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

Investors Call for Dismissal of Chief Executive of Japanese Group Lixil
A New Vote of Confidence Could Help Boost Dollar Tree Stock
Elliott Continues Push for EDP to Sell Brazil Stake
Starboard Issues Investor Presentation Opposing Bristol-Myers Squibb's Ill-Advised Proposed Acquisition of Celgene
Pernod Ricard Eyes Margin Improvement in EMEA-LATAM Business
Barclays Says Bramson Boardroom Bid Could Destabilize Bank
Bristol-Myers Squibb and Starboard Value Square Off Over Celgene Deal
Investor Ubben Criticizes PG&E Board Selection Process
Companies Call for Oversight of Firms That Advise Shareholders
Proxy Adviser ISS Joins Fight Against Panalpina Plan to Lift Vote Cap
Hyundai Home Shopping Rapped for 'Poor' Governance
Britain's Mears Hit by Profit Drop, Debt Rise as Demand Wanes
New Shareholder Challenge to Gilead: What Are You Doing With Billions in Tax Savings?
Elliott May Soften Dividend Stance Amid Increased Backing for Hyundai Motor
BAML Role in Barclays Stake Could Prompt Rethink by Rivals
Smouldering Franking Credit Fight Sparks Investor Push
Xerox Says Exploring Potential Deal for Financing Business
Newell Brands to Sell Processing Solutions Unit for About $500 Million
TransAlta Stock Rises After U.S. Investor Group Demands Change
Breakingviews—Hostile Japanese Deal Propels Abe's Third Arrow
Marriott to Open 1,700 Hotels, Return $11 Billion to Shareholders by 2021
SEC's Roisman Urges Slow Approach to Regulating Shareholder Advisers
GM Under Fire From All Sides Over Ohio Plant Closure
Exclusive: Eldorado Resorts, Caesars Explore Merger—Sources
PG&E Close to Naming New CEO, New Board
TIM Board Backs Chairman Ahead of Crunch Shareholder Vote
Vivendi Statement on Telecom Italia Board Meeting
Investor Seeks Seat on Marriott's Board
Elliott Losing Momentum in Hyundai Fight
IA Warns Laggards Over Lack of Boardroom Mix
Correction: Papa John's Expands Board Amid Shakeup
Activist Investing Invades Europe
Investing Lessons From the Activist Playbook
It's No Surprise That Dual-Class Stock Has Become Popular
Newell Needs a Breakup More Than a CEO
It's Still a Man's World at Hyundai
Do Not Let Company Founders Hide From Accountability
Mutual Funds Start to Put Their Mouth Where Their Money Is
Activist Funds Benefit From Mifid II Research Cuts
EBay Is the Un-Amazon, for Better and Worse
Citi Dealmaker Says Mergers and Acquisitions to Slow Down
Corporate Boards Casting Wider Net When Seeking New Directors – Report
Celgene's Positive Drug Data Bolsters Bristol-Myers Deal, Analyst Says

3/19/2019

Investor Ubben Criticizes PG&E Board Selection Process

Bloomberg (03/19/19) Deveau, Scott; Chediak, Mark

ValueAct Capital Management CEO Jeff Ubben—part of a slate of director candidates at PG&E Corp. (PCG) proposed by BlueMountain Capital Management LLC, which holds about 2.1% of the company's outstanding shares—is criticizing the bankrupt California utility for postponing its deadline for nominating board members for a fifth time while it negotiates with competing shareholder groups. "Extension after extension, BlueMountain's well-vetted and public slate is being ignored, and every shareholder and stakeholder should be disappointed in this process," Ubben said in an interview. "You apparently have some mystery group of shareholders determining who will next be on the board through closed door negotiations." On March 19, PG&E said it pushed back the deadline for shareholder board nominees to March 25. "As the board continues to work through this process of identifying and evaluating candidates, it is committed to engaging with a broad base of shareholders and other stakeholders to solicit their views on new independent director candidates," the company said. The competing group of three investors working with the law firm Jones Day—Knighthead Capital Management LLC, Redwood Capital Management, and Abrams Capital Management—hold slightly less than 10% of the company and have registered with regulators. According to Ubben, "We do not know the quality or nature of the directors being considered. This is not how well-traded public companies should undergo a board transition."

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3/19/2019

Hyundai Home Shopping Rapped for 'Poor' Governance

Korea Times (South Korea) (03/19/19) Hyun-woo, Nam

Institutional Shareholder Services (ISS) issued a Governance Quality Score of 8 (with a score of 1 indicating the lowest governance risk and 10 indicating the highest) to Hyundai Home Shopping. This compares with scores of 2 for Samsung Electronics (SSNLF), 5 for Hyundai Motor (HYMTF), and 6 for Hyundai Mobis. ISS indicates that Hyundai Home Shopping's poor rating is related to its shareholder payments and executive compensation. The company received scores of 9 for shareholder rights due to its weak dividend policy and 10 for executives' wages due to their continuous increases. ISS did not recommend that investors vote against issues proposed by the company's board during a March 28 shareholders meeting, but the scores likely will provide grounds for multiple activist funds with stakes in the company that are demanding an improved dividend policy and a proper evaluation of senior management's performance. Dalton Investments sent a letter to Hyundai Home Shopping directors earlier this month, calling on the company to boost dividends, buy back and cancel shares, pay 40% to 70% of senior management's annual compensation in restricted shares, and evaluate executives' performance with economic value. However, ISS said in its report, "Two dissident shareholders have opposed the distribution of dividends, while raising concerns on the overall board dynamics and oversight function of the audit committee. However, the dissidents came short of providing concrete evidence to make their case compelling at this point."

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3/15/2019

Vivendi Statement on Telecom Italia Board Meeting

Reuters (03/15/19)

Vivendi (VIVHY) has issued a statement denouncing "the behavior of the Elliott-nominated Telecom Italia (TIM) Board members who yesterday rejected by a majority vote the report issued by the company's Board of Statutory Auditors, a totally independent body, citing serious irregularities related to the company's governance and its Board." In its statement, Vivendi calls on the Statutory Auditors and Consob to "exercise their respective powers to further investigate the findings contained in the initial Statutory Auditors report." Vivendi says it wants several governance questions to be addressed, including: Why did the chairman organize the preparatory meeting concerning the dismissal of Amos Genish with the sole participation of the 10 board members designated by Elliott?; why did at least one preparatory meeting take place in the presence of only the 10 board members nominated by Elliott prior to the Nov. 18, 2018, board meeting?; did the chairman have any contact with any of Elliott's representatives before or after the board meetings on Nov. 13 and Nov. 18?; and what were the criteria used in the selection of the legal advisor for a decision as important as the dismissal of the CEO when it was well known that the same law firm has represented Elliott in the past and even sued TIM in recent months? "The Board of Directors' decision yesterday to 'self-police' reinforces Vivendi's belief that TIM shareholders must install a truly independent board," the statement notes.

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3/20/2019

Investing Lessons From the Activist Playbook

Barron's (03/20/19) Root, Al

Carl Icahn, Paul Singer's Elliott Management, Jeff Smith's Starboard Value, and other investors frequently make the headlines, and activism appears to be setting records. In 2018, 131 activists engaged 228 companies, and activists won 161 board seats. The three main strategies in their playbook—sell the company, break it up, or block a deal—have been successful for these investors. Meanwhile, they have been accepted by the investment community, with big fund managers like T. Rowe Price Group (TROW) and Gamco Investors (GBL) more willing to cast their votes in favor of activist slates. However, activists are not generating above-average returns, with Hedge Fund Research reporting that activist hedge funds have trailed the market by about five percentage points a year since the end of the financial crisis and the broader hedge fund industry by about five percentage points a year since the end of 2016. Further, a research paper published in October, which looked at nearly 2,000 activist situations from 1994 to 2011, found that the biggest winners were concentrated in a few small firms. One of the study authors, University of Washington professor Ed deHann, says, "We are not saying activists do harm, we just couldn't identify long-term benefits." However, other research does show long-term benefits, and experts say small investors can benefit from activist hedge funds' experience and research. They add that activists often come up with new value-creation ideas that have not yet been exploited in the market, and are engaging in socially conscious activism.

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3/17/2019

Do Not Let Company Founders Hide From Accountability

Financial Times (03/17/19) Singer, Paul

In this opinion piece, Paul Singer, founder and co-CEO of Elliott Management, discusses Lyft's upcoming roadshow to promote its initial public offering, in which it will attempt to sell a structure that would give the ride-hailing company's two founders 20 votes per share compared to just one vote per share for everyone else. Singer notes that "studies show that companies with dual-class structures tend to underperform over the long term. That is because shareholder accountability is often the best corrective for a company that has lost its way. In my experience, this is especially true in the technology sector, where enthusiasm for dual-class structures runs highest." He highlights his firm's experience with Citrix (CTXS), in which it acquired a 7% stake in 2015 and one of its partners joined the board. "My firm, Elliott Management, frequently encounters technology companies where founders or longtime managers created remarkable innovations but then struggled with the challenges of maturing products, expanding organizations, or slowing growth. They often respond by aggressively seeking new sources of growth, paying richly for acquisitions that do not fit with their business models, or allocating capital towards peripheral activities that fail to generate returns. Worse, such efforts often damage the core businesses that brought success in the first place. This is how Elliott found Citrix in 2015." Singer says Elliott worked with Citrix to address its problems: "The management team, supported by an engaged board, streamlined Citrix's operations, separated out noncore businesses, and refocused on its strengths. Today, Citrix is investing in innovation and revenue is growing faster than it has since 2014. Employee satisfaction is higher, staff turnover is down, and the share price has outperformed." He concludes, "Those with the insight and daring to found a business deserve our respect. But once they sell the vast majority of the company to the public, they should not be allowed to run it forever without any shareholder input. Public ownership must mean public accountability."

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3/14/2019

Activist Funds Benefit From Mifid II Research Cuts

Financial News (03/14/19) Pritchard, Becky

Sharp reductions in spending on investment research by asset managers in Europe have benefited activist hedge funds, according to a panel of experts at a Financial News briefing on March 13. Since the implementation of the Markets in Financial Instruments Directive (Mifid II) in January 2018, which forced asset managers to separate trading and research expenses for the first time, activists' job has gotten easier, said Franck Falezan, managing partner at PrimeStone Capital. As banks trim their research departments and asset managers purchase less research, there is less information on smaller companies available to the market, the experts said. But at the same time, with fewer interested purchasers, activists who buy in could also find it harder to offload the shares later. "Mifid II is both a blessing and a curse," Falezan noted. "It creates dislocation. That is an opportunity to buy things, which are maybe below intrinsic value even before we add any value to the asset, which makes our job easier. But at the same time it's very difficult to exit." Liad Meidar, chief investment officer at Gatemore Capital Management, concurred that the new rules have been a "double-edged sword," making it easier to find good-value stocks. "You are seeing an under-reaction to positive news and an over-reaction to negative news" in the stock markets, he said. "That is driven by the fact that people aren't hearing the story [of these companies] because all of these research houses are behind paywalls and fewer and fewer people are reading them. Companies are really on their own to get the story out there, and it's more challenging." Meidar says activists must use the press to communicate with other shareholders. "To get that attention is challenging, and to get the attention of multiple investors is challenging," he said. "So more and more I think that it becomes appropriate to open up the discussion publicly. Not in ways that can harm the business, but in ways that expose the topic to other shareholders."

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3/14/2019

EBay Is the Un-Amazon, for Better and Worse

Bloomberg (03/14/19) Halzack, Sarah; Ovide, Shira

EBay Inc. (EBAY) is in the odd position of being the second-place player in the fast-growing e-commerce industry while being largely excluded from the conversation about the industry's future. EBay has a bigger share of the U.S. e-commerce market than every other retailer besides Amazon.com Inc. (AMZN), but analysts and industry insiders tend to frame discussions about the U.S. e-commerce industry as a showdown between Amazon and Walmart (WMT). Data compiled by Bloomberg show that Amazon came up in the earnings calls, presentations, and shareholder meetings of 670 companies in retail, consumer products, and similar industries in the last year, while EBay came up at just 86 companies in those sectors. Observers indicate that EBay may be lagging because its sales are concentrated in the wrong spots, as it sells a smaller share of products than Amazon in categories like groceries, household products, and home goods—which are said to be among the faster-growing online shopping categories. In a recent campaign by Elliott, which resulted in new directors and a strategic review, the hedge fund pointed out that insurgents are chipping away at EBay's turf. However, Elliott has not provided a blueprint to jump start sales at EBay. Observers say the company could go deeper in categories like clothing or auto parts, where its performance is strong, and lean into its identity as a place for deals and unique products not carried by Amazon or Walmart.

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