Luby's Will Add Two to Board Amid Pressure From Hedge Fund Investor
" Reuters (01/18/19) Herbst-Bayliss, Svea"
On Jan. 18 the casual dining chain Luby's Inc. (LUB) said it will shake up its board, inviting two new independent directors to replace two sitting members and selecting a new chairman. The announcement comes a week before shareholders will vote on whether to add nominees from Bandera Capital, which owns nearly 10% of the company's shares, to the board. "Luby's has recently been engaged in in-depth discussions with many of our shareholders, and based on the feedback we have received, we have chosen to accelerate our plans to transform the board," said Chairman Gasper Mir III, who plans to remain on the board but give up his role as chairman. Jeff Gramm's Bandera has criticized the company's high expenses and is urging other investors to back its demands for more accountability and oversight by the nine-member board. ISS recommended electing Gramm and his father, former Sen. Philip Gramm, to the board, while Glass Lewis recommended adding only Jeff Gramm.
Bandera Partners Issues Letter to Luby's Stockholders
" MarketWatch (01/18/19)"
Bandera Partners LLC's Jeff Gramm penned a letter to fellow shareholders of Luby's Inc. (LUB) on Jan. 18 warning them not to be fooled by the company's recent actions. "Just over 10 years ago, when Luby's was engaged in a tight proxy contest with an activist investor, the incumbent board instituted some long overdue governance changes to swing votes back in their favor," the letter stated. "Luby's incumbent board narrowly won that contest, and the stock has since fallen over 80% under its watch. Don't let them fool you twice with their latest round of promises." It added that following significant support for Bandera's case that the board has grossly underperformed, "Luby's is proposing a new round of changes and sweetened promises, including swapping in new directors, hand-picked by the underperforming incumbent board, AFTER the election, with an uncertain timeline." Bandera says it does not believe Luby's stockholders will fall for these tactics for a second time, and encourages them to instead vote for its own nominees. "If the newly elected Board wishes to discuss additional board refreshment this coming year, we will welcome that discussion. Today's announcement from Luby's is simply too little too late."
MGM Hands Board Seat to Hedge Fund Corvex's Meister
" Reuters (01/17/19) Herbst-Bayliss, Svea; Roumeliotis, Greg"
MGM Resorts International (MGM) has reached a deal with Corvex Management to appoint its founder, Keith Meister, to the board on Friday, expanding it from 12 to 13 members. The agreement comes after recent reports that Starboard Value had built a position in the casino operator and was considering pushing for changes. MGM's chief executive and chairman, Jim Murren, said the company and Meister have been holding “constructive dialogue” over the last several months, and he praised the investor's track record of “helping companies maximize value for shareholders as well as his experience in real estate and gaming.” Corvex owns about 3% of MGM's stock. “It is clear to me that MGM is focused on driving profitable growth,” Meister said, adding that he believes he can help. Since 2017, MGM said it has appointed four new independent directors, including Meister.
Premier Foods Names Acting Boss Amid Sales Woes
" Belfast Telegraph (Ireland) (01/17/19)"
Premier Foods (PFODF) announced that CFO Alastair Murray will serve as interim CEO, effective Feb. 1, replacing Gavin Darby, who is leaving at the end of the month in the wake of pressure from Oasis Fund Management. His departure comes just months after he narrowly survived a shareholder rebellion against his re-election. The company also reported that group sales dropped 2.2% in its third quarter and that it remains in talks about a potential sale of its Ambrosia brand and its factory in Lifton, Devon. Darby said, "We faced into two sets of challenges in the quarter—lower international sales and our logistics program, which as expected, affected cake sales volumes early in the quarter. As we look to the fourth quarter, we expect to see a good performance from branded sweet treats, we have a good innovation plan lined up, and our expectations for trading profit and adjusted earnings per share for the full year are unchanged."
Gulfport Board Faulted, Share Buybacks Sought by Investor
" Bloomberg (01/17/19) Deveau, Scott"
Firefly Value Partners, which said it owns an 8.1% stake in Gulfport Energy Corp. (GPOR) sent a letter to the board on Thursday calling for changes at the natural gas and oil company. The investment firm said Gulfport's board lacks the experience needed to fix its poor performance and that it should implement a $500 million share buyback program to double its stock price. “We are concerned that the current board does not possess the necessary skills, experience, or alignment with the company's stockholders to effectively steer Gulfport's strategy and maximize long-term shareholder value,” Firefly wrote. The investor wants to work with the company on shaking up the board, sources said, but will consider nominating its own directors if that effort fails. Gulfport confirmed Thursday that it had received the letter, which it said followed talks with the firm. Firefly argues the company—whose shares were trading around $8 Thursday and have dropped 32% in the past year—could be worth more than $30 per share over time if it takes steps to improve its performance. Based on its conversation with Gulfport Chairman David Houston, Firefly said it's concerned that the board won't commit to actions needed to improve value despite a strong cash position and being one of the lowest cost producers of natural gas in the country.
PG&E Shareholder BlueMountain Protests Bankruptcy Decision
" Wall Street Journal (01/17/19) Brickley, Peg"
BlueMountain Capital Management LLC has challenged PG&E Corp.'s (PCG) board over a plan to resort to bankruptcy to address wildfire damages that the utility believes could come with a $30 billion price tag. The California utility announced Monday it would file for bankruptcy in the wake of the deadly Camp Fire last year, which killed 86 people. BlueMountain, which reported owning 4.3 million shares as of Sept. 30, now owns about 11 million shares, according to a source. The hedge fund argues the utility's board is moving too quickly toward chapter 11 bankruptcy, destroying value unnecessarily. “The company has ample liquidity to operate its business; the amount of liabilities remains uncertain and contestable; there are meaningful probabilities of offsets from settlements and cost recovery; and any potential liabilities are payable in the future,” BlueMountain wrote in a letter to PG&E's board of directors on Thursday. Shareholders lose out in bankruptcy, because creditors are paid before equity owners. BlueMountain also cited the effects bankruptcy will have on PG&E's financing costs. The hedge fund urged PG&E's board to reconsider the numbers, examine its other options, and draw on its borrowing power and insurance coverage before admitting insolvency. Until recently, PG&E had investment-grade credit ratings, BlueMountain said, and regulators and lawmakers were open to working with the utility. Bankruptcy will bring hopes of a state rescue to an end, the hedge fund said.
Citigroup Is Revealing Pay Gap Data Most Companies Don't Want to Share
" Washington Post (01/16/19) McGregor, Jena"
In a recent blog post, Citgroup (C) revealed that the median pay for women is 29% less than it is for men at the global financial services giant and that the median pay for U.S. minorities is 7% less than it is for non-minorities. The data came after a proposal from investor Arjuna Capital for Citi to go beyond comparing median pay for female employees with that of their male peers, and offer a global snapshot of the figure along both race and gender lines. The figure is a different way of measuring the pay gap than what is often called pay equity, which compares the earnings of men and women who work in the same jobs. Last year, Citi said that women make 99% of what men make when adjusted for factors such as job function, level, and geography, and that it would make adjustments to close that gap. Arjuna Capital is urging companies to reveal both figures as a a way to show how well companies are closing the "position gap," getting more women into the top-ranking, highest-paying jobs.
Yelp Investor Says Shares Could Almost Double, Urges Changes
" Bloomberg (01/16/19) Deveau, Scott"
SQN Investors LP, one of the top investors in Yelp Inc. (YELP) with a more than 4% stake, said in a presentation that the company could create significant value for investors either by fixing its problems or by selling itself. The technology-focused investment firm started to push for changes at Yelp in December, calling for a board shakeup and a strategic review. SQN said it is prepared to launch a proxy fight if the company doesn't follow its recommendations to boost performance. The firm believes Yelp's shares could almost double to $65 each and it could return $500 million to investors if it stayed independent and implemented SQN's suggestions. Yelp should partner with companies like ANGI Homeservices Inc. (ANGI) or GrubHub Inc. (GRUB) to drive growth and improve the revenue it receives per visitor, SQN said. It also wants Yelp to rein in its expenses, among other measures. "We continue to believe Yelp has great potential to deliver significant value for its investors," said Amish Mehta, founder of SQN Investors. "After years of Yelp underperformance, we have lost patience and believe the board needs fresh perspectives and stockholder representation." Alternatively, SQN argues Yelp could fetch as much as $50 a share in a sale, Mehta said. There would be numerous potential bidders, including strategic buyers and those seeking to leverage Yelp's database of local reviews, he said.
Danish Freight Firm DSV Makes $4 Billion Play for Panalpina
" Reuters (01/16/19) Miller, John; Gronholt-Pedersen, Jacob"
Denmark’s DSV has made a $4.1 billion takeover offer to Swiss rival Panalpina. Shares in Panalpina, which has come under pressure from Cevian Capital to do a deal, jumped as much as 31% to an 11 year high on Wednesday, above DSV’s proposal and signaling investors expect a higher offer. DSV’s approach to Panalpina—which aims to make it the world's No. 3 freight transport company—comes just months after it failed in an attempt to purchase Switzerland’s Ceva Logistics. Panalpina said it had received an unsolicited, non-binding proposal from DSV of 170 Swiss francs per share and that it would consider the proposal, despite saying recently it sought to remain independent. Some analysts said the suggested price was appropriate, but a counterbid was possible. Cevian Capital, which owns 12.3% of Panalpina, recently protested the company's progress and has urged it to be open for a takeover amid its struggles in ocean freight, a delayed IT system, and growth that lagged rivals.
Cruiser Capital Vows to Fight on at Ashland Even After Board Deal
" Reuters (01/15/19) Herbst-Bayliss, Svea"
Cruiser Capital announced it will continue waging its proxy battle at Ashland Global Holdings (ASH) even after the specialty chemicals business reached a deal to overhaul its board with another top shareholder. The hedge fund is asking shareholders to replace four board members, including the company’s CEO, and is arguing that the company’s deal with another shareholder harms all investors. This weekend Ashland agreed with Neuberger Berman, which owns 2.8% of the company, to add two new directors and have one current director resign. “Ashland has gone to great lengths to not constructively engage with the Shareholder Nominees,” Cruiser’s founder Keith Rosenbloom said Tuesday. “Their sequence of transparent entrenchment tactics has clearly revealed a culture of poor corporate governance and the Board’s seeming lack of respect for shareholder rights.” Cruiser filed materials with the Securities and Exchange Commission on Monday night, a step required after making its case to a proxy advisory firm, which will soon issue a recommendation for investors. Cruiser Capital owns 2.5% of Ashland and reportedly feels undercut by the deal. “Ashland needs truly independent voices, elected by all stockholders, in the boardroom,” Rosenbloom said. The firm has been urging Ashland management for months to improve its margins and has said that it believes the company could be worth more than $125 a share if improvements are made.
Apollo Nears Deal to Buy Arconic for More Than $10 Billion
" Wall Street Journal (01/15/19) Mattioli, Dana; Lombardo, Cara; Gottfried, Miriam"
Private-equity firm Apollo Global Management LLC (APO) is close to reaching an agreement to purchase Arconic Inc. (ARNC) for more than $10 billion, ending months of negotiation over what would be one of the biggest leveraged buyouts in recent years. Apollo would pay between $21 and $22 per share in a transaction that's likely to be announced this week, according to sources. Arconic shares are trading at just more than $19, so the price would represent a premium of 10% or more over a stock that's already been elevated by speculation of a deal. The Wall Street Journal first reported in July that Apollo and others were interested in acquiring Arconic, an aerospace-parts manufacturer that was Alcoa before the aluminum company was split up in 2016. Should a deal be finalized, it would end a monthslong sales process for Arconic, which had a market value of approximately $9.3 billion the morning of Jan. 15. Prior to it emerging as the front-runner, Apollo competed in the auction with other buyout firms including a team of Blackstone Group LP and Carlyle Group LP. At the expected price, the transaction would be the biggest take-private by a U.S. buyout firm since Silver Lake teamed up with Michael Dell to take Dell private in a 2013 deal worth more than $20 billion. In addition to market challenges, the sale of Arconic has been complicated by the involvement of its exterior-cladding products in the 2017 fire at the Grenfell Tower in London, which killed or injured numerous people. Elliott Management Corp., Arconic's biggest shareholder with approximately 10.7% of its stock, is expected to purchase the cladding business to separate liabilities stemming from the disaster from the rest of the company and ensure the unit is adequately capitalized and insured, sources said. Elliott, which has advocated changes at Arconic for years, plans to maintain its stake in the company, sources said.
Elliott Statement on Telecom Italia
" Associated Press (01/14/19)"
Elliott Advisors (UK) Limited issued a statement Monday in response to the decision by Telecom Italia's (TIM) board to grant Vivendi's request for a vote upon the revocation of five directors at the company's annual general meeting (AGM) on March 29. "Vivendi's request represents its latest effort to take back control of TIM and run the Company for its own benefit. Should Vivendi continue to pursue these efforts, Elliott is confident that it will not succeed," the fund stated. Elliott noted that just eight months ago, an overwhelming 80% of independent TIM shareholders voted for a new board, rejecting "Vivendi's poor corporate governance record at TIM and its history of related party transactions." The fund added that TIM stakeholders desire stability, and "a contentious board election at this juncture only serves Vivendi's narrow interests." Elliott says it has sought numerous times to engage with Vivendi, but its outreach has gone unanswered. The fund concluded, "Prior to last spring's vote for change, TIM suffered the consequences of a Board that answered to one shareholder, not all shareholders. Should this new vote proceed, Elliott believes TIM shareholders should not turn the Company back over to Vivendi, but should instead give TIM's new, independent Board and its new CEO sufficient time to execute their strategy and create lasting shareholder value."
QEP Resources Working With Evercore on Sale Process
" Bloomberg (01/14/19) Deveau, Scott; Porter, Kiel"
QEP Resources Inc. (QEP), the energy explorer Elliott Management Corp. proposed to purchase last week, is working with Evercore Inc. (EVR) to explore a sale, according to sources. The oil and gas explorer is expected to attract interest from rivals and private equity firms, in addition to Elliott, the sources said. No final decision has been made and QEP could choose to remain independent, they added. Elliott proposed last week to buy QEP for $8.75 a share in cash, or about $2 billion. The hedge fund owns a 5% stake in the company, according to data compiled by Bloomberg.
State Street Tells Boards to Focus on Corporate Culture
" Financial Times (01/14/19) Edgecliffe-Johnson, Andrew"
State Street Global Advisors (SSGA) has written to the independent chairs or lead independent directors of more than 1,100 companies in the S&P 500, FTSE-350, and equivalent indices in Australia, France, Germany, and Japan, asking them to review their companies' cultures. The letter by the world's third-largest asset manager describes how directors can assess, influence, and report on their culture and warns companies that they should expect to answer questions about their culture from SSGA over the coming year. The letter follows a previous letter that focused on sustainability, directors' independence, and gender diversity in the boardroom.
Pernod Ricard to Meet Elliott Ahead of Earnings Update: Sources
" Reuters (01/14/19) Vidalon, Dominique; Keidan, Maiya"
Sources say Pernod Ricard (PDRDY) will meet this month with Paul Singer's Elliott, which has called on the family-backed spirits company to make about 500 million euros of cost cuts, consider merging with another spirits company, and ensure more independence for the board, where many directors have links to the Ricard family. Last month, Elliott disclosed that it had spent around 930 million euros ($1.1 billion) amassing a stake of slightly more than 2.5% in Pernod Ricard and called on the company to improve profit margins and governance. CEO Alexandre Ricard is expected to present his new strategic plan later this year, but some analysts expect the company to give some direction on margins when it publishes first-half earnings on Feb. 7. One source indicates that Elliott is hopeful the company will act on some of the changes it has proposed, including improving investor returns. Since Elliott met with Ricard on Nov. 22, after the company's annual meeting, there have been follow-up technical meetings between both sides. However, some observers doubt whether Elliott will be able to force changes given that the Ricard family controls 15% of the company's shares and 21% of voting rights. Further, long-time investor GBL owns a 7.5% percent stake and has said its supports the company's strategy.
Ashland to Make Board Changes as Shareholders Apply Pressure
" Wall Street Journal (01/13/19) Lombardo, Cara"
Ashland Global Holdings Inc. (ASH) has agreed with Neuberger Berman Group LLC, a shareholder with a 2.8% stake, to add two new directors to its board, refresh leadership of its board committees, and have a longtime director resign. The deal comes after Cruiser Capital Advisors LLC, which owns 2.5% of Ashland, called for the replacement of four Ashland board members in October, including one who will step down as part of the new plan. Cruiser also urged shareholders not to re-elect Ashland CEO Bill Wulfsohn as chairman at Ashland's annual meeting. Cruiser said Sunday that it will evaluate Ashland's announcement, “however on the surface we believe no responsible shareholder would want to effectively vote for nearly 20% of the Company's independent directors without knowing who they are—this sounds like poor corporate governance.” It is unclear whether the changes will be enough to cause Cruiser to withdraw its slate. Cruiser and Ashland had shown no signs of nearing a settlement, potentially setting up the proxy fight to go all the way to a shareholder vote. “The goal here was to try and put this to bed, but the shareholders will decide,” said Charles Kantor, the Neuberger Berman senior portfolio manager who devised the plan with Ashland. “We thought this outcome was significantly superior than the execution risk, the distraction risk, and the nastiness of the alternatives.”