Media Center

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

Teckwah Emphasizes Need for Sustainable Growth in Response to Quarz
Commerzbank's New Chairman Faces Investor Ire Amid CEO Hunt
Evergy to Forgo Sale, Pursue Standalone Plan
SEBI Issues 'Procedural' Guidelines for Proxy Advisory Firms
Commerzbank Names Vetter as Chairman in Rebuke for Cerberus
Support for Toshiba CEO Tumbles in Shareholder Vote
Marathon Petroleum to Sell Gas-Station Chain to 7-Eleven Owners for $21 Billion
Cevian Ups Stake in Pearson Ahead of Boardroom Grab
Quarz Capital's Recent Trail of Engagement Calls
Mack-Cali Drops 6.7% After Q2 Core EPS Misses as Office Leasing Slips
JPM Reshuffles Activist Division in Anticipation of More Campaigns
Toshiba Repels Effissimo Challenge With Sweep of Board Vote
Windstream Asks Investors for a Second Chance After Bankruptcy
George Weston Pursues Ailing Swiss Baking Firm Aryzta
Effissimo Says It Has Cut Toshiba Stake From 15.36% to 9.91%
SoftBank Rally Makes Case for More Radical Surgery
Elliott Picks Up Some Bluewaters Power Debt
Ahead of Bankruptcy Exit, Windstream Holdings Posts $162 Million Loss in Q2
Snow Park Gives Front Yard Ultimatum
Crown Castle Adds Board Retirement Policy After Elliott Urges Changes
Debate Continues Over 14a-8 Reform Plans
Legal Liability for ESG Disclosures
More Corporate Meetings to Go Virtual After Success During Pandemic
The Twisted Logic of Reverse Listings
Ethical CSR Focus Triggers Hostile Investor Activism, Study Finds
Japan's 2020 Proxy Season Results Announced
The SEC's New Proxy Advisor Rules Wall Off Companies From Dissent
TDE Middle Market: Pro-ESG Doesn't Mean Anti-Profits
ESG Assets Keep Growing During Covid-19 Crisis
ESG Agenda
Interview: IsZo Capital Wants Shareholders to Send a Message to U.S.-Listed Chinese Company
SEC Proposed Rule Change Is a Step Backwards for Shareholder Democracy: Edelman
Will the 'Improving Corporate Diversity Through Diversity Act of 2019' Be the Plaintiffs' Bar Next El Dorado?

7/31/2020

Toshiba Repels Effissimo Challenge With Sweep of Board Vote

Bloomberg (07/31/20) Mochizuki, Takashi; Furukawa, Yuki

Toshiba (TOSYY) has beaten back investors with a clean sweep for its board nominees, saying its 12 proposed directors were all elected at a shareholders meeting. Largest Toshiba shareholder Effissimo Capital Management had pushed for co-founder Yoichiro Imai to win a seat on the conglomerate's board. Toshiba's shares slipped by up to 2% in Tokyo trading following the vote. Toshiba has been plagued by scandal and missteps in recent years. It paid a record fine in an accounting fiasco and then saw billions lost on an investment into nuclear power. Toshiba sold its medical unit to Canon (CAJ), its home appliance business to China's Midea Group, and a piece of its memory chip business to a group led by Bain Capital (BCSF) to cover its losses. Effissimo and other investors have sought improved governance and management. The Singapore firm reported a stake in 2017 and was later joined by other investors. Effisimo says that it is open to "constructive engagement" with Toshiba management. "There were many individuals that have shared our concerns and agreed that the further growth in Toshiba and enhancement to its corporate value could not be achieved absent a fundamental improvement in its compliance and corporate governance," the firm states. Effissimo also this week cut its stake in Toshiba from about 15.4% to 9.91% to allay anxiety that its status as an overseas investor would hinder Toshiba's independence. It also aimed to ensure Imai's status as an independent director if he had been appointed to the board. "This stems from our belief that there are internal control-related problems at Toshiba," Effissimo said.

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7/31/2020

Windstream Asks Investors for a Second Chance After Bankruptcy

Yahoo Finance (07/31/20) McNeely, Allison; Seligson, Paula; Scigliuzzo, Davide

Windstream Holdings Inc. (WINMQ) is looking for $2 billion to exit bankruptcy as it tries to improve performance. The company plans to keep CEO Tony Thomas and CFO Bob Gunderman at the helm. Investors have already submitted enough orders to cover the roughly $1.65 billion of first-lien debt at a yield in the low 8% range. With the backing of Elliott Management Corp. and Oaktree Capital Management, Windstream is asking investors to give a second chance to the team that led the company through a controversial 2015 spinoff of Uniti Group Inc. (UNIT) that left it with $6.5 billion in debt. Thomas was in charge when the company spun its network assets into the separate Uniti entity; this sparked conflict with Aurelius Capital Management, which said the spinoff violated the company's debt covenants. Under Windstream's court-approved bankruptcy plan, its unsecured and second-lien creditors will effectively recover nothing, and its first-lien creditors will get about 60 cents back for every dollar they lent. While its reorganization takes care of more than $4 billion of debt, Windstream will still owe about $2 billion. Annual revenue is expected to stabilize at around $4.2 billion annually through 2026, according to materials released in February, down from about $5.5 billion in 2018. Windstream has reported steady operating income for its rural broadband internet service in recent quarters, but analysts say it needs to keep upgrading networks to ensure that demand keeps growing. The company is attempting a fresh start by appointing a new board of directors, which includes Elliott and Oaktree, which are both taking substantial stakes in new equity that will take Windstream private.

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7/30/2020

Ahead of Bankruptcy Exit, Windstream Holdings Posts $162 Million Loss in Q2

FierceTelecom (07/30/20) Robuck, Mike

Windstream Holdings (WINMQ) has reported a net loss of $162.4 million for the second quarter. In what will likely be its last earnings report before becoming a privately held company, Windstream reported that its quarterly revenues were $1.185 billion, down from $1.286 billion a year ago, while its quarterly net loss was a marked improvement from last year's $544.1 million. Windstream added 22,000 Kinetic broadband subscribers in the second quarter, its highest quarter net subscriber additions in over a decade. Based on first-half results, Windstream increased its 2020 full-year guidance to 60,000 net new broadband subscribers. On the pre-recorded earnings call, Windstream CEO Tony Thomas said more Kinetic broadband subscriber opportunities were ahead across its ILEC footprint. Windstream is also aggressively building out its fiber footprint with the addition of $2 billion in capital to offer its broadband service in rural areas. Thomas said 56% of Windstream's Kinetic customer base now has speeds of 25 Mbps or greater, which was up from 47% a year ago. For the first six months of this year, Windstream Enterprise's revenues increased 24% compared to the first half of 2019. Windstream has lightened its debt load by $4 billion since a federal bankruptcy judged approved its reorganization plans in June. Windstream also reorganized its governance, which included naming some of its creditors to its new board. The reorganization plan eliminated junior bondholders who were owed close to $2.4 billion, converted some senior debt to equity, and made Elliott Management Windstream's largest shareholder. Windstream also recently settled a lease conflict with Uniti Group, enhancing its cash flow profile by nearly $300 million per year until 2024. "I am excited to report that our path to emerge from restructuring is clear," Thomas said on the Q2 earnings call. "As a private company, Windstream will have increased flexibility to invest in our network, accelerate our transformation, and return to growth."

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7/30/2020

Snow Park Gives Front Yard Ultimatum

The Deal (07/30/20) Orol, Ronald

Front Yard Residential Corp. (RESI) should sell itself or the real estate investment trust (REIT) will be subject to a director contest in 2021, said Snow Park Capital Partners LP's Jeffrey Pierce, speaking July 27 on a panel at The Deal Economy: Middle Market Week digital conference. Pierce said Snow Park Capital would initiate a director contest if the REIT isn't sold. "We obviously put two directors on the board last year," Pierce noted. "The nice thing about that situation is that there are a lot of buyers, a number of private market participants, some of which participated in the first process and also new ones have reached out to us," he added. Front Yard Residential chose in May to cancel a $2.3 billion sale to privately held Amherst Residential LLC. Rather than take an initial $48 million termination fee, Front Yard agreed to take a $25 million termination fee plus a loan from Amherst and the sale of 4.4 million shares. Amherst has approximately a 7.5% stake in the REIT. Luxembourg-based Altisource Portfolio Solutions, a service provider for the real estate and mortgage industries and former Front Yard parent company, said in a securities filing in May that it questioned Front Yard's decision to end the Amherst deal without requiring the full $48 million termination fee that was part of the merger agreement. Altisource, which has a 5.9% stake in Front Yard Residential, said it no longer supported the REIT in its current direction. Altisource and Snow Park in June initiated a "vote no" campaign against Front Yard director George McDowell and Chairman Rochelle Dobbs at the REIT's 2020 annual meeting. Some 32% of voting shares opposed McDowell and 30% voted against CEO pay. However, the percentage opposed was bigger, and Amherst supported the incumbent board. Front Yard, previously called Altisource Residential Corp., was spun off Altisource Portfolio in 2012.

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8/3/2020

More Corporate Meetings to Go Virtual After Success During Pandemic

CBC (08/03/20)

Experts say the success of annual general meetings (AGMs) taken virtual due to the pandemic will likely mean more options for remote participation at future events. The online migration was a scramble for most, but most of the response to the virtual meetings has been positive. Kevin Thomas, CEO of the Canadian nonprofit proxy advisor Shareholder Association for Research and Education, said the virtual events lack some intangible benefits versus attending a meeting in person, such as being able to have informal chats with executives and shareholders. As of July 28, 583 AGMs had been held by companies listed on the Toronto Stock Exchange, down 22% from last year, as some companies took advantage of pandemic-related deadline extensions offered by regulators. One observer expects virtual AGMs to become more common because people may be hesitant to attend crowded events even when the pandemic is under control, and the convenience of remote attendance has been well demonstrated. In Canada, 54% of the meetings were virtual only, with votes collected ahead of meetings, while 26% were traditional physical AGMs. Thirteen percent were "limited hybrid" meetings, where participants could remotely ask questions but couldn't vote, and 2% were "full hybrid" meetings, where participants could vote and ask questions at the meeting, whether in person or remotely. Shareholders who sponsor proposals are split on the subject of remote meetings. Virtual AGMs in Canada and the U.S. were generally well operated and well-received by shareholders, but there were also a few instances where technology failed or meeting organizers "turned off the mic" to stymie troublesome input.

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8/3/2020

Ethical CSR Focus Triggers Hostile Investor Activism, Study Finds

Financial Times (08/03/20) Fletcher, Laurence

An academic study finds that hedge funds are more likely to engage businesses with high corporate social responsibility (CSR) rankings, as some shareholders consider CSR an indication that a company is wasting money rather than focusing on investor returns. Pennsylvania State University's Mark DesJardine, Erasmus University's Emilio Marti, and HEC Paris business school professor Rodolphe Durand determined this is especially relevant if hedge fund activists deem CSR efforts as little more than greenwashing. The researchers examined 506 U.S.-based activist campaigns between 2000 and 2016, and found that companies whose CSR ratings were above the industry average had a 5% chance of being engaged by activist hedge funds, versus the 3% industry average. Furthermore, hedge funds are more likely to engage companies in sectors with poorer average CSR ratings that highlight CSR issues more. "Activist hedge funds look at CSR as a signal of relative misalignment" with delivering shareholder returns, Durand explained. The researchers observed that concentrating on ethically oriented practices was seen as a sign of wasteful spending, which "prevent[s] firms from maximizing shareholder value in the short term." These findings dovetail with booming interest in environmental, social, and governance (ESG) investing in recent years, which is helping persuade businesses to strengthen their reputations for ethical practices. The Global Sustainable Investment Alliance estimated that local sustainable investing assets totaled more than $30 trillion in 2018, compared to $22.8 trillion in 2016. Many industry insiders expect demand for CSR investments to continue growing despite outside shareholders' hostility, including former Unilever (UN) CEO Paul Polman. After staving off an unsolicited $143 billion takeover bid from Kraft Heinz (KHC) and its private equity investors in 2017, Polman called the failed attempt "a clash between people who think about billions of people in the world and some people that think about a few billionaires." Durand thinks the report's conclusions remain valid despite a recent uptick in ESG investing, noting that activist hedge funds are not fundamentally against a company focusing on CSR, but rather concerned that it is a sign of greater waste. Yet there have been indications that segments of the hedge fund industry have begun to view ESG as being aligned with shareholder returns. Atlas Global Investors founder Quentin Dumortier said robust CSR performance generates shareholder value and is "fully aligned with shareholders' interest," adding that "an activist today should actually aim at pushing companies toward best-in-class and authentic CSR strategies as a powerful driver to create shareholder value." However, Durand et al point out that unwitting attention from hedge funds concerned by CSR distractions can incur costs for targeted businesses, such as hiring lawyers or a public relations specialist, or diverted focus as top management respond to opposition. Durand also contends that a clear explanation of how CSR integrates within the company's business model lessens the chances of activist hostility.

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7/31/2020

The SEC's New Proxy Advisor Rules Wall Off Companies From Dissent

Barron's (07/31/20) Kelly, Lorraine

The Securities and Exchange Commission's (SEC's) final rule amendments on providing proxy voting advice, coupled with updated guidance for investment advisors, will hinder investors' ability to vote in a timely, cost-effective, and objective manner, according to this commentary by Lorraine Kelly, governance business head at Institutional Shareholder Services (ISS). The rule is based on the novel view that providing independent proxy voting advice constitutes a "solicitation," which ISS believes is inconsistent with the plain meaning of the federal securities laws. The SEC chose not to apply the fiduciary standards of the Investment Advisers Act, which would have governed all proxy advice rendered to U.S. investors, but instead chose to regulate proxy advice only if it relates to a public company registered with the SEC. Taking aim at proxy advisory firms, the SEC's thinking appears to be that stymieing their effort to do their work will limit investors' ability to express dissent. Meanwhile, the SEC's supplemental guidance for investment advisors will potentially hamper investors' ability to vote in a timely and unfettered manner. News reports raise concerns about the manner in which the commission arrived at the rule-making; the SEC chairman supported the rule-making by citing comment letters that were apparently fabricated or part of a corporate-funded lobbying effort to solicit and generate public support. The new rule upends the existing balance between public companies and their investor-owners in favor of corporate managers, the commentary says.

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7/31/2020

TDE Middle Market: Pro-ESG Doesn't Mean Anti-Profits

The Deal (07/31/20) Sattiraju, Nikitha

Investors don't need to sacrifice returns to invest in environmental, social, and governance (ESG) funds, according to a panel of ESG investors speaking at The Deal Economy: Middle Market Week on Wednesday. The investment community is realizing that ESG efforts are a way for companies to become more competitive in the long run, according to Lauren Taylor Wolfe of Impactive Capital. Morningstar data indicate that ESG funds drew $20.6 billion in investments in 2019, four times the net flows in 2018, and also outperformed conventional funds. Some hedge funds, such as Jeff Ubben's ValueAct Capital Partners LP, have expanded their own offerings into environmentally and socially focused investing. Meanwhile, some of the biggest passive funds all have ESG funds. Actively managed ESG funds are also more likely to have a better understanding of individual companies which puts them in a better position to influence management, said Ali Dibadj, partner at AllianceBernstein, while passive funds can drive change by pushing companies to meet ESG goals. Dibadj noted that if an active fund proposes changes a company should make to meet ESG goals, large passive funds can use their influence to drive those changes. The profitability of ESG investing is under a spotlight right now thanks to a recently revealed Department of Labor draft rule that would make it harder for employers to offer 401k plans that heavily invest in ESG funds. Nonetheless, the panel agreed that ESG is going to become a more important part of investing in the next five to 10 years.

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7/29/2020

SEC Proposed Rule Change Is a Step Backwards for Shareholder Democracy: Edelman

Yahoo! Finance (07/29/20) Cohen, Jeremy; Zilka, Jeff

The Securities and Exchange Commission (SEC) proposed a rule change on July 10 that would increase the mandatory threshold for filing 13F reports to $3.5 billion in assets under management from the current minimum of $100 million. Jeremy Cohen and Jeff Zilka, senior executives with Edelman's Financial Communications practice, argue that the proposal will have two negative effects. "It will create much higher levels of vulnerability to under-the-radar activist investors who will be able to build positions in the shadows, putting executives and their companies in a bind with little warning," they say. "And it will remove a critical source of information companies use today to identify current investors and target potential new shareholders, which is the bedrock of an effective investor relations program." They contend that ValueAct, Third Point, Trian Partners, and the like will continue to report their holdings, but point out that "more than 60% of activist investors, including prominent activists JANA Partners and Sachem Head, manage assets below the SEC's proposed $3.5 billion cut-off and would no longer file quarterly reports," citing data from Activist Insight. "Ultimately, this burden will be felt not by America's biggest companies, but by smaller businesses with fewer resources to defend themselves. These are the issuers activists target most frequently, as 75% of activist campaigns in North America last year were waged against them, according to Activist Insight," they add. "We recommend companies engage with all investors, whether they have a history of activism or not, as soon as their investment becomes apparent. Removing notification through quarterly 13F filings, as the SEC proposes, will make this vastly more difficult, and will force companies to wait for the activist's 'knock on the door,' versus reaching out proactively, as is the best practice."

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