The $15 Billion Arconic Buyout That Wasn't
" Bloomberg (01/22/19) Sutherland, Brooke"
Arconic (ARNC) has decided not to sell the company. According to Reuters, the maker of metal parts for airplanes and cars rejected a $22.20 offer from Apollo Global Management, which would have implied a valuation of more than $15 billion, including debt. Chairman John Plant said the company did not feel the takeover proposals it had received were in the "best interests of Arconic's shareholders and other stakeholders." Employees, suppliers, and customers could have been worse off, but shareholders would have preferred a deal, writes Brooke Sutherland. Elliott Management, Arconic's largest shareholder, has been increasingly involved at the company. The investor successfully pushed for the ouster of Arconic CEO Klaus Kleinfeld in 2017 and overhauled the board, eventually adding one of its own portfolio managers. Elliott was willing to roll its equity stake into an Apollo-led buyout and buy a majority interest in a spinoff of Arconic's cladding business as a means of helping to mitigate potential liabilities from the Grenfell Tower fire. Elliott based its campaign around the idea that it had better ideas than management about how to run the company and could guide it to a stock price between $33 and $46 a share, according to Sutherland, and now gets a shot to prove that.
Hedge Fund Drops Proxy Battle With Chemicals Maker Ashland
" Wall Street Journal (01/22/19) Thomas, Patrick"
Ashland Global Holdings Inc. (ASH) has reached an accord with Cruiser Capital Advisors LLC. The hedge fund, which owns a 2.5% stake in the company, will withdraw its slate of nominees to Ashland's board and instead back the company's nominees at an annual shareholder meeting in February. Ashland will also appoint Dr. William H. Joyce as a consultant to the company on operational matters. In his new role, Joyce will work closely with Ashland Chairman and CEO William Wulfsohn and report his recommendations to Ashland's board. Cruiser Capital nominated four directors to Ashland's board in October, seeking to oust four current board members. The hedge fund had also urged shareholders not to re-elect Wulfsohn as chairman. Cruiser Capital had previously criticized Wulfsohn and other board members for weak earnings growth and its corporate-governance practices. The fund had also called for Ashland to broaden its cost-cutting program and boost margins. "We believe that Ashland has made significant positive corporate governance and board leadership changes," said Keith Rosenbloom, managing partner of Cruiser Capital. Ashland and Neuberger Berman, which owns a 2.8% stake in the company, last week agreed on a plan in which the company will add two new directors after its annual meeting, refresh leadership of its board committees, and have a longtime director resign. Under the plan with Neuberger, Wulfsohn will remain chairman, but current director Jay Ihlenfeld will be appointed lead independent director. Ashland on Jan. 22 said its board will appoint either Craig Rogerson and Jerome Peribere or both to the governance committee of the board after the shareholder meeting. Ashland named Peribere to the board last year upon a recommendation by Cruiser Capital.
Elliott Thinks Walmart, Google and Private Equity Could Be Interested in Buying eBay’s Core Marketplace Business for About $15 Billion, Source Says
" CNBC (01/22/19) Sherman, Alex"
Elliott Management believes Walmart (WMT), Google (GOOGL), or several private equity firms would be interested in acquiring eBay’s (EBAY) marketplace business if it sheds StubHub and eBay Classifieds Group, according to a source. Elliott disclosed a more than 4% stake in eBay in a letter Tuesday and offered recommendations for the company, including spinning off StubHub and eBay’s portfolio of classified advertising properties. Starboard Value LP has also acquired a stake in eBay and plans to speak to the company about similar changes, said another source. EBay has a market valuation of more than $31 billion. If eBay is able to separate StubHub and the classifieds business, the remaining marketplace business could be a more realistic size for a private equity transaction. EBay’s marketplace business generated $2.1 billion of revenue in the third quarter. StubHub took in $291 million in sales and the classifieds unit booked $254 million. Elliott expects the Classifieds Group could sell for between $8 billion and $12 billion and estimates StubHub could secure between $3.5 billion and $4.5 billion. If EBay sells the marketplace business without operational improvements, Elliott anticipates it could fetch about $15 billion, a source said.
StanChart Chief Pushes Back on Report That Its Biggest Shareholder Is Unhappy
" CNBC (01/23/19) Browne, Ryan"
Standard Chartered (SCBFF) CEO Bill Winters on Wednesday denied a report that its biggest shareholder is unsatisfied with his restructuring efforts, stating Singapore's state-owned investment arm Temasek is in fact “very supportive” of the company. Temasek has been putting the bank under pressure, requesting more frequent briefings from executives and even considering a position on the firm's board, the Financial Times newspaper reported Monday, citing sources. But Winters on Wednesday resisted that report, saying “I'd be surprised if I read anything in the Financial Times which I hadn't heard from them directly.” Temasek has “been a very supportive shareholder throughout,” he said at the World Economic Forum in Davos, Switzerland. “We have an extremely active dialogue with all of our large shareholders, of course including Temasek.” The FT also reported that Temasek would prefer an external replacement for Winters once he resigns and highlighted Piyush Gupta, CEO of Singaporean bank DBS, as a preferred replacement. Temasek currently owns an almost 16% stake in the bank, according to Standard Chartered's latest filing. The bank's share price has declined more than 40% since Winters took over in 2015. Winters said StanChart's share price is “not where we want it to be” and that it knows it has “further to go” in its turnaround plan.
Starboard, Elliott Management Call on eBay to Shed StubHub, Classifieds
" Wall Street Journal (01/22/19) Lombardo, Cara; Chin, Kimberly"
Starboard Value reportedly has joined Elliott Management Corp. in urging EBay Inc. (EBAY) to consider shedding its StubHub ticketing and classified-ads businesses. Elliott announced Tuesday that it owns a more than 4% stake in eBay and urged the e-commerce company to consider spinning off or selling the units because they could be worth more on their own. Meanwhile, Starboard has a stake in eBay of less than 4% and has spoken to the company about those same changes, according to a source. Starboard bought the stake at least six months ago and has been talking to EBay in recent months about improving its operations and potentially separating the two businesses similar to the way it previously spun off payment platform PayPal Holdings Inc. (PYPL), the source said. Shares of eBay were up over 8% in early trading after being down roughly 20% over the past year through Friday. EBay said it values shareholders' input and will carefully review Elliott's proposals. The company faced pressure in 2014 from Carl Icahn, and later spun out PayPal, which is now itself a company worth more than $100 billion. Icahn sold out of his eBay position soon after the split and last year exited his stake in PayPal, with it having roughly doubled in value since the spinoff.
Exclusive: Private Equity Firms Circling Nestle's Skin Health Business - Sources
" Reuters (01/21/19) Schuetze, Arno; Barbaglia, Pamela; Geller, Martinne"
Private equity firms Cinven and Advent have teamed up to bid in an auction for Nestle's skin health business, according to people familiar with the matter. Blackstone (BX), KKR (KKR), Carlyle (CG), CVC, EQT (EQT), and Partners Group are also expected to bid and might look for partners. Nestle, which is shedding underperforming businesses and facing criticism from an investor who is pushing for an overhaul, launched a review of the business in September. Information memorandums on the skin health business sale, being run by Credit Suisse and Evercore, are expected to be sent by the end of January; first-round bids are likely to be submitted in early March. The business could have a price tag of about 7 billion Swiss francs ($7 billion). Industry players that might take part in the auction include Beiersdorf, Allergan (AGN), Henkel, Johnson & Johnson (JNJ), L'Oreal, Pfizer (PFE), and Unilever (UN). The Skin Health unit has performed poorly since its creation in 2014, which has led to one-off costs and restructuring.
EQT Rejects Rice Proposal to Shake Up Management
" Wall Street Journal (01/22/19) Matthews, Christopher M.; Prang, Allison"
On Jan. 22, EQT Corp. (EQT) CEO Robert McNally said on a call with investors that the company rejected a plan by the brothers who founded Rice Energy Inc. and sold it to EQT in 2017 to take over running the combined company. McNally said their plan is based on flawed assumptions and lacks detail. He also announced that EQT is taking additional cost-cutting steps, forming a board committee to review its operations, and searching for a new COO. Daniel, Toby, and Derek Rice—who as a family control about 2.7% of EQT's stock—have said they should run the company and can bring down drilling costs and increase natural-gas production at EQT. They have the support of Elliott Management Corp., and at least two top 10 shareholders, including D.E. Shaw Group, also have voiced support. McNally said in an interview following the call that he was willing to engage with the Rice team, noting that "I think we'll get to the point where there's just no need for a proxy fight."
Elliott Says Urgent Changes Are Needed at eBay in Letter to Board
" Bloomberg (01/22/19) Schuetz, Molly"
Elliott Management Corp. penned a letter to the board of EBay Inc. (EBAY) detailing steps it says are “urgently needed” to boost the value of the online marketplace. Elliott, which owns more than 4% of EBay, proposed a five-step plan that involves reviewing EBay’s portfolio of companies, including StubHub, revitalizing the company’s Marketplace, which Elliott considers poorly managed, and returning capital to shareholders. If its recommendations are followed, Elliot sees EBay’s shares valued at $55 to $63 a share, potentially doubling their value from Friday’s close. “Despite its remarkable history as one of the world’s largest e-commerce platforms, EBay as a public-company investment has underperformed both its peers and the market for a prolonged period of time,” Elliott wrote in the letter. It said that EBay management should focus on “growing and strengthening Marketplace,” which Elliott says has weathered “prolonged, self-inflicted misexecution.” In addition, Elliott said EBay needs to increase “operational efficiency,” and also recommends that EBay accelerate its share repurchase plan to $5 billion this year.
Luby's Will Add Two to Board Amid Pressure From Hedge Fund Investor
" Reuters (01/18/19) Herbst-Bayliss, Svea"
On Jan. 18 the casual dining chain Luby's Inc. (LUB) said it will shake up its board, inviting two new independent directors to replace two sitting members and selecting a new chairman. The announcement comes a week before shareholders will vote on whether to add nominees from Bandera Capital, which owns nearly 10% of the company's shares, to the board. "Luby's has recently been engaged in in-depth discussions with many of our shareholders, and based on the feedback we have received, we have chosen to accelerate our plans to transform the board," said Chairman Gasper Mir III, who plans to remain on the board but give up his role as chairman. Jeff Gramm's Bandera has criticized the company's high expenses and is urging other investors to back its demands for more accountability and oversight by the nine-member board. ISS recommended electing Gramm and his father, former Sen. Philip Gramm, to the board, while Glass Lewis recommended adding only Jeff Gramm.
Bandera Partners Issues Letter to Luby's Stockholders
" MarketWatch (01/18/19)"
Bandera Partners LLC's Jeff Gramm penned a letter to fellow shareholders of Luby's Inc. (LUB) on Jan. 18 warning them not to be fooled by the company's recent actions. "Just over 10 years ago, when Luby's was engaged in a tight proxy contest with an activist investor, the incumbent board instituted some long overdue governance changes to swing votes back in their favor," the letter stated. "Luby's incumbent board narrowly won that contest, and the stock has since fallen over 80% under its watch. Don't let them fool you twice with their latest round of promises." It added that following significant support for Bandera's case that the board has grossly underperformed, "Luby's is proposing a new round of changes and sweetened promises, including swapping in new directors, hand-picked by the underperforming incumbent board, AFTER the election, with an uncertain timeline." Bandera says it does not believe Luby's stockholders will fall for these tactics for a second time, and encourages them to instead vote for its own nominees. "If the newly elected Board wishes to discuss additional board refreshment this coming year, we will welcome that discussion. Today's announcement from Luby's is simply too little too late."
MGM Hands Board Seat to Hedge Fund Corvex's Meister
" Reuters (01/17/19) Herbst-Bayliss, Svea; Roumeliotis, Greg"
MGM Resorts International (MGM) has reached a deal with Corvex Management to appoint its founder, Keith Meister, to the board on Friday, expanding it from 12 to 13 members. The agreement comes after recent reports that Starboard Value had built a position in the casino operator and was considering pushing for changes. MGM's chief executive and chairman, Jim Murren, said the company and Meister have been holding “constructive dialogue” over the last several months, and he praised the investor's track record of “helping companies maximize value for shareholders as well as his experience in real estate and gaming.” Corvex owns about 3% of MGM's stock. “It is clear to me that MGM is focused on driving profitable growth,” Meister said, adding that he believes he can help. Since 2017, MGM said it has appointed four new independent directors, including Meister.
Premier Foods Names Acting Boss Amid Sales Woes
" Belfast Telegraph (Ireland) (01/17/19)"
Premier Foods (PFODF) announced that CFO Alastair Murray will serve as interim CEO, effective Feb. 1, replacing Gavin Darby, who is leaving at the end of the month in the wake of pressure from Oasis Fund Management. His departure comes just months after he narrowly survived a shareholder rebellion against his re-election. The company also reported that group sales dropped 2.2% in its third quarter and that it remains in talks about a potential sale of its Ambrosia brand and its factory in Lifton, Devon. Darby said, "We faced into two sets of challenges in the quarter—lower international sales and our logistics program, which as expected, affected cake sales volumes early in the quarter. As we look to the fourth quarter, we expect to see a good performance from branded sweet treats, we have a good innovation plan lined up, and our expectations for trading profit and adjusted earnings per share for the full year are unchanged."
Gulfport Board Faulted, Share Buybacks Sought by Investor
" Bloomberg (01/17/19) Deveau, Scott"
Firefly Value Partners, which said it owns an 8.1% stake in Gulfport Energy Corp. (GPOR) sent a letter to the board on Thursday calling for changes at the natural gas and oil company. The investment firm said Gulfport's board lacks the experience needed to fix its poor performance and that it should implement a $500 million share buyback program to double its stock price. “We are concerned that the current board does not possess the necessary skills, experience, or alignment with the company's stockholders to effectively steer Gulfport's strategy and maximize long-term shareholder value,” Firefly wrote. The investor wants to work with the company on shaking up the board, sources said, but will consider nominating its own directors if that effort fails. Gulfport confirmed Thursday that it had received the letter, which it said followed talks with the firm. Firefly argues the company—whose shares were trading around $8 Thursday and have dropped 32% in the past year—could be worth more than $30 per share over time if it takes steps to improve its performance. Based on its conversation with Gulfport Chairman David Houston, Firefly said it's concerned that the board won't commit to actions needed to improve value despite a strong cash position and being one of the lowest cost producers of natural gas in the country.