Media Center

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

"Put Up Or Shut Up": Aryzta Shareholders Call For Clarity On Takeover
SoftBank Amasses Over $20 Billion in Public Stock Unit
IsZo Capital Files Lawsuit Against Nam Tai and Participants in $170 Million Private Placement
Australia's CIMIC to Sell 50% of Mining Services Business Thiess to Elliott
A Rights Issue And Revolting Shareholders Are Mere Symptoms Of Unibail's Vulnerable Portfolio
Dealnet's Value Triples With Shareholder Engagement: Dissident Shareholders Congratulate Simply Green
Starboard Says It Now Owns 9% of ACI Worldwide, Stock Gains
SEC Approves Changes to Ease Auditor Independence Rules for Companies, Audit Firms
Starboard Looks to Keep Its Great Track Record Going in the Chip Industry
Investor Jonathan Litt Calls for Special Meeting of Aimco Shareholders
Powerful Investor Group Calls for Crown Directors to "Reconsider" Their Roles
Boral Chair to Retire, Seven Pulls Board Nominee After Investor Backlash
This New Activist Fund Is Shaking Up Europe
Di Marzio Explains Elliott Management's "Precise Philosophy" for Milan's Transfer Business
After Years of Protests, P&G Shareholders Defy Board on Environmental Proposal
Question Raised About Nelson Peltz's Board Seat at P&G Shareholder Meeting
Third Point's Bullish Case for a Pandemic Recovery
Video: ESG Funds Are Under Scrutiny. Here’s Why
2021 Proxy and Annual Report Season
Does Shareholder Activism Split the Pie or Grow the Pie?
Investors Should Watch the Transatlantic Split on ESG Closely
Bracing for Activist Investors in the Retail Industry

10/19/2020

SoftBank Amasses Over $20 Billion in Public Stock Unit

Bloomberg (10/19/20) Turner, Giles; Nair, Dinesh

SoftBank Group Corp. (SFTBY) charged ahead with its new public stock trading arm, increasing equity positions to more than $20 billion despite an initially skeptical response from shareholders. The Japanese conglomerate considered tempering its trading plans in early September after reports that SoftBank’s spending spree was disrupting tech stocks, which erased about $9 billion in market value for SoftBank at the time. Over the past few weeks, SoftBank renewed its commitment to the public equities trading arm. The strategy is currently built around expectations of a volatile third-quarter earnings season, the people said. SoftBank has been buying out-of-the-money call options, which deliver returns when share prices rise, and selling calls at even higher prices. An unidentified trader recently purchased around $200 million worth of call contracts on tech stocks in a single day. Founder Masayoshi Son has been reluctant to provide many details about his trading strategy. The company has talked more about a broader strategy of selling assets, paring debt and buying back shares that has been well-received by investors. The stock rose to a 20-year high Monday, the highest level since March 2000. In August, SoftBank disclosed holdings of $3.9 billion in stocks such as Amazon (AMZN) and Netflix (NFLX). It has bought a lot more stock since then, mostly major tech stocks.

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10/17/2020

Starboard Looks to Keep Its Great Track Record Going in the Chip Industry

CNBC (10/17/20) Squire, Kenneth

13D Monitor founder and president Kenneth Squire highlights chip industry investor Starboard Value's push to keep up its success in the sector by focusing on ON Semiconductor (ON). Starboard's activism in other companies has seen a positive return on investment, with an average return of 71.62% against an average of 23.23% for the S&P 500 during the same time periods. ON Semiconductor sells products across diversified and attractive end markets, with the automotive and industrial sectors comprising almost 60% of revenue. About 80% of its revenue has three-plus years in product longevity and about half is seven-plus years. ON's primary focus on analog and power components and sensors also has positioned the company to net business regardless of end product features. Among the opportunities Starboard is eyeing at ON is a rationalization of its manufacturing footprint and improving utilization rates to increase gross margins. The firm is saddled with excess costs for not fully integrating its acquisitions or realizing other synergies from those acquisitions. ON has 12 manufacturing facilities worldwide, and could easily operate with only three to seven plants. The company has already initiated solid steps, migrating from smaller and outdated facilities to better equipped facilities with excess capacity. Starboard also sees an opportunity in transitioning ON to a fab-lite model allowing for more stable gross margins, more flexibility to meet upticks in demand and downturns, higher free cash flow conversion, and better returns on capital. Finally, Starboard envisions an opportunity for continued industry consolidation, and thinks ON is uniquely positioned as a scaled asset trading at a discount. The company could be enticing for strategic buyers.

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10/15/2020

Powerful Investor Group Calls for Crown Directors to "Reconsider" Their Roles

Sydney Morning Herald (Australia) (10/15/20) Hatch, Patrick; Danckert, Sarah

The Australian Council of Superannuation Investors is encouraging its members to vote against the Crown Resorts (CWN) directors standing for re-election at its annual general meeting next week in protest over how the company has been run. Three directors are standing for re-election at the meeting, including Guy Jalland, who negotiated the sale of a 19.9% stake for the billionaire to Hong Kong's Melco Resorts in a since0abandoned deal that put Crown's Sydney casino licence at risk. Two independent directors, Jane Halton and John Horvath, are also standing for re-election. Horvath's independence was questioned on Wednesday when it emerged he was Kerry Packer's long-time personal physician and oversaw his kidney transplant in 2000. While Packer, who owns 36% of the company, has given no indication of how he will vote, he said in evidence last week he expected changes to the board would be required to make Crown a fit company to hold a casino licence. Crown's corporate governance has been under fire in recent weeks following evidence at a NSW Independent Liquor and Gaming Authority probity inquiry about the casino group's secret deal to pass on sensitive financial information to its largest shareholder James Packer. Prominent advisory groups ISS, CGI Glass Lewis, and Ownership Matters have all recommended Crown shareholders vote down the re-elections. ACSI's members own about 7% of the shares in Crown. Australian fund manager Perpetual, which owns about 9%, and private equity firm Blackstone (BLX), which owns almost 10% and has recently applied for regulatory approval to increase its stake, both declined to comment.

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10/15/2020

Boral Chair to Retire, Seven Pulls Board Nominee After Investor Backlash

Sydney Morning Herald (Australia) (10/15/20) Gray, Darren

Building materials giant Boral Limited (BOALF) has buckled under pressure from activist shareholders, with its chairman Kathryn Fagg to retire from the board next year and Seven Group withdrawing one nomination for the board. In an announcement on Thursday afternoon, the Boral board said it had engaged with shareholders and "listened to concerns" that had been raised about director accountability for the past performance of the business. Boral chairman Kathryn Fagg will leave the company's board next year. Boral said some shareholders were concerned about the level of representation of major shareholder Seven Group on its board, after the recent appointment of Seven chief executive Ryan Stokes and chief financial officer Richard Richards to its board. Seven Group subsequently confirmed it would withdraw Mr Richards' nomination for the board. According to the most recent filing Seven Group has a 19.984% stake in Boral, but two large activist shareholders - Perpetual and Tanarra Capital - had questioned the appointments, claiming they gave Seven excessive influence on Boral. In a recent letter to Fagg the two activist shareholders did not call for her departure, and commended some of the recent decisions of Boral's board including the appointment of new chief executive Zlatko Todorcevski. But three proxy adviser firms had all recommended a vote against Fagg's re-election at Boral's annual shareholder meeting on October 27.

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10/15/2020

This New Activist Fund Is Shaking Up Europe

ValueWalk (10/15/20)

Bluebell was co-founded by Giuseppe Bivona, Marco Taricco and Francesco Trapani, who all serve as chief investment officers. The fund focuses predominantly on medium-to large-cap companies within Europe, which means companies with market capitalizations of between €2 billion and €15 billion, and which they believe to be high-quality businesses in attractive sectors, generally without a controlling or reference shareholder. They launched the $75 million fund in November 2019, although they had been working on high-profile activist situations for over six years as co-investors alongside funds such as JANA Partners, Elliott and Third Point. For the most part, the Bluebell team is working alone on their campaigns, although they can and do selectively invite co-investors alongside them when they see a need for larger critical mass. This is the case in two of the 12 positions currently in the portfolio. Bluebell's brand of engagement tends to happen “behind closed doors”, Tarrico says, because of a “cultural barrier” around activism in continental Europe. Taricco spoke about their long position in Italian specialty finance business Mediobanca (MDIBY). Bluebell sees upside of around 50%, excluding the value of its 13% stake in Generali, the third largest insurance company in Europe and the largest in Italy. Bluebell identified potential improvements in four key areas: strategy, operational efficiency and transparency, capital allocation, and governance. The team added that in excess of 40% of Mediobanca’s regulatory capital is locked into the Generali stake, which they consider a hindrance. Finally, they object to current bylaws call for any shareholder proposing a full list of directors to include senior employees of Mediobanca within the top three positions. Bluebell is currently in discussions with top management and board members ahead of the company’s upcoming annual general meeting at the end of October. Bluebell is a long-biased fund, but it may opportunistically take single-name short positions if the team identifies a particular opportunity. Earlier this year, Bluebell shorted Canadian movie theater operator Cineplex (CPXGF), which was the target of a cash deal by U.K.-based Cineworld announced last December. Bluebell Capital went short on Cineplex because both Cineplex and Cineworld were at risk of survival due to the pandemic and the resulting company would be extremely leveraged. He said the deal was subject to approval from Canada's Ministry of Culture, so they reached out to the regulator and about why the ministry should not authorize the deal. The deal was called off, and Cineplex shares fell.

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10/14/2020

After Years of Protests, P&G Shareholders Defy Board on Environmental Proposal

Cincinnati Business Courier (10/14/20) Brownfield, Andy

At consumer goods giant Procter & Gamble's (PG) 2020 annual shareholder meeting, 67% of shareholders approved a measure put forth by Green Century Equity Fund resolving that the company issue a report addressing how it could increase its efforts at combating deforestation. P&G said this resolution was the first shareholder proposal related to deforestation that it had received. The vote opposed the P&G board's recommendation that the measure be defeated. Environmental groups in years past have held protests both outside of and within P&G's annual meetings. The resolution only required P&G to "issue a report assessing if and how it could increase the scale, pace, and rigor of its efforts to eliminate deforestation and the degradation of intact forests in its supply chains." Green Century Fund, in its proposal, largely leaves it up to P&G what to include in that report. P&G CEO David Taylor said during the annual meeting that for every tree harvested for the company's products, another one is planted. On palm oil, P&G's board wrote that it is a member of the Roundtable on Sustainable Palm Oil (RSPO), which is committed to sourcing those products in a manner that does not contribute to deforestation and respects the rights of workers and indigenous people. P&G's board wrote that it has achieved 60% RSPO certification for the palm oil and derivatives it uses and is on track to reach that certification for 100% of its sourcing by the end of fiscal year 2022. Green Century claims that P&G has ranked below peers like Kimberly-Clark and Unilever by both Forest 500 and CDP Forest and lags on implementing its existing no-deforestation commitment.

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10/14/2020

Question Raised About Nelson Peltz's Board Seat at P&G Shareholder Meeting

Cincinnati Business Courier (10/14/20) Brownfield, Andy

A Procter & Gamble (PG) shareholder raised a question at the company's annual shareholder meeting on Oct. 13, concerning why investor Nelson Peltz still had a seat on P&G's board, in contravention of company rules regarding retirement age. "Mr. Peltz is 13 years older than the director retirement age for directors and 13 years older than the average age of the current board of directors," the question stated. "At what point will you stop making a special exemption for this one particular director or just get rid of the retirement age?" However, Peltz is really only six years older than the P&G director retirement age of 72, though his Trian Fund Management had previously claimed that those rules were non-binding. In his 2017 proxy battle for a P&G board seat, Peltz argued that the company's stock was undervalued, citing a "suffocating bureaucracy," and calling CEO David Taylor misguided in promoting divestment of 105 lesser brands in favor of the 65 most profitable ones. Although P&G prevailed, Taylor appointed Peltz to the board, and at the Oct. 13 meeting defended Peltz's position as a "very positive experience for the company." He explained that "Nelson and all of our directors...provide valuable input and to me are contributing to the success that you're experiencing in our company today. We benefit from the wise counsel of all of our directors and I can say with very clear set of experiences that all directors, including Nelson Peltz, continue to contribute to help the company grow and get better over time."

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10/15/2020

2021 Proxy and Annual Report Season

Harvard Law School Forum on Corporate Governance (10/15/20) Richman, Laura D.; Hermsen, Michael L.; Pinedo, Anna T.

Authors at Mayer Brown LLP provide detailed advice to companies about preparing for the 2021 proxy season. Topics discussed include the impact of Covid-19 on proxy statement disclosures; trends in environmental, social, and governance (ESG) and its impact on the proxy statement; and Covid-19 disclosures in annual reports. As a result of the confluence of COVID-19 and social unrest, human capital matters are poised to play a magnified role in the 2021 Proxy Season. In addition, it is worth noting that some shareholder proposals during the 2020 proxy season achieved approval from a majority of the shares voting. Most of these involved governance matters, but there were also some social and environmental proposals that achieved majority support, or significant minority support, at a number of companies. This trend is likely to continue and evolve in 2021. The Covid-19 pandemic may bring more proposals focusing on employee health and safety, as well as on human capital management generally. In a separate matter, on Sept. 23, the SEC adopted amendments to Rule 14a-8 that effectively make it more difficult to have a shareholder proposal included in a company’s proxy statement. In another matter, on July 22, the SEC adopted amendments codifying its view that voting advice produced by proxy advisors generally constitutes a solicitation under the proxy rules, which has been controversial. ISS sued the SEC in October 2019 over the SEC’s position that proxy voting advice constitutes solicitation, but the parties agreed to hold this litigation in abeyance until the SEC adopted its final rules. On September 18, 2020, ISS filed an amended complaint and motion for summary judgement to encompass the final rules. Regarding virtual meetings, based on the 2020 proxy season, companies may want to cover how they will handle technical glitches and other matters of shareholder interest in their proxy statement.

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10/15/2020

Investors Should Watch the Transatlantic Split on ESG Closely

Financial Times (10/15/20) Tett, Gillian

Gillian Tett suggests a Biden presidency could be beneficial to environmental, social, and governance (ESG) investing, as it might bring in changes to rules around ESG investing and corporate disclosures. Such changes "could accelerate capital flows into the sector, pushing up prices for assets—or delivering what Larry Fink, head of BlackRock, has described as an ESG 'momentum' trade," she argues. Tett cites a transatlantic investment rift opening under the Trump administration, with European regulators and officials rushing to adopt ESG-friendly standards. "The European Central Bank, for example, is setting capital markets benchmarks by getting involved with green bonds. Regulators are moving to embrace the Task Force for Climate-Related Financial Disclosure [TCFD] system," Tett notes. She also reports that the European Commission (EC) is finalizing a taxonomy to define green holdings. Tett refers to Standard Chartered chair José Viñals' statement that this is "pushing financial companies around the world to consider ESG factors." In contrast, the U.S. Securities and Exchange Commission has balked at establishing a scheme for ESG investment. "American regulators seem uninterested in imposing TCFD," Tett observes. The rift is making the EC the de facto global standardization body for big finance groups, and making domestic U.S. players more cautious of ESG than Europeans. An RBC Global Asset Management survey found just 74% of American financial groups believe ESG boosts performance, versus 78% last year; that ratio rose to 96% and 93% in Europe and Asia, respectively. "In ESG, Europe is way ahead of the U.S.," said EY's Carmine di Sibio. "The sustainability issue became a very political issue starting 10 years ago in the U.S.—views are different depending on what party is in office." Tett therefore thinks the prospect of a Biden administration being more favorable to ESG "is likely to spark a portfolio shift—particularly as more U.S. investors are forced to contemplate the degree to which tough climate change regulation could reduce the value of assets like fossil fuel stocks."

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10/15/2020

Bracing for Activist Investors in the Retail Industry

National Law Review (10/15/20) Haas, Steven M.

Hunton Andrews Kurth partner Steven M. Haas writes that many retailers are bracing for shareholder activism in late 2020 and early 2021. The Covid-19 pandemic largely curtailed activist hedge funds in the spring, but as investors and companies have shifted to the “new normal,” activist hedge funds will start engaging with new companies. The retail industry is especially vulnerable to activists who build up shares at historically low prices and then pressure companies to shift strategy. "We expect the primary activist thesis in retail to be driven by [mergers and acquisitions], as activists take positions in companies and try to initiate sale processes." Also anticipated is pursuit by activists of operational changes and replacing senior management teams, particularly in cases where activists are of the opinion that retailer is not aligned with changes in technology and consumer preferences. "Balance sheet strategies (e.g., pushing for an extraordinary dividend or stock buybacks) are much less likely in the sector given the financial condition of most retailers and uncertainty about when the industry will fully recover," Haas says. He expects brick-and-mortar retailers will be most susceptible, while e-commerce retailers will be less, but not completely, vulnerable. "Regardless of the thesis, the activist is likely to be highly critical of retail management's handling of the Covid-19 pandemic—including claims that management did not react quickly enough or, in some cases, overreacted and missed opportunities," Haas observes. "Retailers should assess their vulnerability to shareholder activism and review their preparedness."

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