team have made significant progress turning around Chipotle and reaccelerating growth," Ackman wrote in the hedge fund's shareholder presentation. "Reigniting same-store sales growth is the key priority for 2019." Chipotle's same-store sales advanced 6.1% in the fourth quarter, beating consensus expectations of 4.49% growth; profits also topped analyst expectations. United Technologies (UTX) has been another strong performer for Pershing; the stock is up more than 17% since Jan. 1. United Technologies is a "high-quality industrial conglomerate with market-leading businesses in aerospace, elevators, and heating, ventilation, and air conditioning," Ackman's presentation noted. The "upcoming business separation should be a catalyst for significant share price appreciation." He added that United Technologies seems well insulted from the current trade dispute between the United States and China and has seen "limited impact" from tariffs. One investment that has yet to post significant gains for Pershing is Hilton Worldwide Holdings (HLT). The fund said in October that it had purchased a 3.7% stake in the global hotel operator, shortly before shares dropped to a more than one-year low on concerns over a slowdown in the hospitality business. The stock has largely matched the performance of the S&P 500 this year, but the fund remains optimistic. "Hilton is a high-quality, asset-light, high-margin business with significant growth potential led by a superb management team," the fund told clients Feb. 13. Its "collection of scaled brands and [its] loyalty program create strong network effects for consumers and cost and revenue advantages for hotel owners."

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2/12/2019

Interserve Rescue Plan: Shareholder Rebellion Grows as Dissenting Hedge Fund Recruits Another Supporter

City A.M. (02/12/19) Daniel, Alex

Coltrane Asset Management last week launched a bid to oust all members of Interserve's board except CEO Debbie White after the company announced the details of a deleveraging plan with its lenders. Coltrane has a 27% stake in Interserve. Dutch hedge fund Farringdon Capital Management, which has a 6.2% stake in the outsourcer is also now backing the rebellion. Bram Cornelisse, chairman of Farringdon, told City A.M. Feb. 12 that the fund is "supporting the efforts of Coltrane to achieve a more equitable outcome for shareholders compared to the deal suggested by management which hands almost the entire company to the debt holders." A source added Farringdon has also written directly to Interserve on the matter. A vote will take place in March. Interserve needs the support of 50% of its shareholders to go ahead with the deal. Interserve's rescue deal prompted anger at Coltrane last week because it proposed all but eliminating existing shareholders' stake in the company, trimming it to just 2.75%, while lenders including RBS, HSBC, and BNP Paribas would be given control. Coltrane subsequently wrote to the company calling for a general meeting and the ouster of directors Glyn Barker, Mark Whiteling, Russell King, Anne Fahy, Nick Salmon, Gareth Edwards, Dougie Sutherland, and Nicholas Pollard. It said Interserve should replace them with two rescue specialists, David Frauman and Stuart Ross. Sutherland also announced he is stepping down from the board, and will leave his role as a director at the end of February, though a source said his decision was "not in any way related" to Coltrane's demand. Debbie White, CEO of Interserve and the architect of the rescue deal, continues to have shareholders' support, according to the firm.

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2/12/2019

Thyssenkrupp Bows to Investor by Simplifying Organization

Reuters (02/12/19) Steitz, Christoph

Thyssenkrupp's (TKAMY) decision to streamline its corporate structure marks a win for Cevian as the German company works to retain shareholders with its wider restructuring plan. Cevian has an 18% stake in the submarines-to-elevators group. Thyssenkrupp plans to scrap its matrix structure, which has long been criticized by investors for adding costs and slowing down decision-making with its multiple leadership layers based on products and regions. The company said the plan, which includes taking out parts of its organization related to regional headquarters and shared services, would assist with cutting general and administrative costs to below 300 million euros ($339 million) by 2020-21, representing a 20% reduction. Cevian has been a vocal critic of the matrix structure, calling for a more nimble and leaner set-up. "The decision of Thyssenkrupp's management team to remove the matrix structure is a major step to free entrepreneurial forces and increases accountability of management," stated Lars Foerberg, founding partner of Cevian Capital. "Thyssenkrupp has great potential and we support every step that improves the competitiveness of the company." The revamp comes ahead of a wider restructuring that will see the group separate its capital goods arm—elevators, car parts, and plant engineering—from its materials operations, and needs to be implemented before the legal separation, which will be effective as of October.

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2/11/2019

Just Eat Takeaway Merger Talk Sounds Like Too Much of a Mouthful

Financial Times (02/11/19) Vincent, Matthew

Cat Rock Capital was surprised by Just Eat (JSTTY) appointing Kevin Edwards, former chief marketing officer of the Movember Foundation, to run its Canadian business. The Movember Foundation is an organization that encourages men to grow mustaches for charity, meaning Edwards' expertise in "food delivery" is limited. Cat Rock also criticized the hiring of Peter Plumb, former CEO of Moneysupermarket, as Just Eat's CEO—a position that he exited last month. Now, the investor is questioning whether interim CEO Peter Duffy has any experience in food delivery after serving eight years at easyJet (ESYJY). In an open letter to Just Eat's board on Feb. 11, Cat Rock wrote, "Just Eat clearly needs a world-class management team with online food delivery experience." The firm's founder, Alex Captain, called the company's progress in recruiting a permanent CEO "plodding, and ultimately calamitous" and suggested that the experienced candidates he put forward had been disregarded. He recommended that Just Eat contact "a well-run industry peer" and invite it to "merge" with Just Eat by offering a premium to the current share price, paid in its own equity. Captain argued that this approach would result in a new management team with proven knowhow and working technology. "We would expect that there would be significant strategic interest in a merger from other industry participants," he said. "For example...Takeaway.com." Observers note that Cat Rock, as a 5% shareholder in Takeaway.com, could see an uplift in its 2% stake in Just Eat as the result of such a deal, especially because Takeaway.com has risen in value by 20% in a year while Just Eat's share price has fallen 20% over the same period.

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2/8/2019

Elliott Questions Pernod’s New Goals

Wall Street Journal (02/08/19) Roca, Cristina

Elliott Management Corp. argued Friday that Pernod Ricard's (PDRDY) financial targets could be more ambitious, after the spirits maker set out fresh mid-term guidance yesterday during half-year earnings reporting. The fund, which disclosed a stake in Pernod late last year, has been calling for changes to the company’s operational strategy and governance, saying it lags behind peers such as Diageo (DEO). Elliott said Friday that Pernod’s new plan “is a first small step in starting to address the company’s shortcomings in operational efficiency.” Pernod, the owner of Absolut vodka, raised its full-year operating profit guidance Thursday and said that as part of its mid-term plan, it will target sales growth of 4%-7% between fiscal 2019 and 2021. It will also increase its operating leverage by 50 to 60 basis points annually between fiscal 2019 and 2021 and gradually up its dividend distribution to roughly 50% of profit from recurring operations by fiscal 2020, up from a distribution of 41% for fiscal 2018. In an interview Thursday, Pernod CEO Alexandre Ricard hit back at Elliott, saying the business is going in the right direction. However, Elliott responded Friday that it believes these targets could go further, and that the steps proposed by Pernod lack specificity and clarity. “Necessary enhancements to the company's board and corporate governance have yet to be addressed,” the investor said.

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2/7/2019

Pernod Hits Back at Elliott as Stock Hits Record High

Wall Street Journal (02/07/19) Kostov, Nick

Pernod Ricard (PDRDY) chief Alexandre Ricard defended against criticism from Elliott Management Corp., presenting his own plan to boost profit. The French drinks giant has been under pressure since Elliott acquired a 2.5% stake in December, saying Pernod had “significant room for improvement” and calling for better profit margins and governance. Ricard says Pernod is making progress on both fronts. “The business is going in the right direction,” said Ricard, the grandson of the company’s founder, in a recent interview. Ricard’s position was bolstered Thursday when the company raised its profit forecast for the year, helped by strong demand for high-end cognac in China. Its shares rose 2.5% to hit a record high. Pernod said it would target sales growth of 4% to 7% over the next three years as part of a plan that also aims to boost operating profit margin by 0.5 and 0.6 percentage points a year and cut €100 million of costs over two years. “We've been building the foundations of future growth for the past three years,” Ricard said. “Now it's all about consolidating. However, it isn't clear if these moves will satisfy Elliott. The hedge fund, which is one of Pernod's largest investors, has argued that Pernod has lost market share in key drinks and “underperformed its peers on several metrics.” Elliott also wants Pernod to raise its operating margin to a level closer to rival Diageo (DEO).

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2/7/2019

Digital First to Attempt an Overhaul of Gannett Board

Wall Street Journal (02/07/19) Lombardo, Cara

Digital First Media, the hedge-fund-backed newspaper chain officially known as MNG Enterprises Inc., has launched a proxy fight to shake up Gannett Co.'s (GCI) board of directors. Digital First is one of Gannett's biggest shareholders with a roughly 7.5% stake. It nominated a slate of six candidates Thursday and will solicit shareholder votes for them to replace a majority of the board members at the company's annual meeting this spring. Gannett, the publisher of USA Today and other daily newspapers, earlier this week rejected a $1.4 billion takeover bid from Digital First and questioned the bid's credibility. Digital First's nominees include Heath Freeman, one of the founders of Alden Global Capital LLC, the New York hedge fund that is Digital First's majority owner and is known for slashing costs at the titles it acquires. MNG Chairman Joseph Fuchs and former MNG Chief Executive Steven Rossi are also nominees. Digital First said it would have preferred to avoid a costly and distracting proxy contest, but that it had no choice after Gannett refused to extend the nomination deadline to allow for continued discussions. Digital First also attempted in writing to reserve the right to submit placeholder names for its nominees and potentially swap them out later, which would give it more time to locate and vet nominees, according to sources. But Gannett's bylaws don't allow this, those sources said. Gannett spurned Digital First's initial offer Monday, saying it undervalued the company, questioning how it would be financed, and raising concerns about Digital First's record of laying off staffers at its publications.

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2/13/2019

Small Companies Face Added Pressure to Put Women on Boards

Wall Street Journal (02/13/19) Broughton, Kristin

There are fewer large public companies with all-male boards as investors in recent years have demanded boardroom diversity. Now, proxy advisors are encouraging community banks, regional energy companies, and other small and midsize enterprises to increase gender diversity on their boards or risk losing shareholder support. Under a policy taking effect this year, Glass Lewis & Co. will recommend that investors vote against re-electing directors who chair nominating committees at companies with all-male boards. The proxy advisory firm said it would target companies in the Russell 3000 Index during annual meeting season. "Companies that don't have women on their boards are outliers," said Courteney Keatinge, senior director of environmental, social, and governance research at Glass Lewis. "And we want to make sure those outliers are called out." Institutional Shareholder Services Inc. plans to implement a similar policy in 2020. According to Glass Lewis, only four companies in the S&P 500 had all-male boards at the end of last year, down from 31 five years earlier. Further, there were 509 companies in the Russell 3000 with male-only boards at the end of the year, down from 708 companies over the same period. Glass Lewis said it will take into account existing efforts at companies to recruit women directors, as well as any agreements companies have in place with significant investors.

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2/13/2019

The Road Ahead for Shareholder Activism

Harvard Law School Forum on Corporate Governance and Financial Regulation (02/13/19) Weinstein, Gail; de Wied, Warren S.; Richter, Philip

Last year was a record year for activism in terms of number of campaigns, capital deployed, number of activists involved, first-time activists, and board seats obtained. While statistically activism continues to grow, the activist investing market in the United States is mature, with the number of repeat activism targets exceeding the number of first time targets, according to research from Fried, Frank, Harris, Shriver & Jacobson. Activism is concentrated among a small number of leading activists, the significance of board seats won is overstated, non-U.S. activism has slowed, super-cap companies remain infrequently engaged, and returns for activist funds have been low and highly volatile. In response to the expansion of activism in recent years, corporate boards and senior executives now think like activists, institutional investors have become more involved and vocal, and merger and acquisition activity has changed, with the majority of transactions now initiated by a bidder rather than by an engaged company's decision to initiate a sale process. Fried, Frank, Harris, Shriver & Jacobson sees the road ahead containing many pitfalls for activists, including political uncertainty that will drive market volatility and more challenging financing conditions. A significant market disruption or tightening of liquidity could lead to a shakeout among activists and the return of distressed activism. Moreover, M&A-related activism may become more aggressive; activity in environmental, social, and governance is likely to increase; and growth could pick up in Europe and Asia.

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2/13/2019

Want a Better Board? Look to Private Equity

Institutional Investor (02/13/19) McElhaney, Alicia

Companies that are looking to better align their board with their institutional shareholders and better handle shareholder activism should look to the private-equity model of boards, according to new research from Columbia Law School professors Ronald Gilson and Jeffrey Gordon. In a paper entitled "Board 3.0—An Introduction," the researchers explain that private equity sponsors offer robust incentives, adding that this has resulted in a different mode of board and director engagement that seems associated with high value creation. Gilson and Gordon describe the current board structure of publicly traded companies as Board 2.0, and call for a model that combines these directors with those that follow a new model of corporate governance—Board 3.0. Under the 3.0 model, the 2.0 directors would serve on compliance and special committees, while the new directors would serve on a "strategic review" committee that would monitor the strategy and performance of the company. The 3.0 directors, which would serve a limited time in their role, would be compensated through stocks in a long-term manner. The Board 2.0 is "dominated by part-time independent directors who are dependent on company management for information and are otherwise heavily influenced by stock market prices as the measure of managerial performance," says the paper. The authors express concern that institutions may back up activist hedge funds, which may not be acting in the best interest of shareholders, via proxy votes in the hopes of dissolving a dispute.

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2/11/2019

Institutional Investors Looking More Closely Into Companies, Boards – Morrow Sodali

Pensions & Investments (02/11/19) Bradford, Hazel

Asset owners and managers continue to "dig deeper" into how their portfolio companies are dealing with issues such as environmental, social, and governance (ESG), executive pay, and activism, and away from compliance checklists, according to Morrow Sodali's Institutional Investor Survey. "Shareholders are increasingly interested in looking at companies on the merits rather than just doing a compliance exercise," said John Wilcox, chairman of Morrow Sodali, a global corporate governance firm, in an interview. The fourth annual survey, released on Feb. 11, asked investors with a collective $33 trillion in assets which issues matter most about the companies they hold. The 46 respondents represent senior governance specialists in their organizations, with $19.5 trillion in active investments and $13.5 trillion in passive ones. Asked to rank the factors that influence their voting decisions, 93% selected governance policies and practices, followed by long-term business strategy and effective communications. On ESG factors, the survey found it is "increasingly being blended into the discussion about what companies are supposed to be doing and how they are judged," Wilcox said. On board engagement, 87% of respondents indicated that "proactive and regular engagement" with the board of directors helps them evaluate a company's culture, purpose and reputational risk. Asked about activist campaigns, the institutional investors said they are most likely to support one when there is a focus on long-term strategy.

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2/11/2019

Pernod Gets the Gentle Treatment From New York Hedge Fund

Bloomberg (02/11/19) Laurent, Lionel

Although Elliott Management Corp.'s Paul Singer often is portrayed as every CEO's worst nightmare as he pushes for radical changes, his approach has been different at French liquor-maker Pernod Ricard SA (PDRDY). He is taking what Bloomberg columnist Lionel Laurent calls "a more back-seat, common-sense approach that advocates tweaks rather than a structural overhaul." Laurent adds that "judging by the recent board changes at the company and the share-price rise, it is working out for Elliott and Pernod's management." Elliott disclosed its nearly 1 billion euro ($1.1 billion) stake in Pernod Ricard in December, criticizing the family-run company's governance and calling for cost cuts to fix its poor performance versus peers. Thierry Le Clercq, a fund manager at Mandarine Gestion, says Ricard appears unfazed by Elliott's arrival. Meanwhile, Elliott appears not to be especially pushy. According to Laurent, "A refreshed board might give the CEO Ricard more freedom to tackle spending and finally turn the page on the 2008 acquisition of Absolut, which saddled Pernod with debt and hefty write-downs. Ricard himself told Bloomberg News in an interview that family shareholders had been pushing him to stick to the existing strategy 'or else.' So it's interesting that he says he's 'happy' that Elliott is now on the register. As for Singer, he could do with an easy win in Europe that doesn't involve a protracted, politically charged struggle."

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2/11/2019

Charting the Rise of Europe's Investors

European CEO (02/11/19) Goldsmith, Courtney

Hedge funds have become the face of activist investing, and increasingly they are engaging European companies. In 2016, there were 40 activist campaigns at European firms worth more than €1 billion, up from just six in 2009. JPMorgan said in its report on the 2018 proxy season that Europe had "confirmed its position as a major shareholder activism arena." According to Activist Insight, 128, or 40%, of the 318 non-U.S. campaigns initiated in 2018 engaged European companies. However, Europe still lags behind the United States, where the average number of new campaigns ranged between 300 and 500. The JPMorgan report found that non-European activists were responsible for initiating 43 campaigns in Europe in 2018, up from 39 in 2017, and nearly 75% of those campaigns were said to have been launched by U.S. funds seeking viable engagement outside their oversaturated home market. "Both Corvex Management and Sachem Head launched their first European campaigns this past year, while Trian Fund is said to be raising a U.K.-listed fund to [engage] a European company," JPMorgan said. Meanwhile, local players are now getting involved, with London Business School finance professor Julian Franks noting that over the years, activism has become more acceptable in Europe. "The [engaged companies] are becoming more used to it, more prepared. And I think the activists think, 'Well do we really need to take full-page ads hitting these companies over the head?'" Franks added. "There are a lot of consulting firms who prepare potential [engaged companies] to think through what their activist wants and whether they should do it in advance. That's not at all unusual."

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2/10/2019

A Wary Welcome for Investors' New Tactics

Financial Times (02/10/19)

This Financial Times editorial notes that during the 1980s, investors like Carl Icahn and Nelson Peltz engaged in short-term tactics, but now, as investor activism is on the rise, firms like Elliott Management, Peltz's Trian, and ValueAct sometimes snap up stakes and settle down for the longer haul, lobbying from inside the boardroom. According to Lazard, there were activist campaigns at 226 larger companies across the globe last year, up 20% from 2017, and activist funds invested a record $65 billion of fresh capital. There looks to be more of the same this year, with Sherborne's Edward Bramson pushing for an overhaul of Barclays (BCS), Paul Singer's Elliott Management taking aim at governance and unsatisfactory profit margins at Pernod Ricard (PDRDY), and ValueAct recently securing a deal with Olympus (OCPNY) to appoint three non-Japanese board directors. This editorial states that "activists' growing maturity ought to be good news for everybody. Activists pose a useful challenge to boardroom smugness. When they do win board seats, they appoint experienced board members, not paid troublemakers. They help regulate the self-aggrandizing tendency of established directors to pursue acquisitions for the sake of it, trading on the inertia of long-term investors. Their willingness to deepen oversight of complacent companies offsets the passivity of many index funds. As a result of activists' engagement tactics, traditional long-term asset managers are having to come off the fence and become more vocal, both about the opinions of the activist campaigners and their own objectives. That said, boards are right to remain wary."

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2/10/2019

A Rarity On Wall Street: A Female- and Minority-Led Activist Hedge Fund

Wall Street Journal (02/10/19) Lombardo, Cara

The co-founders and managing partners of the new activist fund Impactive Capital LP are Christian Asmar, who is Hispanic, and Lauren Taylor Wolfe. Both spent roughly a decade at activist hedge fund Blue Harbour Group LP before leaving to strike out on their own. Impactive will be shaking up an industry in which less than 5% of hedge funds are owned by women and less than 9% are owned by minorities, according to a recent report from Bella Research Group and the John S. and James L. Knight Foundation. An analysis by the Wall Street Journal last year found that even when women are present in high-level positions at large hedge funds, they are rarely involved in investment decisions. The pair are launching Impactive with $250 million from the California State Teachers’ Retirement System and hope to harness investors’ increased focus on companies’ environmental, social, and governance (ESG) track records and their professed disdain for short-termism. "We have the flexibility, because we have long-term capital, to take a longer-term view," says Taylor Wolfe. Impactive will focus on pushing small- and medium-size companies to make changes such as adding a diverse set of board members, reducing emissions or investing in technology that could hurt returns in the near term but that it believes will pay off over time. It also will employ traditional activist tools such as urging companies to improve capital allocation or spin off noncore businesses. Calstrs has committed the capital for a six-year term.

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2/8/2019

Funds Turn Attention to Banks as New Merger Wave Sets Up

CNBC (02/08/19) Franck, Thomas

Activist investors are turning up the heat on the U.S. banking industry, which many see as ripe for a new merger wave. Activists often avoid heavily regulated banks, but with the Trump administration and a GOP-controlled Senate trying to ease some of the industry's oversight, the possibility of big bank deals has resurfaced. "We've been seeing activity and clients looking into the banks space for a number of years now," said Schulte Roth & Zabel Shareholder Activism co-chair Ele Klein. "We've been waiting for more activism for a while now: There are too many banks in the U.S. right now and the industry needs consolidation." After BB&T (BBT) and SunTrust (STI) announced their $28 billion all-stock merger on Thursday, the first big bank deal in a decade, activists may be inspired to push other banks as well. ValueAct has already built a stake in Citigroup, saying last year that banks are lower risk "than at any time in our investing lifetimes." Though ValueAct hasn't made public calls for changes, the bank has agreed to give the investor greater insight into its strategy and operations. Many are looking to see combinations of other large regional banks with undervalued stock, including Citizens Financial Group (CFG), KeyCorp, and PNC Financial (PNC-P), said Blue Lion Capital partner Johnny Guerry. "A vibrant M&A market leaves underperforming banks with few excuses to not explore strategic alternatives," Guerry said. For example, "Comerica (CMA) has been pressured by activists over the past few years, and the success of these transactions only augments the legitimacy of the activists' calls to find a partner." Last week, Blue Lion sent a letter to Empire Bancorp (EMPK) calling for a sale, citing poor efficiency ratios and "egregious expense levels."

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2/7/2019

Foreign Funds Set Their Sights on Japan's Smaller Companies

Nikkei Asian Review (02/07/19) Anzai, Akihide

Shareholder activism is on the rise in Japan, and investors are starting to look beyond global names to local companies as the push for better corporate governance gathers steam. Fir Tree Partners recently disclosed a 5.1% stake in rail operator Kyushu Railway. The firm is urging the rail company to focus more on shareholder returns, and has proposed that the company buy back 15% of its outstanding shares worth of 90 billion yen. The investor has also proposed introducing stock-based remuneration for management. Japan's corporate governance code was revised last June to urge companies to disclose policies on reducing cross-shareholdings, enhance board structure and consider the cost of capital when making plans, and analysts say the move is starting to pay off. "Foreign investors previously tended to invest only in big companies, such as Toyota Motor or megabanks," said Yuji Kuramoto, head of stewardship at Daiwa SB Investments. "But now, following Japan's reform, they are inclined to invest more in companies that show promise in terms of technology, property and further room for corporate governance reform." Fir Tree began investing in Kyushu Railway in 2016. It was less interested in the company's rail operations, however, than in its property portfolio, according to Fir Tree managing director Aaron Stern. Kyushu Railway has "very, very high-quality real estate," Stern said. He said Fir Tree made its proposals to Kyushu Railway several months ago and recommended that the stock buyback be carried out during the next midterm business plan, which starts in April.

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2/7/2019

Opinion: Will the Departure of Arconic’s CEO Derail Its Turnaround Plan?

Motley Fool (02/07/19) Whiteman, Lou

Arconic (ARNC) announced early Wednesday that CEO Chip Blankenship is out after barely a year on the job. The sudden departure suggests a broader boardroom battle behind the scenes, writes Motley Fool author Lou Whiteman, and comes barely two weeks after Arconic walked away from talks to sell itself to Apollo Global Management (APO) in favor of remaining independent. Whiteman believes that decision was a long-term win for investors who now have the opportunity to reap the benefits of a turnaround instead of Apollo. Elliott Management, owner of 10.75% of the company as of Sept. 30, was said to strongly favor the transaction, however. Elliott feuded with Blankenship's predecessor, Klaus Kleinfeld, who resigned in April 2017 after the board said he showed poor judgement in his interactions with Elliott. Investors will learn more about what comes next on Feb. 8, when Arconic announces its full-year 2018 results and provides an update on its portfolio review. Whiteman expects the restructuring plan to remain largely intact, and notes the good news for investors is that Arconic still has an impressive set of assets and exposure to long-term growth markets including aerospace. And, according to its now-former CEO, it also has a pretty straightforward path to streamline operations and improve results. Still, the prospect of owning a company where management and a key shareholder are on separate pages is disconcerting, Whiteman writes. Arconic still has issues to resolve, including a substantial debt burden and liabilities due to London's Grenfell Tower fire in 2017. There is also the risk of a global slowdown that would eat into demand. Blankenship's departure and the intrigue surrounding the move are a blow to the case for buying Arconic. However, there is still plenty to suggest that a solid management team can cut significant inefficiencies and over time increase the company's valuation considerably, Whiteman concludes.

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2/6/2019

The Long View: The Role of Shareholder Proposals in Shaping U.S. Corporate Governance (2000-2018)

Harvard Law School Forum on Corporate Governance and Financial Regulation (02/06/19) Papadopoulos, Kosmas

The number of shareholder proposals related to governance issues peaked after the corporate scandals of the early 2000s, according to research from ISS Analytics. The governance reform initiatives received strong backing from investors, with some proposal categories (declassifying the board, removing supermajority vote requirements, and redeeming or voting on poison pills) consistently obtaining support levels above 60% of votes cast. The percentage of governance shareholder proposals receiving support by majority of votes cast rose steadily from 5% of proposals in 1994 to 37% of voted proposals in 2003, and support levels have remained high since then. Many key governance practices are now widely adopted by large-capitalization companies, which has led proposal campaigns to recently shift to governance topics where shareholders do not appear to have reached consensus, such as shareholders' ability to call a special meeting and the establishment of an independent board chair. Last year, the percentage of majority-supported governance shareholder proposals dropped to its lowest level since 1999. The vast majority of governance shareholder proposals in recent years have been filed by individual investors, such as John Chevedden and James McRitchie. Even with limited resources, proponents can make a significant impact on the market by focusing on large companies. The rise of stewardship among large institutional investors could lead these shareholders to move to advance governance improvements.

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