Activist Database

Activist Deadline Calendar & Standstill Database

Featuring standstill agreement and nomination deadline windows, provisions and timelines

Media Center

Featuring all breaking news and in depth articles and editorial press coverage pertaining to shareholder activism and corporate governance.
Amber Capital Locks Horns With Lagardere Over Lawsuit
Aecom Nears $2.4 Billion Deal to Sell Management Services Unit
Elliott and Blackstone Enter Hostile Territory in Japan
UTC, Raytheon Investors Block Merger
Box Tries to Escape the Curse of the Silicon Valley Midcap
Australia Makes Big Strides in Closing Gender Gap, Global Survey Finds
Citigroup Names New Global Co-Heads of Equity Capital Markets
Elliott Ranks as Busiest Hedge Fund in Third Quarter, Again
Uniper Remains Independent for Now Despite Fortum Push: CEO
N.Y.C. Official Calls for Mandatory Diversity Effort in the Boardroom
Lagardere Sues Amber Capital, Claims 84 Million Euros of Damages
Progenics Inked a Merger to Avoid Negotiating a Proxy War. One Investor Still Wants to Fight
U.K. Regulator Tells Companies to Improve Financial Disclosures
Victoria's Secret Head of Stores Is Stepping Down
SAP CEO Steps Down
'Sustainable' Investors Match the Performance of Regular Investors, New IMF Research Finds
Most Companies Avoid Putting ESG Metrics in Incentive Plans
PG&E Bankruptcy Judge Gives Outside Group's Plan a Chance
Auto1, Private Equity Firms to Bid for Scout24's Cars Unit: Sources
AT&T to Sell Puerto Rico Business as It Looks to Pay Down Debt
Stockholder Withdraws Other Nomination for Brookdale Board
Elliott Questions Japan Firm Unizo's Actions in Bidding War
Bed Bath & Beyond Picks Target Executive as New CEO
Norway Oil Fund to Publish All Voting Plans
At Least 70 Companies Still Need a Female Director to Comply With California State Law, Report Says
Finland's Fortum to Gain Control of Uniper in $2.5 Billion Deal
Hedge Fund Standard General Returns to Media Dealmaking Roots
Two Hedge Funds Dodge a Russian Poison Pill
Amag Settles With Caligan, Adds Two Board Directors
Fortum CEO Demands Uniper Chairman Seat After Shareholder Deal
Telecom Italia CEO Accelerates Overhaul With Data Center Spinoff
Argo Group Gets SEC Subpoena Over Executive Compensation
Neuberger Berman Takes a Victory Lap. Saba Says Not So Fast.
Investor Wins Seats on Tix Board
Aramark Announces a New CEO, Investor Becomes Vice Chair of the Board
Germany's Aareal Conducts Strategic Review Following Calls From Investor
ISS Seeks Input for 2020 Proxy Season Votes
Emerson Faces Pressure to Split Itself in Two
New Glass Lewis Chief to Expand Abroad Amid U.S. Regulatory Clamp-Down
Proxy Solicitor Okapi Hires Harnett From Strategic Governance Advisors
Brookdale Says Board Nominee Made 'Derogatory' Comments About Rival Female CEO
Lantheus Strikes Deal to Buy Progenics, Sparking Investor Backlash
Brookdale Calls Investor's Nominee 'Unfit' for Board
FTI Consulting Hires ISS Executive for Governance and Activism Team
Paddy Power Owner in $6 Billion Deal to Create Global Betting Giant
Andersons, Marathon, Merge Four Ethanol Operations Into One Company
Hunting the Hunter: Following Elliott's Lead
Recent Trends in Shareholder Activism
The Evolving Boardroom: Signs of Change
Having More Female Executives Correlated With Better Performance at Companies, New Research Finds
Virtual Shareholder Meetings in the U.S.
Japan's Foreign-Investor Screening Risks Undoing Years of Reform
ESG Incorporation Starting to Take Hold in U.S. – Callan Survey
Time for Corporations to Get Their Houses in Order
We Talked to 24 People About the Hedge-Fund Wunderkind at Elliott Who Wants to Shake Up AT&T. Here's Why Management Should Be Terrified.
Corporate Board Elections Getting a Little Less Cozy
Spotlight Thrown on Japan Inc.'s Stakeholder-Focused Model
Men Agree That Gender Diversity on Boards Is Important—But They're Sick of Hearing About It
Shareholder Activism and Governance in France
Pragmatism Key to Proxy Voting Decisions, Say Corporate Governance Heads
Shareholder Activism Is a Balancing Act for Sias
Brexit and Shareholder Activism Could Be Behind CEO Exodus From FTSE 100 Companies, Experts Suggest
The Breakup of Another Industrial Giant Is Coming
AC Milan and Elliott: The Hedge Fund Trying to Crack Italian Football
How Boards Can Equip Themselves for Rapid Change
Investors Are Worried About AT&T's Content Game
Response to CII Proposal to Amend DGCL
Investors Are Getting Closer to a Climate Change Tipping Point
ComScore: A Hard Sell
Video: Lack of Diversity Puts Companies at Risk of Going Under, Says Ariel Investments Co-CEO Mellody Hobson
United Technologies' Merger With Raytheon Is Complicated. Three Ways to Play It.
There's a New Hedge Fund for Badly Governed Companies in Japan
Why Sustainability Reporting Needs Governance Perspective
Ackman Flat in September, But Still Crushing 2019

Voting Database

A new searchable database featuring the comprehensive voting records of all top institutional investors. This includes every proposal that was up for a vote and how the investor voted.

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13D Monitor | In The Media

10/14/2019

Amber Capital Locks Horns With Lagardere Over Lawsuit

Reuters (10/14/19) Kar-Gupta, Sudip; White, Sarah

On Oct. 14, Amber Capital called the lawsuit it is facing from Lagardere baseless and said it would continue to seek strategy and management changes at the French publishing company. Lagardere said on Oct. 11 that it was suing the minority shareholder and seeking 84 million euros ($93 million) in damages, accusing Amber of leading a "destabilizing campaign" and using smear tactics in the press that hurt its share price. The move comes as French lawmakers have issued proposals, such as more transparent disclosure requirements, that could feed into plans by the government to rein in activist funds. Amber, which has a stake of about 5.3% in Lagardere, said, "Lagardere is hoping to intimidate Amber with this new claim, which is as aggressive as it is baseless. The reality of the company's situation will not change until the managing partners decide to reconsider its strategy and governance."

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10/13/2019

Aecom Nears $2.4 Billion Deal to Sell Management Services Unit

Bloomberg (10/13/19) Deveau, Scott; Tan, Gillian

Sources say Aecom (ACM) is close to a $2.4 billion deal to sell its management services business to a consortium of private equity firms, including Lindsay Goldberg and American Securities. In June, the engineering and design company announced plans to spin off its management services unit—a move criticized by Jeff Smith's Starboard Value, which argued that the plan did not go far enough and called for the company to explore an outright sale. Starboard added that there was room for operational improvements in its design and consulting services business as well.

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10/13/2019

Elliott and Blackstone Enter Hostile Territory in Japan

Bloomberg (10/13/19) Ren, Shuli

Developer and hotel operator Unizo Holdings Co. is currently fighting off a hostile takeover bid that could shake up the Japanese market. Unizo, which has much of its office rental business in Tokyo, has seen its stock soar 128% since July, when it received an unsolicited tender offer from leading travel agency HIS Co. This was followed by a rival bid from SoftBank Group Corp. (SFTBY)-owned Fortress Investment Group, which was itself followed by a higher offer from private-equity giant Blackstone Group Inc. (BX). Though initially supportive of the Fortress offer, Unizo's board of directors has since demanded terms whereby a new owner will be unable to restructure or dissolve Unizo without the consent of employees. Employees would also determine whether the fund will exit and how it will do so—possibly through buybacks, strategic sales, or re-listing. Elliott Management, which has built a 13% stake in the company since August, has voiced its disappointment with these terms, which are unlikely to work for Blackstone or Fortress. If both deals fall through, Elliott will carry a significant loss and may not be able to call an extraordinary general meeting until January. The Fortress offer will expire Thursday. Foreigners who want control of Unizo may be fighting an uphill battle, because the company has shown a willingness to dilute its shareholders many times over to maintain its independence. Unizo is heavily indebted, and the stock trades at 1.4 times book value, but because Japanese developers do not account for valuation changes in their properties, the company's actual net asset value is more than twice its book value. This makes it an attractive deal for private equity, but only if Unizo allows the funds to divest assets and pay off debt.

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10/12/2019

UTC, Raytheon Investors Block Merger

Journal Inquirer (10/12/19) Vasile, Zachary F.

On Oct. 11, investors in United Technologies Corp. (UTX) and Raytheon (RTN) voted to approve the companies' proposed merger, paving the way for the creation of a massive aerospace and defense enterprise. The companies said that shareholders backed the merger by an "overwhelming" margin. UTC is officially the surviving entity of that merger, and its investors will own 57% of the new firm, but it will move its headquarters to where Raytheon is based. The merger, which will close in the first half of 2020, had drawn criticism from investors Dan Loeb of Third Point Management and Bill Ackman of Pershing Square, who owned 0.75% and 0.67% of UTC, respectively.

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10/11/2019

Box Tries to Escape the Curse of the Silicon Valley Midcap

Bloomberg Businessweek (10/11/19) Grant, Nico

Midcap cloud-computing company Box Inc. (BOX) has struggled with slowing growth and intensifying competition, compounding investor concerns that the aging company has yet to turn a profit. Box shares are down more than a quarter since its 2015 initial public offering, and its growth and revenue both lag behind file-sharing rival Dropbox Inc. (DBX). Shareholder advisory firms Glass Lewis and ISS have both raised concerns about the structure of its board. In September, investor Starborad Value LP disclosed a 7.5% stake in Box, saying the shares were undervalued and that it would seek changes including asset sales, business combinations, and a board refresh. Box hopes to avoid a hostile engagement with Starboard, and early talks between the two have been collaborative in tone. Executives are confident about their current strategy for the company, acknowledging that some of their evidence for this is based on internal developments that investors may not see. Nonetheless, Starboard's involvement has led the company to reconsider parts of its strategy, looking for more ways to cut costs.

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10/11/2019

Australia Makes Big Strides in Closing Gender Gap, Global Survey Finds

Sydney Morning Herald (Australia) (10/11/19) Chung, Laura

A new report from the Credit Suisse Research Institute has found that companies in Australia and New Zealand recorded the biggest improvement in women senior managers over three years. Australia and New Zealand topped the list of 56 countries, showing the greatest improvement in the "momentum" category for female participation in senior management. Across the three years, Australia and New Zealand improved by 7.9%, and the total percentage of women on boards in those countries jumped from 19.5% in 2015 to 29.6% in 2019. While Australia and New Zealand topped the momentum category, other countries, including France, Norway, Italy, and Vietnam, recorded higher total percentages of women on boards. The report concluded that "the impact of greater diversity in the boardroom leads to a better gender balance in executive functions." Gender, work, and employment relations professor Rae Cooper from the University of Sydney Business School cautioned that while the progress should be celebrated, there are always steps that can be taken to improve gender diversity in corporate offices.

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10/11/2019

Citigroup Names New Global Co-Heads of Equity Capital Markets

Financial Times (10/11/19) Morris, Stephen; Noonan, Laura

Citigroup (C) has appointed Douglas Adams and James Fleming as its new global co-heads of equity capital markets (ECM), the unit that assists companies in raising money on public stock exchanges. The move comes as ECM fees have dropped 16% industry-wide this year, according to data from Refinitiv. Citi has been under pressure from ValueAct, which has a $2 billion stake in the bank, to increase its strategic focus.

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10/11/2019

Elliott Ranks as Busiest Hedge Fund in Third Quarter, Again

Reuters (10/11/19) Herbst-Bayliss, Svea

According to data released by Lazard on Oct. 11, Paul Singer's Elliott Management outspent its rival hedge funds in the third quarter with campaigns at AT&T (T) and Marathon Petroleum Corp. (MPC). During the quarter, Elliott committed $5.2 billion in new capital, making it the busiest activist both by capital committed and number of campaigns launched. So far this year, Elliott has committed $8.4 billion in 14 campaigns, compared with Carl Icahn's Icahn Associates, which has committed $2.6 billion in three campaigns; Daniel Loeb's Third Point, which has committed $2.4 billion in three campaigns; and Starboard Value, which has committed $2.3 billion in 11 campaigns. Overall, activists deployed $11 billion in capital in the third quarter, up from $8.7 billion during the same period last year. A record 20 campaigns were launched in Europe, according to Lazard, which noted that close to half of all campaigns in 2019 made demands for mergers and acquisitions.

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10/11/2019

Uniper Remains Independent for Now Despite Fortum Push: CEO

Reuters (10/11/19) Kaeckenhoff, Tom; Steitz, Christoph

In an internal memo, Uniper CEO Andreas Schierenbeck told staff that he will seek clarity on several issues as its biggest shareholder, Fortum (FOJCY), plans to increase its stake. Schierenbeck wrote, "We...need to acknowledge that Fortum with its current or possible future share in Uniper is not only a major shareholder, but also a competitor. Overall, Uniper is an independent company and will continue to operate as such." Fortum recently agreed to acquire a more than 20.5% stake in Uniper from Elliott and Knight Vinke for 2.3 billion euros ($2.5 billion), which would boost its stake to more than 70.5%. The deal is subject to regulatory approval in Russia, where regulators have capped Fortum's ownership in Uniper at 49.99% due to a strategic water license operated by Uniper's local subsidiary Unipro. According to Schierenbeck, "My ultimate goal for the coming discussions therefore is to request further details around the plans from Fortum." Uniper opposes a full takeover by Fortum due to concerns about job cuts and a breakup.

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10/11/2019

N.Y.C. Official Calls for Mandatory Diversity Effort in the Boardroom

New York Times (10/11/19)

As part of his office's Boardroom Accountability project, New York City comptroller Scott Stringer will ask directors of 56 companies to adopt a version of the N.F.L.'s Rooney Rule, which requires its teams to interview ethnic minority candidates for head coach roles or other senior operational positions. Stringer points out that as of last year, two-thirds of board members at Fortune 500 companies were white men, and an even higher proportion of Fortune 500 CEOs are in that demographic. Stringer oversees five municipal public pension funds that manage over $200 billion in assets. Over the past five years, he has used this influence to push for corporate governance changes, including giving shareholders the ability to nominate board members directly.

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10/10/2019

Progenics Inked a Merger to Avoid Negotiating a Proxy War. One Investor Still Wants to Fight

FiercePharma (10/10/19) Blankenship, Kyle

Progenics Pharmaceuticals (PGNX) has agreed to a merger deal with Lantheus Therapeutics, at a 21.5% premium to Progenics' share price, rather than face a proxy war with Velan Capital. However, Velan says the proposed merger has been added to its list of grievances, calling for five of its nominees to replace three members of Progenics' board—CEO Mark Baker, David Scheinberg, and Nicole Williams—after what it calls "a misguided attempt to seek out the nearest exit." In a letter to Progenics' shareholders, Velan said, "Given this board's troubling track record, this latest maneuver, while deeply concerning, is not surprising and only solidifies our belief that wholesale Board and leadership change at Progenics is urgently required." In June, Velan accused the company of diluting its stock in a plan to enrich company executives. Earlier that month, Progenics had issued 1.63 million shares of common stock instead of using cash reserves to make a milestone payment for its acquisition of Azedra, the drugmaker's sole approved drug.

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10/10/2019

U.K. Regulator Tells Companies to Improve Financial Disclosures

Wall Street Journal (10/10/19) Trentmann, Nina

Companies must boost the quality of financial disclosures in their annual reports following the introduction of two new accounting standards, according to a review by the U.K. Financial Reporting Council. The nation's regulator for accounting and auditing reviewed 65 British companies' annual reports. It also analyzed the application of new rules governing the accounting of revenue recognition and financial instruments, as well as of an existing rule on the impairment of non-financial assets. "There is considerable scope for companies to improve the quality of their disclosures which will be a focus of future reviews in the early years of application of the new standards," the council concluded in an official statement.

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10/10/2019

Victoria's Secret Head of Stores Is Stepping Down

CNN (10/10/19) Valinsky, Jordan

One of Victoria's Secret's key executives is stepping down as the lingerie retailer continues to weather a battering year. April Holt, executive vice president of stores, is exiting the L Brands (LB)-owned company after more than 16 years. Succeeding her on an interim basis until a permanent replacement can be named is Becky Kritek-Behringer, a 17-year veteran who is presently Victoria's Secret's senior vice president of store operations. According to an unnamed L Brands spokesperson, Holt is departing for personal reasons. But her exit comes at a troubling time for Victoria's Secret, with customers shunning the company's racy advertising. Many have switched allegiance to companies that make custom-fitted bras, including ThirdLove, or competitors like American Eagle (AEO). Hedge fund investor James Mitarotonda has called for L Brands to divest Victoria's Secret. In an open letter written in March, he said L Brands should "take swift action to improve the performance of Victoria's Secret, by, among other things, correcting past merchandising mistakes and ensuring that Victoria's Secret is communicating a compelling, up-to-date brand image that resonates with today's consumers."

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10/10/2019

SAP CEO Steps Down

Wall Street Journal (10/10/19) Fitch, Asa

German business-software giant SAP (SAP) has announced that CEO Bill McDermott is being replaced in the role by two executives, Jennifer Morgan and Christian Klein, to serve as co-CEOs. SAP has used a co-CEO structure before, as have some other firms, but they are likely to remain uncommon overall. SAP also disclosed its preliminary third-quarter results, which beat analysts' expectations and boosted the stock by about 5% in after-hours trading. The stock is still down 14% overall in the last three months, despite a brief rally in April after investor Elliott Management Corp. disclosed a stake in SAP and called the company undervalued. Around the same time, SAP announced plans to triple its cloud-computing sales by the end of 2023 on top of the ambitious cost-cutting program it had announced earlier in the year. SAP profitability has lagged behind global peers as it struggles to keep pace with rivals like Salesforce.com Inc. (CRM), which now holds a 17% market share compared to SAP's 5.6% share.

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10/10/2019

'Sustainable' Investors Match the Performance of Regular Investors, New IMF Research Finds

CNBC (10/10/19) Schulze, Elizabeth

New research from the International Monetary Fund (IMF) finds that equity funds with an explicit sustainability mandate perform as well as conventional equity funds. The IMF estimates that there are more than 1,500 such funds controlling roughly $600 billion in assets, up from $200 billion in 2010, though they still represent less than 2% of the total investment fund universe. The research suggests that investors do not need to sacrifice returns when making investments that account for environmental, social, and governance (ESG) factors. The IMF also describes a shift in "responsible investment strategies," as sustainable investors focus more on putting money into companies with good ESG scores than on excluding funds that have bad ESG scores. Moreover, sustainable investing has evolved to include more careful screening based on the need for impact that also addresses some of the sacrifice in performance. One barrier to making sustainable active management funds more widespread is the persistence of rumors that their fees are often higher than those of other active funds, as well as the lack of a consistent definition of "sustainable" principles. The IMF report urged policy-makers to play a role in setting those standards.

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10/10/2019

Most Companies Avoid Putting ESG Metrics in Incentive Plans

IR Magazine (10/10/19) Human, Tim

An analysis of the pay policies of the FTSE 350 and ISEQ 20, conducted by FTI Consulting and CGLytics, found that while companies are including more environmental, social, and governance (ESG) issues in incentive plans, only a small amount of pay is linked to ESG performance. The study found that 27.4% of companies have added ESG metrics to their incentive protocols, or 12.8% if "customer satisfaction" is not considered an ESG measure. This is a steady increase from 2008, when only 4.3% included ESG-related KPIs in bonus plans, and from 2013, when that figure reached 19%. For companies that include ESG metrics in their incentive programs, these metrics account for less than 15% of bonus payments. The authors of the report note that companies could face more pressure to link ESG and long-term incentive plans. They note that while material external resources, like the standards published by the Sustainability Accounting Standards Board, are helpful in identifying strategic ESG risk and opportunities, the internal view of the company is ultimately critical to effecting change. Regulatory changes such as the Shareholder Rights Directive II in the European Union will put even more pressure on investors to analyze ESG factors when looking at executive pay.

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10/9/2019

PG&E Bankruptcy Judge Gives Outside Group's Plan a Chance

New York Times (10/09/19) Eavis, Peter

On Oct. 9, federal bankruptcy judge Dennis Montali ruled that California utility PG&E (PCG) no longer had the sole right to shape the terms of its reorganization. This allows a group of creditors including Elliott Management to present a rival proposal, which has the support of individuals with claims against PG&E for wildfire damages. The ruling, which sent PG&E stock down nearly 30% in extended trading, is a significant blow to PG&E management and its largest shareholders. The creditors' plan would provide up to $14.5 billion to wildfire victims and grant bondholders a 59% stake in the company. About 41% of the stock in the reorganized PG&E would go into trusts to help pay insurance claims and the damages submitted by the wildfire victims, leaving current shareholders with a tiny stake. By contrast, PG&E's plan would pay up to $8.4 billion to wildfire victims and preserves more of shareholders' stakes. In his decision, Montali seemed to encourage a resolution between the two parties and noted that "parties more deserving of consideration" had spoken through the group representing wildfire claimants. Due to a new state law enacted this year, PG&E must exit bankruptcy for the company to access a new state fund that is being set up to help pay for the catastrophic costs of future wildfires. The bankruptcy battle has repercussions in PG&E's service area, which covers most of Northern and Central California, and the state aims to have the company emerge with the financial ability to pay for wildfires caused by its power lines.

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10/9/2019

Auto1, Private Equity Firms to Bid for Scout24's Cars Unit: Sources

Reuters (10/09/19) Schuetze, Arno; Hübner, Alexander

Scout24, the German classifieds group, has attracted interest in its automobile unit AutoScout24 from used-car dealing platform Auto1 and a number of private equity firms, according to sources. Scout24 in August said—under pressure from investor Elliott—it would explore a sale or spin-off of AutoScout24, which is Germany's No.2 used-car classifieds platform. Buyout groups Permira, Apax, Carlyle, and Hellman & Friedman likely will submit first-round bids of between 2 billion euros and 2.3 billion euros ($2.2 billion-$2.5 billion), including debt, for Autoscout24 by an Oct. 9 deadline, the sources said. "We are still undertaking a strategic analysis of what we will do with AutoScout24," noted a Scout24 spokesman. "No decision has been taken on the path that we will take." Elliott has said that Scout24's auto and property listings units have few synergies. It argues that ImmobilienScout24 could fetch a standalone valuation of 5 billion euros, while AutoScout24 could command up to 2.5 billion euros. "The valuation of more than 2 billion euros appears steep, but is optically inflated through Scout24's acquisition of loss-making consumer finance firm Finanzcheck and the transfer of some consumer service ops to Autoscout," a source said.

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10/9/2019

AT&T to Sell Puerto Rico Business as It Looks to Pay Down Debt

Wall Street Journal (10/09/19) Ramachandran, Shalini; FitzGerald, Drew

AT&T Inc. (T) has agreed to sell is Puerto Rican and U.S. Virgin Islands businesses to Liberty Latin America Ltd. (LILA) for $1.95 billion in cash. About 1,300 employees will be transferred to Liberty Latin America as part of the deal, which is expected to close within six to nine months. The move will help AT&T reduce the debt load it accumulated through its $80 billion-plus acquisition of Time Warner last year and move the telecommunications giant closer to repurchasing shares. It also signals progress on its goal of shedding noncore assets, which has been promoted by Elliott Management Corp., which recently disclosed a stake in the company. The total raised from asset sales this year is now more than $11 billion. AT&T said it expects to return to repurchasing shares in the fourth quarter.

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10/9/2019

Stockholder Withdraws Other Nomination for Brookdale Board

McKnight's Senior Living (10/09/19) Bowers, Lois A.

On Oct. 8, Land & Buildings CIO Jonathan Litt withdrew the nomination of James "Jay" F. Flaherty III from consideration for the board of Brookdale Senior Living (BKD), ending a proxy contest but promising to continue monitoring the company's progress on its "path towards shareholder value creation." The move comes a month after Litt removed himself from consideration for Brookdale's board while continuing to back Flaherty. Land & Buildings had proposed both candidates in July, but Brookdale opted to nominate Vicki Freed and Guy Sansone instead. Litt noted that while Flaherty would have been an "ideal addition" to the Brookdale board and received support from fellow shareholders, Land & Buildings ultimately decided that withdrawing the nomination was "the best path forward at this time."

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10/9/2019

Elliott Questions Japan Firm Unizo's Actions in Bidding War

Bloomberg (10/09/19) Lee, Min Jeong; Hyuga, Takahiko

Japanese developer Unizo Holdings Co. is under fire from top shareholder Elliott Management Corp. for its handling of a bidding war that started in July. In an Oct. 9 letter to the company's board, Elliott questions the decisions that Unizo has made in responding to competing offers for the firm, specifically a lack of disclosure and the presence of potential conflicts of interest. Elliott's letter is the latest twist in an unusual bidding battle, which started in July when HIS Co. launched an unsuccessful hostile bid for Unizo. This was followed by a competing 4,000 yen-per-share offer from SoftBank Group Corp.'s Fortress Investment Group in August, which Unizo supported until last month, when it received a rival bid from a large investment fund, reportedly Blackstone Group (BX), for 5,000 yen a share. Elliott asked for Unizo to explain the "Employee Share Ownership Management Company," which Unizo proposed to Fortress as grounds for any deal agreement and would give employees significant control over decisions such as buying and selling properties and nominating directors. The structure may be meant to let existing management retain control over the company through an arrangement similar to a management buyout. Elliott also questioned why Unizo did not disclose its basic policy on acquisitions when it expressed its position on tender offer bids in August. Shares in Unizo have surged nearly 130% since July 10, closing at 4,560 yen per share on Oct. 9.

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10/9/2019

Bed Bath & Beyond Picks Target Executive as New CEO

Financial Times (10/09/19) Wells, Peter

Bed Bath & Beyond (BBBY) has appointed Target (TGT) executive Mark Tritton as its new chief executive, pushing its shares 21.4% higher in after-hours trading. BB&B has stepped up a management overhaul because a group of hedge funds including Legion Partners, Macellum Advisors, and Ancora Advisors demanded the resignation of former CEO Stephen Temares, a complete board refresh, and a streamlining of its product offerings. Tritton will take over from board member Mary Winston, who has been the company's interim CEO since Steven Temares stepped down amid pressure from a shareholder group in May. Target has managed strong performance in a struggling retail industry, bolstered by Tritton's efforts to build a durable new retail model that included a turnaround of its private-label strategy. Target achieved eight consecutive quarters of comparable sales growth under Tritton, its best performance for that industry metric in over 10 years. Target has a total return of 78% over the last three years, compared to BB&B's total return of negative 75% over the same period. At BB&B, Tritton will focus on creating better shopping experiences for customers across online and brick-and-mortar channels, broadening its range of merchandise, and undertaking a review of the company's cost structure and asset base.

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10/8/2019

Norway Oil Fund to Publish All Voting Plans

Financial Times (10/08/19) Milne, Richard

The world's largest sovereign wealth fund, which is managed by Norges Bank Investment Management, aims to release all its voting intentions ahead of the annual meetings of all portfolio companies by 2022. The move is expected to shake up how investors approach corporate governance. Norway's $1.1 trillion oil fund currently shares how it has voted within 24 hours of annual meetings, but since 2015 it has disclosed a handful of times a year prior to shareholder votes. Its strategy for the 2020-22 period, laid out on Oct. 8, will extend this practice to all 9,000 of the companies in which it has stakes. The new strategy also fleshes out the fund's impending move into renewable energy infrastructure assets; it expects such assets to account for about 1% of its portfolio. Fund executive Yngve Slyngstad told the Financial Times in 2017 that pre-disclosing its voting intentions a few times a year was effective in changing corporate behavior but needed to be done with care, because companies were often compromised by the mere threat that it might disclose voting intentions early. The investment mandate is decided by the Norwegian parliament and currently aims to hold 70% in equities, 5% in property, and the rest in bonds. The fund is also expected to reduce its number of employees for the first time since its inception in 1996, as a result of natural attrition in some jobs and the movement of some functions such as communications and human resources to Norges Bank. It also plans to increase its "active positioning around corporate actions and capital market events" and repeated its warning that the Norwegian public should be ready for "significant fluctuations" in the fund's value due to its increasing equity exposure.

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10/8/2019

At Least 70 Companies Still Need a Female Director to Comply With California State Law, Report Says

San Francisco Chronicle (10/08/19) Pender, Kathleen

Clemson University researchers say that publicly traded companies based in California have increased their number of female directors since last year, when the state passed a law requiring female representation on corporate boards. Previous academic studies have focused on the law's impact on California companies in the Russell 3000 index, but the law will have a bigger short-term impact on smaller companies that are not in the index. The researchers examined the board makeup at 488 of the 602 California companies that had filed a proxy statement in the first half of 2019 and compared it to last year's statement. They found that companies boosted their number of female directors by 23%, while public companies in a control group (which excluded states that had voted for the Democratic nominee in each of the past five presidential elections) increased their female directors by 14.5%. However, the researchers also found that 70 companies, or 14% of the examined companies, still did not have a female director listed on the statement. These companies have until the end of 2019 to have at least one female board member before they face a $100,000 penalty. Researchers note that most of these are smaller companies, and many are biotech firms that "might not have the cash flow" or reputation to easily attract female directors. They also note that the average annual director pay at the 70 companies without a female director was about $142,000, suggesting that some firms may benefit from delaying an appointment and paying the fine. The researchers predicted that while smaller companies will struggle to attract female candidates, that negative is offset by the networking effect if the firm's board has a venture capitalist from a venture firm that has a high-ranking woman.

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10/8/2019

Finland's Fortum to Gain Control of Uniper in $2.5 Billion Deal

Reuters (10/08/19) Kauranen, Anne; Steitz, Christoph

Finnish state-controlled utility Fortum (FOJCY) will gain control of Uniper by acquiring stakes from hedge funds Elliott Management and Knight Vinke. If approved, the deal would give Fortum an additional 20.5% of the company, raising its stake from 50% to 70.5%. The acquisition would simplify Uniper's complex ownership structure and round off Fortum's portfolio in the area of base-load energy supply. Fortum has been seeking control of the German energy company since 2017, but Uniper management resisted a takeover on the grounds that it could lead to a breakup and threaten the firm's credit rating. Uniper shares fell 9% after Fortum said it would rule out any domination agreement, profit and loss transfer agreement, or squeeze-out of minority shareholder for at least two years, while Fortum's stock rose 1%. Fortum also pledged to honor all current collective bargaining agreements at Uniper, saying it would not force layoffs or relocate the company's headquarters. Credit Suisse (CS) said in a note that the deal was positive for Fortum, delivering synergies and helping to resolve the deadlock with management.

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10/8/2019

Hedge Fund Standard General Returns to Media Dealmaking Roots

Bloomberg (10/08/19) Lee, Lisa; Ahmed, Nabila

Hedge fund Standard General LP is returning to the media business with a 9.8% stake in TV broadcaster Tegna Inc. (TGNA) and is looking for a deal. The fund hopes to tap its prior industry experience at Media General, which was acquired by Nexstar Media Group Inc. (NXST) in 2017. Tegna has already drawn interest from private equity giant Apollo Management, which recently acquired 13 stations from Cox Enterprises Inc., though Tegna rebuffed its letter of interest. Standard General is now one of Tegna's top investors and may push it to explore deal options. Standard Capital CIO Soo Kim has served on the board of several TV station firms, and the firm has achieved an annualized net return of 5% over the past five years. Standard General tends to take large ownership stakes and use them to claim board seats and direct management, holding, for example, 20% of National CineMedia Inc. (NCMI) alongside its position in Tegna. TV broadcasting mergers may face regulatory challenges, because a federal appeals court recently rejected changes that the Federal Communications Commission made to media ownership rules, narrowing the potential universe of acquirers. These media ownership restrictions could give Tegna an opportunity to acquire assets instead of selling them as its competitors are focused on other deals.

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10/8/2019

Two Hedge Funds Dodge a Russian Poison Pill

Bloomberg (10/08/19) Hughes, Chris

Elliott Management Corp. and Knight Vinke were successful in getting a higher price from the Finnish utility Fortum Oyj (FOJCY) for their combined 21% holding in Germany's Uniper SE. Seeing a potential path to Russian approval of its takeover bid for Uniper has prompted Fortum to agree to pay 2.3 billion euros ($2.5 billion) for the position held by Elliott and Knight Vinke, which would give it a 71% stake. "For Elliott, it's a classic short-term win from opportunistically buying into a bid target. For Knight Vinke, it's the profitable culmination of a longstanding activist campaign that began with nudging the German power giant E.ON SE (EONGY) to carve out Uniper in a demerger three years ago," says Bloomberg Opinion columnist Chris Hughes. "There's nothing here for Uniper minority investors, though. They were hoping to get a fresh takeover offer from Fortum, made available to all shareholders. Either that or a so-called 'domination agreement' whereby Fortum got full access to Uniper's cash flow in return for paying minority shareholders a chunky dividend. Fortum says it has no plans to make a fresh bid and won't seek a domination agreement for at least two years." Hughes adds, "Minority investors are always in a tough spot when the register includes other big beasts, especially when one is a strategic bidder and another is Elliott. The episode is a reminder that sometimes their interests are best served by management not fighting too hard."

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10/8/2019

Amag Settles With Caligan, Adds Two Board Directors

Reuters (10/08/19) Herbst-Bayliss, Svea; Joseph, Saumya

On Oct. 8, Amag Pharmaceuticals Inc. (AMAG) agreed to add two directors proposed by Caligan Partners, which owns a 10.3% stake in the drugmaker, to its board. The move to add Caligan Partners' founder David Johnson and former Boehringer Ingelheim USA CEO Paul Fonteyne came after Caligan Partners pressured the company to conduct a strategic business review. Amag, whose shares have fallen more than 45% in the past year, said it was expanding its board to 11 people. Camber Capital Management, the company's second-largest shareholder, also pushed for new board members. Board Chairman Gino Santini said in a statement, "As part of Amag's commitment to good corporate governance and ongoing board refreshment, we are pleased to have reached an agreement with Caligan that is in the best interests of all shareholders." The settlement comes just months after Caligan's settlement with the Knowles Corp. (KN) in May, in which one director was added to its board.

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10/8/2019

Fortum CEO Demands Uniper Chairman Seat After Shareholder Deal

Reuters (10/08/19) Inverardi, Matthias

Finnish utility Fortum expects to claim the supervisory board chair at German company Uniper if regulators approve a deal to buy stakes from two activist funds. Fortum CEO Pekka Lundmark told reporters on Oct. 8 that it has some candidates in mind to fill the role. Fortum CFO Markus Rauramo is currently the deputy chairman of Uniper's supervisory board, and former E.ON executive Bernhard Reutersberg serves as chairman.

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10/8/2019

Telecom Italia CEO Accelerates Overhaul With Data Center Spinoff

Bloomberg (10/08/19) Lepido, Daniele

Seeking to cut its massive debt pile and share the burden of future infrastructure spending, Telecom Italia SpA will spin off its 23 data centers in Italy and list them on the stock market. CEO Luigi Gubitosi wants to create a separate unit for the facilities in the first half of 2020 and bring in financial investors to improve its growth prospects ahead of the IPO. Telecom Italia would keep overall control of the unit and keep operations in Italy for security reasons. News of the spinoff saw Telecom Italia shares reverse a decline to close up 0.4% on Oct. 8 and rise another 0.5% at open on Oct. 9. The spinoff follows a truce in a year-long board battle between two of the company's biggest shareholders, which had limited Gubitosi's ability to move ahead with reforms. Telecom Italia, which sold 11 data centers to Asterion Industrial Partners for 550 million euros in May, will follow other companies in seeking new investors to help their data centers compete with the rollout of 5G wireless networks. Sources say the data centers are valued at 12 to 18 times their pre-tax earnings, potentially worth around 1 billion euros. The data center plan would replicate what Telecom Italia did with its wireless towers, turning them into a new unit called Inwit and listing it in June 2015, since which its shares have more than doubled. Elsewhere, Gubitosi is looking to merge Telecom's largest asset, Italy's dominant fixed-line network, with rival Open Fiber SpA. An analyst with Bloomberg Intelligence has said, "The abating tussle between Telecom Italia shareholders Vivendi and Elliott Management is enabling a focus on execution and asset sales, boosting the ambition to return to domestic Ebitda growth next year and leverage reduction."

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10/8/2019

Argo Group Gets SEC Subpoena Over Executive Compensation

Bloomberg (10/08/19) Deveau, Scott

The Securities and Exchange Commission (SEC) has subpoenaed Argo Group International Holdings Ltd. (ARGO) to obtain documents on the company's executive compensation disclosures. Argo also said its independent directors are conducting a review of the company's governance and compensation matters. In a statement, Argo said, "The company, working with the assistance of outside counsel, is fully cooperating with the SEC and does not believe that the amounts involved are material to the company's financial position or results of operations." The investigation comes after Voce Capital Management accused Argo of misusing corporate assets, including company-owned aircraft and housing. According to a regulatory filing, Argo CEO Mark Watson earned about $8.4 million in total compensation in 2018, up 180% from 2017. Voce, which holds a 5.5% stake in Argo, sought five board seats but abandoned its push in May after two states reportedly refused to let the fund solicit proxies in their jurisdictions.

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10/8/2019

Neuberger Berman Takes a Victory Lap. Saba Says Not So Fast.

Institutional Investor (10/08/19) McElhaney, Alicia

Although Neuberger Berman is claiming victory in its proxy fight over a closed end credit fund with shareholder Saba Capital Management, which owns a 19.1% stake, Boaz Weinstein, Saba's founder, says the results of the proxy vote are complicated. At the Oct. 3 annual meeting, shareholders of Neuberger Berman's High Yield Strategies Fund (NHS) voted on three measures proposed by Saba, namely a new director slate, termination of Neuberger's leadership of the fund, and for Neuberger to consider a tender offer. Neuberger spokesperson Alexander Samuelson said in a statement, "The rules were clear and the outcome is clear. Stockholders unaffiliated with the raiders voted more than 2 to 1 against Saba. On the two binding proposals, Saba was defeated and long-term interests of stockholders were protected." Saba countered that more shareholders voted in favor of each of its proposals than voted against them, but because it lacked a majority of votes on both its slate of directors and its leadership termination proposals, neither will be implemented. However, the tender offer did receive enough votes at 62% of shareholders, but Weinstein said, "If they want to ignore the will of shareholders and not tender, that's their prerogative."

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10/7/2019

Investor Wins Seats on Tix Board

San Fernando Valley Business Journal (10/07/19) Madler, Mark

Investor Haren Bhakta has been appointed to the board of Tix Corp. (TIXC). Bhakta is an investor in Tix through his firm HSB Capital Partners, which owns approximately 5% of the stock. Bhakta joins Michael Fisk and Jeremy Weiner in being appointed to the board of the discount ticket seller. The trio replace four incumbent company directors who were re-elected at the company's Sept. 27 annual meeting, but stepped down to permit the appointees to take their place. Shareholders also re-elected Tix CEO Mitch Francis, Norman Feirstein, Jordan Fiksenbaum, and David Sax. Bhakta has spearheaded an effort for over a year to get a slate of candidates elected to the Tix board to address mismanagement at the company. "Michael Fisk, Jeremy Weiner, and I are committed to working diligently with the management team and our fellow members of the board of directors towards our shared goal of maximizing value for all stockholders," Bhakta stated.

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10/7/2019

Aramark Announces a New CEO, Investor Becomes Vice Chair of the Board

Philadelphia Inquirer (10/07/19) Brubaker, Harold

On Oct. 7, Aramark Corp. (ARMK) said John J. Zillmer has replaced Eric Foss as CEO, and Paul C. Hilal, whose Mantle Ridge L.P. is the company's biggest shareholder with a 20% stake, will become vice chairman. Hilal and Zillmer both serve on the board of CSX Corp. (CSX), which also has been engaged by Mantle Ridge. Zillmer said in a statement, "I am extremely excited about the opportunity to rejoin Aramark at such a dynamic time in the company's history. I look forward to working closely with the board and the Aramark team to drive growth and value for our employees, customers, partners, and shareholders." The announcement follows Foss' abrupt retirement six weeks ago, just after Hilal disclosed that Mantel Ridge had acquired 9.8% of Aramark's shares and additional interest, giving the firm a 20% stake. According to an Aug. 16 filing with the Securities and Exchange Commission, Mantle Ridge said it planned to have "conversations, meetings, and other communications" with members of Aramark's board, management team, and other stockholders "to discuss the issuer's business, operations, strategies, governance, the composition of the executive suite and board, and possibilities for changes."

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10/7/2019

Germany's Aareal Conducts Strategic Review Following Calls From Investor

Reuters (10/07/19) Seidenstuecker, Hans; Sims, Tom

On Oct. 7, Aareal said it has undertaken a strategic review following calls from Teleios Capital Partners to consider selling its Aareon software unit. In a letter to Teleios, which holds a 3.4% stake in the German real estate lender, CEO Hermann Merkens said Aareon is a "key pillar" and that it continues to grow and invest in the division. However, he acknowledged that Aareal is "assessing all relevant options."

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10/7/2019

ISS Seeks Input for 2020 Proxy Season Votes

Investment Executive (10/07/19) Langton, James

Institutional Shareholder Services Inc. (ISS) is requesting feedback from investors, companies, governance experts, and others on its proposed proxy voting policies for 2020. ISS is advancing 17 possible policy changes in various markets worldwide. The proposed changes for U.S. companies include matters such as sunset provisions for dual-class stock structures, share repurchase programs, and shareholder proposals on independent board chairs. The proposed changes for European companies include policies for compensation committees, gender diversity on corporate boards, and director term limits. The proxy advisor is not proposing any significant changes for Canadian companies. Comments are due by Oct. 18. ISS' goal is to finalize its policy changes in the first half of November for shareholder meetings that occur after Feb. 1, 2020.

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10/4/2019

Emerson Faces Pressure to Split Itself in Two

St. Louis Post-Dispatch (10/04/19) Nicklaus, David

Emerson Electric Co. (EMR) CEO David Farr is facing pressure from D.E. Shaw to separate its industrial automation business—which accounts for two-thirds of revenue—from its commerical and residential solutions division. The company said it will review "operational, capital allocation, and portfolio initiatives to enhance shareholder value," which analysts took to mean that a split could be possible. Stephens Inc. analyst Rob McCarthy says Emerson likely was studying such a move already, but pressure from the hedge fund may have sped up the announcement. "This is a company that is very thoughtful about their portfolio structure," McCarthy said. The decision is complicated by Emerson's pride in achieving 62 consecutive years of dividend increases, and the fact that Farr has indicated his plans to retire in 2021 but a successor has not been named. Morningstar analyst Joshua Aguilar says, "I think Farr probably realizes the businesses would be better off separate, but he was trying to build up the automation business and leave the separation question to the next CEO."

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10/4/2019

New Glass Lewis Chief to Expand Abroad Amid U.S. Regulatory Clamp-Down

Reuters (10/04/19) Herbst-Bayliss, Svea; DiNapoli, Jessica

Glass Lewis & Co. intends to expand its operation overseas in the wake of newly introduced restrictions by the Securities and Exchange Commission (SEC), says new Executive Chairman Kevin Cameron. He co-founded Glass Lewis in 2003 and in September took over leadership of the firm, a few weeks after the SEC announced new oversight rules for proxy advisers. The SEC said proxy advisers such as Glass Lewis cannot distribute incorrect data, which could make them legally liable if they do, and also clarified that investors have no obligation as shareholders to vote their shares, which could cut their reliance on proxy advisers. Cameron's aim is to assist Glass Lewis with navigating this new regulatory environment, as well as win market share over bigger rival Institutional Shareholder Services Inc. (ISS). "We want to keep expanding globally, including in Asia where we historically haven't been as strong," Cameron said. "Europe will also see growth, building on the investment we've made building out our presence there in recent years." In September, Glass Lewis also hired Gordon Seymour as its special counsel for public policy to aid in assisting with the new regulatory landscape, Cameron said. Seymour previously worked as general counsel for the Public Company Accounting Oversight Board and at the SEC. Carrie Busch, who worked at Glass Lewis at its inception and led its international proxy research and new business initiatives divisions, returned in September as president.

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10/4/2019

Proxy Solicitor Okapi Hires Harnett From Strategic Governance Advisors

Reuters (10/04/19) DiNapoli, Jessica; Herbst-Bayliss, Svea

Proxy solicitor Okapi Partners, which has long worked for Elliott Management and Starboard Value, is hiring a senior executive from an advisory firm to aid with growing its business with corporate clients, according to sources. Okapi has hired Mark Harnett, an industry veteran, who will join the firm later this month. Harnett recently worked at public relations firm Sard Verbinnen & Co.'s corporate governance advisory unit, Strategic Governance Advisors, which was founded by former Institutional Shareholder Services executive Chris Cernich in 2016. Harnett spent most of his career at MacKenzie Partners, the proxy solicitor he co-founded with Daniel Burch in 1992. Since Okapi's launch, activist pressure on companies has steadily risen. 2019, for instance, was a watershed year for activists who engaged a record number of companies and won a record number of board seats, according to data from Lazard. Although many such investors lost money last year, their returns have largely rebounded this year with some including Pershing Square Capital Management, ValueAct Capital, Trian Fund Management, and Starboard Value posting double digit returns in the first half of the year.

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10/3/2019

Brookdale Says Board Nominee Made 'Derogatory' Comments About Rival Female CEO

Nashville Business Journal (10/03/19) Stinnett, Joel

In an Oct. 3 letter to shareholders, Brookdale Senior Living (BKD) accused board nominee Jay Flaherty, former chairman and CEO of HCP Inc. (HCP), of making "derogatory" comments about the female CEO of rival Ventas (VTR) and participating in "fraudulent" behavior intended to mislead the market. According to Brookdale, the actions taken by Flaherty—who was nominated by shareholder Land & Buildings—cost HCP more than $100 million in damages before he was terminated. The company called Flaherty "unfit to serve" on its board and argued that his election to the board could hinder Brookdale's relationships with Ventas and HCP, which own a combined 60% of Brookdale's leased properties. Land & Buildings responded with a statement that read, "The deeply personal attacks Brookdale has chosen to make against our director nominee, James (Jay) F. Flaherty III, are reflective of a board that has willingly sacrificed its professionalism and integrity to prevent a truly objective voice from entering the boardroom. The company's smear tactics and use of cherry-picked, out-of-context information is nothing more than a transparent attempt to deflect shareholders' attention from Brookdale's persistent failure to deliver value and mislead shareholders about Mr. Flaherty's reputation." This marks the latest development in a three-year proxy battle between Brookdale and Land & Buildings, whose founder and chief investment officer, Jonathan Litt, has sent several letters to Brookdale shareholders calling for structural changes and the sale or spinoff of Brookdale's real estate holdings to boost shareholder value.

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10/3/2019

Lantheus Strikes Deal to Buy Progenics, Sparking Investor Backlash

MedTech Dive (10/03/19) Taylor, Nick Paul

Some Progenics Pharmaceuticals (PGNX) shareholders are pushing back on its agreement to sell the company to Lantheus Holdings (LNTH) in an all-stock deal. On Wednesday, the companies disclosed a deal that values Progenics at a 21.5% premium to its average stock price over the past 30 days. Velan Capital, a significant shareholder in Progenics, accused the company's management of selling up at a "massive discount" and of making a "shameful maneuver" to prevent investors from being heard. In recent months, Velan has been pushing for changes at Progenics, including a change in the makeup of Progenics' board. "Velan is appalled that the Board would so egregiously attempt to shirk its fiduciary duties by approving a transaction to sell the Company at such a massive discount," the investor wrote in a statement published hours after Progenics disclosed the deal. Velan cited specific concerns including the requirement for Progenics to pay an $18.3 million break-up fee if its board recommends against the takeover. The investor sees the Lantheus deal as "effectively penalizing stockholders" if they consent to its reform proposals. Velan is now working on a plan that will present an alternative path forward for Progenics.

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10/3/2019

Brookdale Calls Investor's Nominee 'Unfit' for Board

Seeking Alpha (10/03/19) Kiesche, Liz

Brookdale Senior Living (BKD) said in a letter to shareholders that Jay Flaherty, Land & Buildings' nominee for its board, is "unfit to serve on the board" and could endanger the company's relationship with its biggest landlords. Brookdale urges shareholders to vote for its nominees, Victoria Freed and Guy Sansone, at its Oct. 29 annual meeting. Both of its nominees have been endorsed by Glenview Capital Management, Brookdale's biggest shareholder. Further, the company said it has tried to come to an agreement with Land & Buildings, but "at every turn, Land & Buildings has declined our proposals."

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10/2/2019

FTI Consulting Hires ISS Executive for Governance and Activism Team

Reuters (10/02/19) Herbst-Bayliss, Svea

FTI Consulting Inc. (FCN) has hired a corporate governance analyst from Institutional Shareholder Services (ISS) for its division that advises clients on hot topics including climate change and executive pay. Kosmas Papadopoulos has joined FTI's Corporate Governance & Activism team as a senior director. Papadopoulos is working for Rodolfo Araujo, who previously also worked at ISS and joined FTI earlier in 2019. FTI has been expanding in this area of expertise as more companies and their boards face calls from activist investors for changes such as divesting units and revamping management teams.

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10/2/2019

Paddy Power Owner in $6 Billion Deal to Create Global Betting Giant

Bloomberg (10/02/19) Seal, Thomas

Flutter Entertainment (PDYPY) has reached an agreement to acquire The Stars Group (TSG) in a $6 billion all-share deal. Dublin-based Flutter's offer of 0.2253 of its shares in exchange for each Stars share is a significant windfall for ValueAct Capital Management, which built a 4.7% stake in the Toronto-based company in the second quarter. The average share price of Stars was $17.76 at that time, but the stock traded at $19.02 after the announcement of the deal. The offer assigns an equity value to Stars Group of about 4.95 billion pounds ($6 billion), which represents a premium of about 40% to Tuesday's closing share price. "We have been an engaged shareholder in Stars Group for some time and are delighted to see innovative, emerging companies becoming the growth companies of tomorrow," said Alex Baum, vice president at ValueAct. The deal creates the world's largest online gaming group. Flutter is eyeing opportunities in the United States after a Supreme Court decision legalized sports betting.

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10/2/2019

Andersons, Marathon, Merge Four Ethanol Operations Into One Company

Toledo Blade (OH) (10/02/19) Chavez, Jon

On Oct. 2, The Andersons Inc. (ANDE) and Marathon Petroleum Corp. (MPC) said they have merged four ethanol operations into a new company, dubbed The Andersons Marathon Holdings LLC. The Andersons will own 50.1% of the new holding company, while Marathon will own 49.9%. The move comes about a week after Elliott Management Corp. renewed its demand for Marathon to split into three companies in an effort to boost shareholder value by as much as $40 billion. Elliott argues that Marathon's corporate structure remains overly complex and that dividing into three would help address "the company's chronic underperformance, to improve its businesses and to unlock significant and sustainable value for its shareholders." The hedge fund has called for Marathon to split its Speedway convenience stores, MPLX pipeline assets, and the refining business.

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10/13/2019

Hunting the Hunter: Following Elliott's Lead

Forbes (10/13/19) Conrad, Roger

Elliott Management's latest 13-F filing shows positions in 37 different companies. In recent months the firm has engaged energy conglomerate Marathon Petroleum (MPC), where it has the support of hedge fund D.E. Shaw in pushing to oust the current CEO and split the company's businesses into separate entities. Elliott has engaged Marathon before: in 2016 it brought about some changes that led the shares to return nearly 35% in 2017, and it was able to exit the stock in February 2018. Elliott's August re-entry with Marathon coincided with its successful exit from utility Sempra Energy (SRE), where in June 2018 it had proposed a board shakeup and the sale of non-utility assets. In all of these cases, Elliott did not get everything it wanted, but it succeeded because it knew when to walk away. This is a sharp contrast to Elliott's engagement at Telecom Italia (TIT). Though Elliott successfully fought off French media giant Vivendi SA (VVU) and gained control of the company, Telecom Italia shares have fallen roughly 35% and its Elliott-picked CEO resigned last month. Going forward, Elliott seems likely to steer away from taking full control of companies. Marathon shares are up 42% from mid-August, and it is likely to spin off its Speedway convenience store chain. Elliott's engagement at AT&T (T) seems to be going well so far, although it is still in early stages. At PG&E (PCG), Elliott leads a creditor group that was recently granted the right to file its reorganization plan in competition with the company's own. Despite having the upper hand, the creditors would likely drop the plan in favor of a rich settlement, because winning would leave them with an unwieldy amount of the company's stock.

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10/11/2019

Recent Trends in Shareholder Activism

Harvard Law School Forum on Corporate Governance and Financial Regulation (10/11/19) Grossman, Richard J.; Berg, Alexander J.

Lazard's Shareholder Advisory Group reports that about 46% of all activist campaigns in the first half of 2019 were in some way related to mergers and acquisitions (M&A). However, the role that M&A plays in a campaign can be positive or negative. Approximately 65% of all activist campaigns with an M&A goal revolved around the divestiture of a noncore business line or a sale or breakup of the company. Conversely, 35% of activist campaigns with an M&A focus engaged companies to oppose a pending deal, generally as an effort to boost the value of their positions in a proposed transaction. Some deal-challenging activists did so on the grounds that they are not in the best interests of shareholders, as Starboard Value did regarding the Bristol-Myers Squibb (BMY)-Celgene (CELG) deal and Third Point did for the United Technologies (UTX)-Raytheon (RTN) merger. In addition, frequent investors like Elliott Management and Starboard Value have started to engage in a more traditional private equity strategy. Private equity is a logical next step for activists, who often seek to identify and expose a company's weaknesses for profit. Moreover, the ability to engage in private equity increases an activist's credibility when approaching a company, because the threat exists that the activist itself can bid to acquire or invest in the company as a long-term interest. Meanwhile, "reluctivists," or traditionally long-only institutional investors, are increasingly engaging in activist campaigns.

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10/11/2019

The Evolving Boardroom: Signs of Change

PwC (10/11/19)

PwC has released the 2019 Annual Corporate Directors Survey, from its Governance Insights Center, which paints a picture of significant transformation in the boardroom with additional changes on the horizon. The survey gauged the views of public company directors from all over the country on an array of corporate governance matters. This past summer, more than 700 directors from a cross-section of companies took part in the research. Eighty-three percent of respondents said they don't believe forcing diversity through laws is the best way to make their boards more diverse. It wasn't just male directors saying this, either. The PwC poll found that 54% of female board members concur. In other findings, 56% of directors say investors are giving too much time and focus to environmental, social, and governance issues and 72% say their boards have made changes in response to their last assessment process versus just 49% in 2016.

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10/10/2019

Having More Female Executives Correlated With Better Performance at Companies, New Research Finds

Independent (London) (10/10/19) Dmitracova, Olesya

In a recent report, researchers at Credit Suisse (CS) analyzed 3,000 companies from 56 countries and found that, in the past 10 years, the stocks of firms where over 20% of top managers are women rose more than those of other companies. Shares also rose much more than at firms where women make up less than 15% of senior management. The researchers do not assert cause and effect, noting that other factors may be at work. The second part of the research focused on 476 family-owned firms out of the total sample and found that the stocks of these businesses tended to generate above-average returns. They also found that, in each of the last five years, family-owned companies with at least one female executive had outperformed male-only family-owned companies. In a survey of 120 family-owned companies from over 10 countries, Credit Suisse found that having more women executives leads to a greater tendency to focus on the company's environmental, social, and governance impacts. Family-owned firms with a substantial number of women executives also showed stronger revenue growth and profit margins as well as a lower reliance on debt. The research reinforces earlier findings on the effects of gender diversity at companies and may support the business case for more women directors.

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10/10/2019

Virtual Shareholder Meetings in the U.S.

Harvard Law School Forum on Corporate Governance and Financial Regulation (10/10/19) Buellingen, Marie Clara

A forthcoming study by Institutional Shareholder Services finds that while the overall share of virtual annual meetings among Russell 3000 firms has risen to 7.7%, tripling since 2014, the rate of new adoption has slowed in the last two years. The study does not identify a link between governance structure or provisions and company meeting format, and dissent levels on key voting items do not vary materially for physical and virtual meeting holders. When deciding whether to adopt a new meeting format, companies and shareholders should evaluate key considerations to protect shareholder rights, because best practice is still evolving on the matter. The best balance may be offered by hybrid meetings, which shareholders can attend either physically or virtually, receiving all of the same opportunities as remote attendees that they would have as physical attendees. However, hybrid meetings currently account for less than 1% of annual meetings, and their growth lags considerably behind virtual meetings. While virtual meetings have increased across all sectors, the information technology and communication services sectors have led the way in adopting a virtual meeting format. There is no significant difference in adoption between S&P 500 companies and the rest of the Russell 3000.

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10/10/2019

Japan's Foreign-Investor Screening Risks Undoing Years of Reform

Wall Street Journal (10/10/19) Bird, Mike

The Japanese government's proposals published this week to more carefully screen foreign investors may make the nation a bit safer, but at the cost of undoing years of difficult work to shore up the investment climate. If the proposals go into effect, foreign shareholders would have to disclose to regulators when their stake in certain listed companies reaches 1%, down from the current level of 10%. The current notification process, which is done only in the Japanese language, is paper-based and burdensome. Investors tell the government when they cross the threshold, triggering a review that can result in the trade being canceled. A decision currently takes 30 days, although the Ministry of Finance says it wants to cut the number of days. Japan's system already produces an average of 607 notifications annually, far more than does the Committee on Foreign Investment in the United States, for example, and the Ministry of Finance expects that to increase by 700% as the shareholding threshold drops. Western brokers working for Japanese investors would be at a disadvantage to their Japanese competitors, because the proposed rules don't distinguish between end investors and intermediaries. Activists trying to build a stake also could be frustrated. Japan currently ranks lower on the basis of foreign investors' rights than almost all other developed markets, according to index firm MSCI. The new rules would exacerbate that shortcoming.

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10/10/2019

ESG Incorporation Starting to Take Hold in U.S. – Callan Survey

Pensions & Investments (10/10/19) Bradford, Hazel

U.S. institutional investors are starting to catch up with the rest of the globe when it comes to incorporating environmental, social, and governance factors into investment processes, according to a survey of 89 investors by Callan. Approximately 42% of the investors said they incorporated ESG factors into their investment process in 2019, up from 22% in 2013. Including such factors in all investment decisions also rose this year, with 51% of institutional investors that incorporate ESG doing so, as opposed to using separate allocations, negative screening, and other approaches to ESG. "There [is] still a wide range of how to implement it," said Anna West, senior vice president, ESG practice leader. In the United States the approach is geared toward boosting investment outcomes by concentrating on financially relevant information, and then selecting where more can be added via engagement and other methods. Investors "are using all of the potential implementation tools," West stated. Forty-nine percent of public pension plans incorporated ESG in 2019, up from 15% in 2013, while 19% of corporate plans incorporated ESG, up from 14%. Organizations with greater board diversity were more likely to incorporate ESG into investment decisions, the survey found.

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10/9/2019

Time for Corporations to Get Their Houses in Order

The Australian (10/09/19) Gill, Abigail; Tuck, John; Whittaker, James

Corporate governance, risk management, and compliance issues have risen to greater prominence in Australia over the last few months. Key developments include heightened external scrutiny of corporate practices following a royal commission, growing emphasis on non-financial risks, a growing appetite for corporate regulation, and new protection and accountability laws. Australian corporations and financial service providers must reassess their culture, internal policies, and processes. Moreover, there is a growing consensus that current models of liability are insufficient and a company's criminal responsibility should be linked to the effectiveness of its internal policies. Similar trends have been observed in other democracies, such as the United Kingdom, where regulators have suggested extending the successful "failure to prevent" model for bribery and tax evasion offenses to other offenses. In Australia, the Crimes Legislation Amendment Bill of 2017 sought to introduce a "failure to prevent" bribery offense modeled after the approach of the U.K. Bribery Act. This offense would impose strict liability on corporations for bribery offenses committed by an organization's "associates" unless a company can show it had "adequate procedures" in place to prevent the crime. Though the bill lapsed in the Senate due to the 2019 federal election, the re-elected government will likely seek to reintroduce it. There is also a heightened focus on identifying and informing on wrongdoing, with recent reforms passing in February 2019 that expanded protections for private-sector whistleblowers. These reforms impose a significant compliance burden that organizations will have to address in order to avoid penalties. It is important that organizations pinpoint and resolve internal weaknesses before the information becomes public in order to maintain stakeholder confidence.

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10/9/2019

We Talked to 24 People About the Hedge-Fund Wunderkind at Elliott Who Wants to Shake Up AT&T. Here's Why Management Should Be Terrified.

Business Insider (10/09/19) Saacks, Bradley; Sullivan, Casey

Jesse Cohn, who is leading Elliott Management's campaign at telecom giant AT&T (T), is shrewd, aggressive, and instrumental to Elliott's success, according to this article. Colleagues and former opponents point to Cohn's talent for effecting change at companies and say that AT&T should expect to see this in action. The company has already taken some of Cohn's advice, exploring a split from DirecTV after Elliott recommended that it do so. People close to Cohn say that he has developed a more diplomatic touch as he engages larger companies, where he needs to win the approval of long-term shareholders such as BlackRock (BLK) and Vanguard. Elliott's investments have increasingly been presented as a play for the company's long-term value, which gives Cohn even more influence when engaging a company like AT&T. Cohn wants AT&T to halt plans for any merger and acquisition activity, outsource work, and close "redundant stores"; it is unclear whether he will try to join the board.

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10/8/2019

Corporate Board Elections Getting a Little Less Cozy

Wall Street Journal (10/08/19) Francis, Theo

In the past, elections for corporate boards weren't very suspenseful. Most candidates were unopposed and won handily. But in 2019, 478 public-company directors failed to win the support of a majority of voted shares, up 39% from 2015, according to the ProxyPulse report produced jointly by Broadridge Financial Solutions Inc. (BR) and PricewaterhouseCoopers. Some 1,726 directors failed to win support from at least 70% of voted shares, the report indicates. Still, despite the increase in rejections, just a small portion of directors were rebuffed by shareholders. There were 22,520 directors who stood for election during the 2019 period covered by the report, and directors won 95% of the vote. At some companies, boards can select to keep directors who fail to win majority support, but the practice is disliked by investors. Increasingly, investors have called for rules mandating that directors win a majority of shares voted to keep their seats. Most directors who lose shareholder support aren't at companies involved in proxy battles with activist investors. Usually, investors vote against incumbents without looking to replace them directly. Among the 500 most widely held public companies, 50 directors failed to win a majority of shares voted in 2019, compared with 15 in 2015. The number of directors failing to win at least 70% of the vote more than doubled to 170, from 69. When directors lost shareholder support, it tended to reflect lack of confidence from institutional investors rather than individual shareholders, the report said. Investors seem most likely to withhold support for members of board nominating and governance committees, says Paul DeNicola, principal of PwC's Governance Insights Center. That apparently reflects the rising interest among institutional investors in diversity and other board-composition issues.

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10/8/2019

Spotlight Thrown on Japan Inc.'s Stakeholder-Focused Model

Financial Times (10/08/19) Inagaki, Kana

Last month, the Tokyo-based property group Unizo Holdings invoked employee protection as a reason for withdrawing its recommendation for Fortress Investment's $1.3 billion white knight bid, emphasizing how the idea of shareholder supremacy is not as ingrained in the minds of Japanese CEOs as it is elsewhere in the world. Senior executives at Unizo argued that its concept of corporate value that considers both shareholder interests and employee well-being should merit global acceptance. The matter began in July when HIS made an unsolicited bid, and the following month Unizo turned to Fortress to defend itself. Unizo ultimately turned against Fortress rather than seek a higher offer, setting forth conditions that must be accepted by any existing and future bidder. The plan aimed to protect the interests of Unizo's staff by forming a new entity, controlled by employees, to acquire a stake in the company after a takeover was completed, and the "employee stock ownership management company" would be given veto power over the nomination of directors, management strategy, employment conditions, and the sale of its properties. Investors said the conditions are similar to a "stealth" management buyout to entrench current management. Observers note that Unizo could undermine efforts by companies to align their management goals with maintaining profitability and meeting their societal responsibilities by using the broader stakeholder view as a shield to push management's own interests.

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10/8/2019

Men Agree That Gender Diversity on Boards Is Important—But They're Sick of Hearing About It

Fortune (10/08/19) Hinchliffe, Emma

PwC's Annual Corporate Directors Survey reveals that 63% of board directors believe their investors devote too much attention to board gender diversity, up from 35% in 2018. According to Paula Loop, leader of PwC's Governance Insights Center, "They're saying, 'We heard you, we've taken a lot of measures and we're focused on it—now go away and focus on something else.'" While no company in the S&P 500 had an all-male board as of this summer and 20% of board seats at Russell 3000 companies are held by women ahead of the 2020 goal, observers say these accomplishments make directors feel like enough has been done. The survey says 72% of male directors believe too much attention is paid to gender diversity, but only 25% of female directors say the same. Another 76% of male directors believe boards will naturally become more diverse over time, but just 33% of female directors agree. Further, 46% of women, but only 9% of men, support laws mandating board diversity. "Men are more tired of the topic than women, clearly. Men are saying, 'Look we've heard you.' Women are saying, 'We need to continue to focus on this to really make it happen,'" Loop says. However, 62% of directors polled strongly agree that diversity brings unique perspectives to the boardroom, and 52% strongly agree that gender diversity is very important in achieving diversity of thought.

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10/8/2019

Shareholder Activism and Governance in France

Harvard Law School Forum on Corporate Governance and Financial Regulation (10/08/19) Emmerich, Adam O.; Niles, Sebastian V.; Robinson, John L.

The Finance Commission of the French National Assembly is issuing a report that will suggest reforms to French securities market regulations to address shareholder activism and market transparency. The report concentrates on responding to the excesses of activists in the French market with improved disclosure, reduced asymmetry of regulation between activist investors and French public companies, and improved regulations regarding short selling. Among the suggestions are cutting the threshold for disclosure of equity ownership from 5% to 3%. The report also suggests improved regulation of short trading in excess of certain volume limits and boosting the powers of the French market regulator, the Autorité des marchés financiers, to enable it to respond more quickly and effectively to market abuses.

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10/8/2019

Pragmatism Key to Proxy Voting Decisions, Say Corporate Governance Heads

Citywire Selector (10/08/19) Benstead, Sam

Asset managers should vote at annual general meetings based on pragmatism, say a number of corporate governance leaders at asset managers with a strong focus on environmental, social, and governance (ESG) issues. Senior officials at the asset managers say that every shareholder proposal should be analyzed on an individual basis and not approached with a one-size-fits-all ESG voting protocol. Melanie Adams, head of corporate governance at RBC Global Asset Management, says the company typically will vote against items if the company is already providing sufficient disclosure for it. "If a shareholder proposes that the company put together a report, such as on median gender pay differences, we would look at what the company is already disclosing. Generally we would support that type of a report, but if the company is already disclosing it then we are mindful that we don't want to bring an extra burden on the company," Adams says. She notes that they don't want to burden companies with unnecessary reporting that may not be material to their sector. "Some ESG issues are more material in some sectors than others," she points out. Lisa Beauvilain, head of sustainability & ESG at Impax Asset Management, says excessive automation of voting is a trap for asset managers. "In order for voting to be consistent with stewardship and ESG policies and to be able to explain a voting decision, analysis of resolutions is often necessary," Beauvilain says. "This is very much the case as well for shareholder resolutions, which need to be analyzed case by case. Most shareholder resolutions are reasonable and merit the support by shareholders in order to fulfill fiduciary duties, and many resolutions are essential to support for stewardship consistency. But some may not merit support, but that is more unusual. Voting requires attention and analysis."

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10/7/2019

Shareholder Activism Is a Balancing Act for Sias

Business Times (10/07/2019) Shiao, Vivien

David Gerald of the Securities Investors Association Singapore (Sias) describes shareholder governance as a balancing act for Sias, which works to drive home the need for transparency and accountability in corporate governance. The Sias Investors' Choice Awards aimed to highlight companies with exemplary corporate governance, and as the industry watchdog celebrates its twentieth anniversary, it is looking at how to prepare for the future. Gerald argues for Sias' approach to resolving issues "in the boardroom and not the courtroom," which he says is better-suited to Asia than a more confrontational approach. He gives the example of Isetan, where minority shareholders called an extraordinary general meeting in January 2007 to replace the independent directors and table resolutions to distribute tax credit and royalties. After the bid failed, Sias contacted the independent directors to work toward a resolution that would benefit all stakeholders. The negotiations led the Japanese directors to declare a final and special dividend of S$1.50 per share, demonstrating that a conciliatory approach can bring value to minority shareholders. Gerald emphasized that Sias is an industry watchdog and that serious regulatory breaches are reported to the Singapore Exchange, the Monetary Authority of Singapore (MAS), or the Commercial Affairs Department. He also refuted claims that Sias cannot be objective because it traditionally relies on corporate funding, noting that the MAS is stepping in to fund the organization. Going forward, Sias will focus on investor education, corporate governance workshops, and providing timely guidance to retail investors through equity research reports.

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10/7/2019

Brexit and Shareholder Activism Could Be Behind CEO Exodus From FTSE 100 Companies, Experts Suggest

iNews (U.K.) (10/07/19) Key, Alys

FTSE 100 companies have seen 18 executive departures in 2019, well above the post-2000 average of 12 per year. Three CEOs left big companies in the last week alone, as British Petroleum (BP), Imperial Brands (IMBBY), and Tesco (TSCDY) announced that their chief executives were stepping down. CEOs most often step down due to poor share price performance, calls for change from investors or board members, or because they want to leave their legacy intact while they are ahead. Analysts say the high CEO turnover may be related to Brexit-related uncertainty and the prospect of a global economic slowdown, as well as a rise in shareholder activism in the United Kingdom. One analyst drew a link with the high turnover seen in 2007 shortly before the financial crisis, positing that "these execs don't want to run a blue chip firm after Brexit." Yet the trend does not seem confined to U.K. companies, as the United States is currently on track to exceed the number of CEO departures seen in 2008 just before the economic crisis.

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10/7/2019

The Breakup of Another Industrial Giant Is Coming

Bloomberg Businessweek (10/07/19) Sutherland, Brooke

Emerson Electric Co. (EMR) is conducting a comprehensive review of its businesses, announced shortly after investor D.E. Shaw & Co. built a stake in the company with plans to push for a breakup. EMR's structure makes it a prospect at a time when industrial conglomerates are dismantling themselves to focus more on individual elements. The softening manufacturing economy has dragged down Emerson's growth and endangered its earnings targets, and in August the company warned that customers had delayed $450 million of 2020 projects until 2021. In this context, CEO David Farr may not be able to prolong a decision on a breakup even if the investor payoff does not seem compelling on paper. Sources say that D.E. Shaw believes every piece of Emerson could find a buyer and thereby boost returns, and the industry is likely to show significant interest in Emerson's assets given the current air of consolidation in the HVAC market. Most of the company's other businesses could go into private equity, and the automation business could pique the interest of Rockwell Automation Inc. (ROK), which rebuffed an Emerson takeover approach in 2017. Bloomberg estimates that Emerson's stock could be worth 14% more than what it traded for before the breakup talk, assuming its units are valued on par with its peers.

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10/6/2019

AC Milan and Elliott: The Hedge Fund Trying to Crack Italian Football

Financial Times (10/06/19) Ahmed, Murad; Massoudi, Arash

In October 2018, Paolo Maldini, former captain of AC Milan and now its technical director, called on Gordon Singer, head of Elliott Management's London office, to pony up the €35 million fee to acquire Brazilian forward Lucas Paquetá. Earlier that year, the hedge fund had taken control of the seven-time European club football champions in a move considered its most high-profile venture since battling Argentina's government over its sovereign debts. Although the figure is small by Elliott's standards, it was more than the budget that the hedge fund's executives had earmarked for a club in financial trouble, but Singer agreed. The transaction has generated interest in whether Elliott can find a formula to crack the volatile football industry. According to Elliott executives, its plan is to win matches on the pitch and raise revenues off it to boost the club's value and sell for a healthy return. However, observers say that is easier said than done, and failure at AC Milan would be a reputational blow for Elliott, particularly in Italy, where the hedge fund is active in battles over the future of Telecom Italia (TIAJF) and CNH Industrial (CNHI). According to a club insider, "If they turn it round in a couple of years, no one will care. But in terms of bad press, there's a huge liability here...The risk/reward of owning a club like AC Milan for a company like Elliott seems really bizarre." Nevertheless, Elliott portfolio manager Giorgio Furlani said, "You'll see the fruits of this work at the end. Whenever the end will be."

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10/6/2019

How Boards Can Equip Themselves for Rapid Change

Associations Now (10/19) Athitakis, Mark

Accelerating change is placing greater pressure on corporate boards to be alert to disruption and respond quickly to it. Among the latest research making that point is "Fit for the Future: An Urgent Imperative for Board Leadership." Produced by the National Association of Corporate Directors (NACD), the report found that 73% of corporate board members feel that board work is more challenging than it was just three years ago. Also, 36% named the "accelerating pace of business" as one of the key impediments to board effectiveness. NACD CEO Peter Gleason suggests that organizations are beginning to feel the friction between modern economic trends and corporate governance structures that were established decades ago. "Operating in the 21st century, the pace of change that we're operating in with a model that is older requires that we rethink how we are comprising the board," Gleason comments. "We need to rethink the various skill sets and talents that are there in order to be ready to make changes." Making such changes requires rethinking both board recruitment and engagement.

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10/4/2019

Investors Are Worried About AT&T's Content Game

Bloomberg Quint (10/04/19) Smith, Gerry; Melin, Anders

Some investors are concerned about the series of longtime Time Warner entertainment executives who have left since AT&T Inc.'s (T) $109 billion acquisition of the media company last year, especially given that the deal turned AT&T into the world's most-indebted nonfinancial company. Elliott Management Corp. said last month that the high rate of leadership turnover is "alarming" and a "particularly troubling pattern" given AT&T's inexperience in Time Warner's business, which now accounts for nearly 20% of its revenue. In a letter to AT&T's board, the hedge fund said, "This lack of continuity in leadership presents a real concern for investors and should be a key focus for the board." AT&T argues that its combination of media creation and distribution assets is crucial to its strategy of taking on Netflix Inc. (NFLX) and disrupting TV advertising, and that the executive departures will not put a damper on its efforts. However, Elliott's letter has raised the stakes, with Bloomberg Intelligence analyst John Butler noting, "An alarm went off inside AT&T. The urgency here to get this strategy in motion and prove it has legs is probably higher now than it was before the letter."

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10/4/2019

Response to CII Proposal to Amend DGCL

Harvard Law School Forum on Corporate Governance and Financial Regulation (10/04/19) Berger, David; Simmerman, Amy

The Council of Institutional Investors' (CII) latest attempt to obtain a mandatory prohibition against dual-class stock is flawed in several respects and demonstrates a lack of understanding of basic principles of Delaware corporate law, according to this opinion piece. CII wants Delaware's legislature and governor to amend the state's corporate code to effectively prohibit publicly traded Delaware corporations from having multi-class stock unless the multi-class structure ends no later than seven years after the company's initial public offering. The proposal conflicts with the principle that the Delaware General Corporation Law (DGCL) is an enabling statute, designed to provide investors and other corporate stakeholders broad flexibility to determine among themselves how a corporation should be governed. Moreover, it runs counter to the idea that there are very limited distinctions in the DGCL between public and private corporations, a second core principle of Delaware law. CII's proposal also represents bad policy because the most recent empirical research shows dual-class companies have out-performed their single-class peers for at least a decade. The proposal comes at a time of intense debate over corporate purpose. CII's narrow understanding of stockholder primacy is not required by Delaware law and is inconsistent with the broader understanding of corporate purpose.

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10/4/2019

Investors Are Getting Closer to a Climate Change Tipping Point

CNBC (10/04/19) Maier, Stephanie

Stephanie Maier, director of responsible investment at HSBC Global Asset Management, said climate change "poses a business-critical risk for global companies and a systemic challenge to the financial system" and "will increasingly impact all economies, asset classes, and industries, whether directly or indirectly." To avoid an "estimated $23 trillion in global losses over the next 80 years in line with a 4°C rise in global temperatures," Maier says, "it is incumbent on companies to embrace necessary changes in corporate strategy. Those that do have opportunity to thrive." She points out that more than 370 investors with more than $35 trillion in assets under management are working through Climate Action 100+ to engage 161 global companies that are collectively responsible for more than two-thirds of global industrial greenhouse gas emissions. "Supported by five investor networks—AIGCC, Ceres, IGCC, IIGCC, and PRI—as partner organizations behind the initiative, this is unparalleled shareholder muscle at work in looking to ensure the world's largest corporate emitters align their business strategies with the goals of the Paris Agreement on climate change," Maier notes. "The benefits that collaboration with investors offers are clear and to be embraced. Strengthening corporate governance, bringing emissions in line with the goals of the Paris Agreement, and improving climate-related financial disclosures all help build stronger, more resilient companies...Just as companies need to double down on progress, so too do investors in pressing the case for, and benefits of, necessary transition. This must be broader than any one initiative alone, however large. This is why broader collaboration is key."

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10/4/2019

ComScore: A Hard Sell

Washington Business Journal (10/04/19) Medici, Andy

Observers say comScore Inc. (SCOR) may consider selling itself, and it has the product portfolio and client list to attract a strong buyer. However, reeling from losses, unfavorable financing deals, and stagnant performance, the audience measurement and analytics company's stock hovers around $2 per share, and its potential price tag could disappoint long-time investors. On an Aug. 6 conference call, interim CEO Dale Fuller—comScore's fifth CEO in six years—said, "We are looking at all strategic options for the company, and we're trying to ensure that we're not going to continue to add to dilution of the current shareholders." Although comScore could try to work its way back to sustainability, experts say doing so would be an uphill battle. According to Futurum Research principal analyst Daniel Newman, "The company will need a spark that simply doesn't exist in order to regain momentum and return to profitability. There is always a possibility of the company digging itself out, but a sale makes the most sense." Under an agreement with Starboard Value, which holds millions of warrants in the company, comScore must keep its cash reserves above $40 million—up from $20 million last year—or offer up even more warrants to the hedge fund.

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10/4/2019

Video: Lack of Diversity Puts Companies at Risk of Going Under, Says Ariel Investments Co-CEO Mellody Hobson

Yahoo Finance (10/04/19) Zahn, Max; Serwer, Andy

Although women occupy more seats on public company boards than they have in the past, they still only hold 20% of them, according to data from Equilar. Women hold only 23% of C-suite positions, and for women of color, that number declines to 4%, according to a 2018 study by McKinsey & Co. Companies that don't foster diversity put themselves at risk of financial difficulties, says Ariel Investments Co-CEO Mellody Hobson in an episode of Yahoo Finance's "Influencers with Andy Serwer." "I don't equivocate on this: Firms that are not paying attention to this are committing corporate suicide. It may not be fast, but at some point, it will come if you don't pay attention to this," Hobson says. Hobson notes that she and her colleagues speak to leaders from companies who provide "a lot of excuses when it comes to why boards are not diverse or management teams are not diverse." Hobson, who sits on the board of directors at Starbucks (SBUX) and JPMorgan Chase (JPM), says, "We do not believe you can be a 21st-century company in this world without having a perspective, and being inclusive, and having a diverse make-up in your employment base."

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10/4/2019

United Technologies' Merger With Raytheon Is Complicated. Three Ways to Play It.

Barron's (10/04/19) Bary, Andrew

While the merger of United Technologies (UTX) and Raytheon (RTN) lacks a strategic rationale, there are opportunities in both stocks. The deal's complexity has made it a difficult sell, and major shareholders in both companies have been critical, with United Technologies shareholders including Bill Ackman and Dan Loeb expressing concern and Raytheon shareholders resenting the lack of a premium for their company. Institutional Shareholder Services and Glass Lewis both recommended approval. United Technologies and Raytheon helped their case in July when they estimated an appealing 7.5% free-cash-flow yield for 2021, above that of most defense and aerospace peers. United Technologies shares have held steady since the merger news, Raytheon has gained 3%, and both trade at about 16 times projected 2019 earnings. One analyst says the stability of the cash flows from the defense business and the stronger balance sheet make United Technologies lower in risk, and identifies growth potential in the company's next-generation geared turbofan engine. The deal also relieves some of United Technologies' substantial debt load, turning $40 billion in net debt into a more manageable $26 billion in net debt for the merged company, less than two times its annual pretax cash flow.

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10/3/2019

There's a New Hedge Fund for Badly Governed Companies in Japan

Bloomberg (10/03/19) Oda, Shoko

Union Bancaire Privee plans to offer a new hedge fund for poorly run companies in Japan. The long-short fund will seek out about 30 undervalued companies with good governance, while shorting roughly 60 richly valued businesses with weak oversight. The yet-to-be-named fund is essentially a bet that the quality of a company's governance matters to its share price. The hedge fund offers a way to bet on effectiveness of corporate governance reforms, unlike the approach of buying into firms that are poorly managed and urging them to make changes. Zuhair Khan, who achieved some recognition in Japan in recent years by ranking poorly governed companies at risk of scandal, will start the fund. "I looked at the reform efforts from multiple angles and talked to all the players: the government, politicians, regulators and the stock exchange, corporates, allegiant shareholders, domestic passive managers, foreign active managers, hedge funds, and of course activist funds," says the former head of research at Jefferies Japan, adding that he combined this with detailed governance data gathering and quantitative analysis. The fund will debut by the end of the year.

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10/3/2019

Why Sustainability Reporting Needs Governance Perspective

Corporate Secretary (10/03/19) Genovese, Alyson; Saltman, Hannah

Corporate sustainability reporting isn't useful in decision-making unless it is considered within the context of a company's corporate governance protocols. A 2018 Ceres report shows that corporate sustainability disclosures are more and more common—but aren't necessarily meaningful. Eighty-six percent of S&P 500 companies in 2018 issued a sustainability report, and more than 70% of big global companies disclose data using the Global Reporting Initiative standards. However, the Ceres report reveals that the explanation of how companies' sustainability and business strategies tie together often is lackluster. Investors want to understand how management is held accountable for boosting sustainability performance. Institutional investors say board oversight of business-relevant sustainability issues—especially climate risks—is a leading area of engagement, because companies with robust governance protocols for environmental, social, and governance issues outperform the MSCI ACWI benchmark. These protocols are indicators of future performance due to their ability to measure progress toward sustainability goals. Thus, more than 80% of mainstream investors rely on sustainability data to inform their decision-making. Investors want companies to demonstrate board-level accountability for material sustainability issues; focus on materiality but also keep track of emerging trends; and externally assure material sustainability disclosures.

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10/3/2019

Ackman Flat in September, But Still Crushing 2019

Institutional Investor (10/03/19) Celarier, Michelle

Bill Ackman's Pershing Square Holdings ended September flat, but its year-to-date gain remains 54.5%, according to a recent performance report to investors, which also shows that the firm gained 6.4% in the third quarter. Gains in Warren Buffett's Berkshire Hathaway (BRK.A) (over 2%), Fannie Mae (FNMA) (35%), and Freddie Mac (FMCC) (over 10%) kept Pershing Square's portfolio from entering the red for last month. Howard Hughes (HHC) and Hilton Holdings (HLT) also posted gains in September of nearly 3% and less than 1%, respectively. Meanwhile, Chipotle Mexican Grill (CMG), Ackman's single biggest position, was flat for the month after a 95% increase this year. Further, Restaurant Brands (QSR) declined more than 9%, Starbucks (SBUX) about 8%, and Lowe's (LOW) nearly 2% during the month.

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