Media Center

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

U.S. Investor Mittleman Brothers Slams 'Bargain' $468m Village Roadshow Takeover Proposal by BGH Capital
EasyJet Founder Loses Bid to Oust Management in Strategy Showdown
Investors Slam GameStop's Board for Destroying $2.5 Billion in Shareholder Value
Bow Street-nominated Mack-Cali Directors Speak Out
Axel Springer Among Bidders for eBay's Classifieds Business
SoftBank's Masa-Misra Partnership Strained by Losses, Infighting
Driver Management Exposes First United's Refusal to Acknowledge the Truth
Glass Lewis Recommends GCP Applied Technologies Shareholders Vote for GCP Director Nominees
Ackman Tempts Musk to Join Cities With Howard Hughes Presence
Starboard Delivers Open Letter to GCP Shareholders
EasyJet's Future Hangs on Founder's Bid to Dismiss Leadership
SEC Urged to Take Global Lead in Requiring ESG Disclosures
Sony: Consolidation Begins
Hertz Creditor Talks Reach Impasse Ahead of Friday Deadline
Aryzta's Investors Seek EGM to Force Board Reshuffle
BlackRock CEO Larry Fink Under Fire Over Climate Change
Shareholder Urges Watford Holdings to Sell Itself, or Be Put Into Runoff
GCP Applied Technologies Sends Letter to Shareholders Highlighting Strength and Commitment of Its 10 Director Nominees
First United Sends Letter to Shareholders Clarifying Additional Attempts by Driver to Mislead Shareholders
Teleios Capital Urges Aareal Bank to Be Open About Approaches for Aareon Unit
Third Point Founder Daniel Loeb Takes Over as Munib Islam Leaves Firm
Herbalife Targets $600 Million Junk Bond Sale for Share Buybacks
Sony Embraces Its Inner Conglomerate
Synalloy Sends Letter to Shareholders Dismantling Dissident Group's 'Plan'
Bow Street Releases Investor Presentation Highlighting Need for Change at Mack-Cali
Tracking Carl Icahn's Portfolio—Q1 2020 Update
TCI Files Wirecard Complaint With Munich Prosecutors
Hertz Wants to Keep European Business Solvent as It Eyes U.S. Bankruptcy
Sony to Acquire Full Control of Financial Unit for $3.7 Billion
SoftBank Plans to Seek Buyers for About $20 Billion of Its T-Mobile Shares
Elliott Management Takes Stake in Oracle
Mack-Cali Sends Letter to Shareholders Regarding Bow Street
GCP Applied Technologies Urges Shareholders to Protect the Value of Their Investment by Voting for GCP's Nominees
Hertz Replaces CEO as Coronavirus Causes Dramatic Quarterly Loss
Alibaba's Jack Ma Quits SoftBank Board After $18B Vision Fund Loss
Elliott Adds Oracle, Dropbox
Bill Ackman Reports Stakes in Blackstone, Park Hotels
Thyssenkrupp to Shrink Radically in Drive to Survive
SoftBank's Vision Fund Tumbles to $18 Billion Loss in 'Valley of Coronavirus'
SoftBank in Talks to Sell T-Mobile Shares to Deutsche Telekom
Dan Loeb Snaps Up 1.4M Disney Shares; Says Goodbye to Campbell Soup
Carl Icahn Initiates Position in Delek US Holdings, Boosts Occidental Petroleum
Elliott Management Enters Virgin Atlantic Bailout Talks
Litt, Investor That Pushed for Gaming REIT Merger, Drops GLP Stake
Starboard Value Builds New Stakes in ACI Worldwide, Resideo
Proxy Adviser ISS Backs Six Starboard Candidates in Campaign at GCP: Report
Tough Choices at Cuisine de France Owner as Activists Park on Front Lawn
GCP Issues Statement in Response to Starboard Filing
HC2 Holdings Reaches Settlement With MG Capital for Board Seats
Aryzta Appoints Consultants to Conduct Strategic Review
Fir Tree Comments on JR Kyushu's Response to Shareholder Proposals
Phil Falcone Hangs Onto HC2 Board Seat in Battle
FRC Updates Corporate Governance and Reporting Guidance to Include Interim Reports
Kate Spade Took Cheap Buyout to Avoid Proxy Fight, Suit Says
Exxon Mobil Faces New Climate Challenge From Shareholder
GCP Applied Technologies Mails Letter to Shareholders
Standard Life Aberdeen Hit by Investor Backlash Over Virtual AGMs
Hedge Funds, Go Home — Japan Is Closing the Door
Australian Boards Are Male and Pale
NBIM to Explain Votes Against Company Boards
Carl Icahn's Love for Occidental Petroleum Might Be Costly
The SEC's Suggested 'Speed Bump' Is an Affront to Institutional Investors
Large European Companies Fall Short on ESG Disclosure – Report
Future Returns: Social Factors Gain Stature in ESG Analysis
Responsible Executive Compensation During Times of Crisis
Truce Sorely Wanted on Proxy Proposal Championed by SEC
Executive and Director Compensation Reductions in the Covid-19 Era: An Ongoing Review of Russell 3000 Disclosures
Carl Icahn Stuck Between a Rock and a Hard Place With Hertz
Managers See Mixed Results in Promoting ESG in House – Survey
Nelson Peltz Says He's Bullish on a Vaccine, Putting New Money to Work, and Voting for Trump
These Stocks Have Been Weakened by the Coronavirus Pandemic—and Investors Could Soon Pounce
Box CEO Talks Covid-19, Activist Investors, and Parenting
ESG Disclosure in 2020 Proxy Statements

5/22/2020

EasyJet Founder Loses Bid to Oust Management in Strategy Showdown

Reuters (05/22/20) Young, Sarah

EasyJet (ESYJY) founder Stelios Haji-Ioannou was unsuccessful in his effort to oust the airline's top three executives on May 22, giving it a brief respite in its fight for survival during the Covid-19 pandemic. Haji-Ioannou's family has a stake in easyJet of 34% and is its largest investor. With air travel largely halted and easyJet planes parked around the globe, Haji-Ioannou had ratcheted up his public campaign for management to scuttle a $5.6 billion order for 107 new Airbus (EADSY) aircraft that he says easyJet can't afford. A virtual shareholder meeting was called to remove the chairman, chief executive, finance director, and one other director that became a proxy vote on easyJet's broader strategy. The company said more than 99% of votes cast by independent shareholders supported the board. "The airline industry is facing unprecedented challenges and the board's immediate priority has been to take the necessary steps to successfully guide easyJet through this period of uncertainty," said Chairman John Barton. "The board seeks good relationships with all of the company's shareholders and hopes to be able to re-engage constructively with Sir Stelios." EasyJet's financial position is healthy enough to get through the crisis, and the new planes are needed to replace ageing jets and will help it stay competitive when flying resumes, according to management. Haji-Ioannou said he will continue to learn why the Airbus deal is going forward.

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5/21/2020

SoftBank's Masa-Misra Partnership Strained by Losses, Infighting

Bloomberg (05/21/20) Alpeyev, Pavel; Turner, Giles; Elstrom, Peter

SoftBank Group Corp.'s (SFTBY) $100 billion Vision Fund reported this week that it lost $17.7 billion in the latest fiscal year, the biggest loss in its 39-year history. As shares in the group are hammered and SoftBank Group founder Masayoshi Son plans to sell $42 billion in assets, there are signs of tension around Vision Fund manager Rajeev Misra. Misra has come under fire for an alleged effort to tarnish internal rivals including COO Marcelo Claure, and the company has acknowledged that it is conducting an internal review. Elliott Management Corp., meanwhile, has built a $3 billion stake in the company, asking SoftBank to name three independent directors and create a new board committee to improve the Vision Fund's investment process. Sources say Elliott wants SoftBank to get to the bottom of Misra's alleged campaigns against his colleagues, expressing dismay at the infighting among top managers. Some insiders speculate that Son needs Misra's financial expertise to navigate the next few months of asset sales, share buybacks, and loan repayments. Still, there are long-term risks for Son in tolerating what many see as a divisive culture and chaotic infighting that have plagued the Vision Fund. Misra's fate is ultimately intertwined with the Vision Fund, which now risks becoming one of Son's worst missteps. "Misra personifies what Vision Fund is about—a bunch of dealmakers obsessed with leverage who have no business running a venture capital fund," said Amir Anvarzadeh, a strategist at Asymmetric Advisors in Singapore. "But it would be naive to put all of their problems at Misra's feet. Son has the ultimate word."

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5/21/2020

Glass Lewis Recommends GCP Applied Technologies Shareholders Vote for GCP Director Nominees

Globe Newswire (05/21/20)

GCP Applied Technologies Inc. (GCP), a global provider of construction products technologies, has announced that Glass Lewis & Co. recommends that shareholders vote for the company's director nominees—Randall Dearth, Clay Kiefaber, James Kirsch, Philip Mason, Danny Shepherd, and Armand Lauzon—in connection with the company's Annual Meeting of Stockholders scheduled to be held on May 28, 2020. In addition, Glass Lewis recommends shareholders vote for the ratification of the amended shareholder rights agreement. In its report dated May 21, 2020, Glass Lewis noted the potential unintended consequences that could occur unless shareholders vote using the blue proxy card, saying, "...given the extent of the change sought by Starboard, effectively targeting every other incumbent director besides the two it placed last year through the settlement, we are not convinced that support of Starboard's entire slate is either justified or advisable." Glass Lewis also said, "...we see evidence in the Company's recent quarterly results and improved performance in 2019 which suggests that current management is addressing certain issues and achieving results, even if not as quickly as some shareholders might demand. In our view, current management does not appear to be a problem at this point, but more likely an integral part of the solution going forward."

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5/21/2020

EasyJet's Future Hangs on Founder's Bid to Dismiss Leadership

Bloomberg (05/21/20) Philip, Siddharth Vikram

Top EasyJet PLC (ESYJY) shareholder Stelios Haji-Ioannou is calling for the ouster of the U.K. airline's leadership, including CEO Johan Lundgren, Chairman John Barton, and CFO Andrew Findlay. Shareholders will vote on the motion at EasyJet's annual shareholder meeting on Friday. The clash centers on an order for more than 100 Airbus SE A320neo jets that comprise the bulk of 4.6 billion pounds in capital spending planned through fiscal 2023. Haji-Ioannou says the purchase will drain cash as the air-transport industry faces years of subdued demand in the aftermath of Covid-19; he wants EasyJet's existing fleet cut to 250 aircraft from 318. EasyJet says it has revised the order in light of the Covid-19 pandemic and also deferred the delivery of 24 planes to an undetermined date. The airline says it has reduced near-term capital expenditures by more than 1 billion pounds, though it has yet to announce job cuts of a level announced by peers.  Haji-Ioannou has generally failed to attract broad shareholder support in previous battles with management, but he has prompted some change, including, potentially, the departure of Barton's predecessor as chairman in 2013 and EasyJet's higher-than-average payouts. This time, Haji-Ioannou's call to cut spending comes with the industry mired in the deepest crisis in its history, which could turn more shareholders to his way of thinking. A defeat for Lundgren would still come as a surprise, as he and his family own about 34% of EasyJet, and the company reckons it could have the backing of shareholders controlling 45% of votes. Invesco (IVZ), Ninety One U.K., and Phoenix Asset Management, who together hold about 15% of EasyJet stock, have publicly pledged their support to management, and major shareholder advisory firms have also recommended that people vote against Haji-Ioannou's resolutions.

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5/21/2020

Hertz Creditor Talks Reach Impasse Ahead of Friday Deadline

Bloomberg (05/21/20) Boston, Claire; Ronalds-Hannon, Eliza; Welch, David

Hertz Global Holdings (HTZ) is stuck in a deadlock with creditors, including owners of asset-backed securities (ABS) tied to fleets of vehicles, with a May 22 deadline to either extend a forbearance agreement or make roughly $400 million in lease payments. Sources say Hertz may need to seek bankruptcy protection if an agreement cannot be reached. Top shareholder Carl Icahn could still make an 11th-hour rescue to protect his $1.6 billion investment. An increase in used-vehicle prices from tepid levels in the last two months has given ABS holders less incentive to again extend the forbearance period. J.D. Power says those prices bottomed out in the week ending April 19, down more than 15% from where they were prior to the federal lockdown. Prices were down less than 10% by the end of the first week of May. A liquidation scenario entails a risk for bondholders, because although quick vehicle sell-offs can help maximize the value of rapidly depreciating holdings, swamping the market with too many cars depresses prices. Few bondholders expect used-vehicle prices to plummet to such a level that owners of the largest, highest-rated portions of the ABS would take losses. Sources say while Hertz ABS have faced downgrades, any harm from liquidations would likely be felt in smaller, lower-rated portions of the securities. Senior segments of Hertz debt issued between 2015 and 2019 changed owners on Thursday for between 93.5 and 95 cents on the dollar, while Trace says a lower-rated portion of a 2015 deal slipped around 19 points to trade at 81 cents. Any action by Icahn could force him to deal with bondholders like Apollo Global Management (APO), which has been purchasing Hertz debt at distressed prices to offset a short bet in the credit-default swaps market.

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5/19/2020

Bow Street Releases Investor Presentation Highlighting Need for Change at Mack-Cali

Business Wire (05/19/20)

Bow Street LLC has released an in-depth presentation to Mack-Cali Realty Corp. (CLI) shareholders detailing the need to change the Mack-Cali board of directors by adding independence and restoring a culture of oversight, accountability, and value creation. Akiva Katz and Howard Shainker, managing partners of Bow Street, said, "The legacy directors and management have left Mack-Cali in a precarious position—with a leveraged balance sheet, weak occupancy trends, and lacking a coherent strategy. If Mr. DeMarco and the legacy Board could not create shareholder value during a time of broad economic prosperity, we are deeply concerned about their ability to protect and maintain the value of shareholders' investment during a prospective downturn. Now, more than ever before, it is imperative that the Company be armed with competent leadership overseen by independent fiduciaries who can restore trust with all Mack-Cali stakeholders. It is time to usher in a new era at Mack-Cali. Bow Street's highly capable, independent nominees have the relevant experience and fresh perspectives required to change the culture of the Boardroom and create meaningful value for the Company and its shareholders." Key highlights of the presentation include the need for Mack-Cali to overhaul its board; Mack-Cali's operational underperformance and execution issues, including an increase in debt and a decrease in cash flow; Mack-Cali's legacy of poor corporate governance; and the mechanisms by which Mack-Cali's legacy directors have proactively marginalized and intentionally minimized the impact of the four directors duly elected by shareholders in 2019, including refusing to re-nominate them for election in 2020. Bow Street is calling for shareholders to vote for all of Bow Street's board nominees.

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5/19/2020

TCI Files Wirecard Complaint With Munich Prosecutors

Financial Times (05/19/20) McCrum, Dan; Storbeck, Olaf

Sir Christopher Hohn's TCI Fund Management has filed a complaint against Wirecard (WCAGY) executives in Munich, calling for a criminal investigation into alleged accounting fraud. TCI has sold short 1.5% of Wirecard. In a May 19 statement, TCI said, "The KPMG report published by Wirecard on April 28, 2020, as well as public reporting, including that in the Financial Times and Wirtschaftswoche, reveal anomalies that may have criminal relevance." Since the results of the six-month special audit by KPMG were released that month, Wirecard's shares have lost two-fifths of their value. KPMG said it encountered "obstacles" to its work and was unable to verify that the "lion's share" of Wirecard's operating profits between 2016 and 2018 were genuine. Prosecutors say TCI is raising the suspicion of embezzlement against Wirecard executives tied to the group's acquisition of the Indian company Hermes as well as unsecured loans that Wirecard made to third-party business partners. Wirecard already faces a criminal investigation in Singapore, inquiries by Germany's financial watchdog, BaFin, and a probe by the accountancy regulator. Wirecard called TCI's complaint "completely unfounded," and noted that the fund is not a shareholder in the company. "Wirecard therefore regards the filing as a purely tactical maneuver of a short seller," the company added. Hohn previously called for Wirecard CEO Markus Braun to be fired or sidelined while a full internal investigation is conducted.

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5/19/2020

Hertz Wants to Keep European Business Solvent as It Eyes U.S. Bankruptcy

New York Post (05/19/20) Kosman, Josh

Hertz Global Holdings (HTZ) aims to maintain the solvency of its European business as it prepares for a possible bankruptcy filing in the United States. A source said the company on May 15 asked lenders to its European division to sign a waiver by May 22 that will allow it to avoid bankruptcy. Additional sources reported that Hertz would likely request the waiver only if it planned to declare bankruptcy for its U.S. division. The firm's European unit is stronger financially than the U.S. branch because a larger portion of its vehicle fleet can be sold back to automakers at guaranteed prices. After Hertz failed to pay roughly $500 million to creditors by May 4, it lobbied for and was accorded the May 22 extension. The company is pursuing the waiver as the second deadline looms at a time when the coronavirus has battered its business. "It is possible they get a few extra days [beyond Friday] to make the payment, but nothing more," one source suggested. On May 18, Hertz said Kathryn Marinello resigned as company CEO and has been replaced by Paul Stone, who most recently oversaw its North American retail operations. Marinello's leadership failed to financially strengthen Hertz for the pandemic, including her rejection of a $300 million to $500 million loan in March. Marinello has consented to consult for Hertz for the next year, but Jefferies analyst Hamzah Mazari said her resignation may be a bad omen. Mazari cited a recent Wharton Business School study suggesting that just 14% of CEOs stay on through bankruptcy, and added that "given that we only have a few days before the forbearance ends, chances of a [bankruptcy] filing are very high." Hertz shares declined 6.6% to $2.96.

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5/18/2020

SoftBank Plans to Seek Buyers for About $20 Billion of Its T-Mobile Shares

Wall Street Journal (05/18/20) Lombardo, Cara; Hoffman, Liz

SoftBank Group Corp. (SFTBY) will seek buyers for about $20 billion of its shares in T-Mobile US Inc. (TMUS). Banks are working to round up investors for what would be one of the largest stock trades in market history, according to people familiar with the matter. SoftBank owns roughly 25% of T-Mobile after the company's recent merger with SoftBank-controlled Sprint. Another 44% is owned by T-Mobile's longtime parent, Deutsche Telekom AG (DTEGY), with the rest trading publicly. Under the planned multipart deal, Deutsche Telekom would secure the right to buy T-Mobile shares in the future to bring its ownership stake above 50%. In turn, SoftBank would be released from agreements that would have barred it from selling most of its T-Mobile shares for years. The planned T-Mobile sale would rank among the largest open-market stock trades ever, and investors often demand big discounts to take on trades of that size. SoftBank has said it plans to sell up to $41 billion in assets to prop up its struggling portfolio and buy back its own shares, which trade at a steep discount relative to net asset value. The sales are meant to boost the price of SoftBank's Japan-listed shares and mollify Elliott Management Corp., which has been pushing for changes at the company. SoftBank on Monday reported a $13 billion quarterly loss, dragged down by its Vision Fund, which owns stakes in dozens of tech-sector companies.

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5/18/2020

Thyssenkrupp to Shrink Radically in Drive to Survive

Financial Times (05/18/20) Miller, Joe

German industrial conglomerate Thyssenkrupp (TKAMY) said it is planning to transition into a company with "the leanest possible holding" after unveiling a restructuring strategy that could contract its workforce by 20,000 employees and entail the merger of its steel business with a competitor. The group will put businesses with a combined yearly turnover of roughly €6 billion up for sale, including its stainless steel plant in Italy and its factory-building arm. Thyssenkrupp also verified that it was in discussions to consolidate its steel business despite the collapse of a merger with Tata (TTM) last year, and said it would seek partners for its shipbuilding unit. Investors Elliott Management (RRTS) and Cevian have been pressuring the conglomerate to adopt a leaner structure for years. Earlier this year, Thyssenkrupp sold its single most profitable unit, its lift and escalators business, to private equity groups Advent (AWI) and Cinven for €17.2 billion. The company said the need for its steel business' reorganization was "only heightened as a result of the [coronavirus] crisis, as there will be a structural increase in existing overcapacities in Europe." Martina Merz, Thyssenkrupp's third CEO in just over a year, said the firm had "taken some difficult decisions that were long overdue" and would "emerge smaller but stronger." The Krupp Foundation, which is Thyssenkrupp's biggest shareholder and controls nearly 21% of its stock, said it backs the company's actions despite its mandate to protect corporate integrity. "We have confidence in the executive board and expect it and all management teams to pursue the announced course with vigor," the foundation declared. "Thyssenkrupp has no time to lose." Cevian founding partner Lars Förberg, whose firm owns 18% of Thyssenkrupp stock, said the announcement is an "important step" for the company, and that it was "now crucial that this plan is implemented with urgency and decisiveness."

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5/18/2020

SoftBank in Talks to Sell T-Mobile Shares to Deutsche Telekom

Wall Street Journal (05/18/20) FitzGerald, Drew; Lombardo, Cara

SoftBank Group Corp. (SFTBY) is in talks to sell a significant portion of its T-Mobile US Inc. (TMUS) stake to controlling shareholder Deutsche Telekom AG (DTEGY), boosting the German company's nearly 44% stake in T-Mobile to above 50%. Deutsche Telekom already has voting control of T-Mobile under a prior agreement with SoftBank, which recently held about 25% of T-Mobile's common stock. T-Mobile took its current form on April 1 after it absorbed the SoftBank-controlled Sprint Corp., consolidating the U.S. wireless sector into a market dominated by three national networks. SoftBank is expected to retain rights to 48.8 million shares it surrendered to complete the merger that will be reissued if T-Mobile's stock price reaches certain milestones within two years. SoftBank is seeking to sell assets and improve its performance after suffering big investment losses and coming under pressure from Elliott Management Corp. SoftBank said in March that it would aim to sell $41 billion of assets to boost its liquidity and help fund a big new stock-buyback program.  The new stock sale under discussion would allow SoftBank to cash out some of its bet on Sprint, which has become a rare bright spot for the Japanese conglomerate as many of its other investments have been hit hard by the Covid-19 crisis. SoftBank and Deutsche Telekom had agreed to lockup provisions that prevent SoftBank from selling most of its position in T-Mobile over the next four years. Deutsche Telekom reported on Friday that its first-quarter revenue and profit both increased despite the early effects of Covid-19 on its operations.

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5/15/2020

Proxy Adviser ISS Backs Six Starboard Candidates in Campaign at GCP: Report

Reuters (05/15/20) Herbst-Bayliss, Svea

Institutional Shareholder Services (ISS) on May 15 recommended that GCP Applied Technologies (GCP) investors should elect six of Starboard Value's eight director nominees to the company's board, effectively passing control of the board to an activist shareholder. The proxy adviser said GCP is "in need of a comprehensive turnaround plan that can be effectively executed by management and overseen by the board," and Starboard has outlined a plan and has seasoned executives to implement it. Proxy advisers are traditionally cautious in supporting an activist seeking board control, but ISS advises this, noting that GCP's board is apparently opposing outside viewpoints. GCP announced in April that it intends to expand the board by one seat to 10. GCP and Starboard, which controls 9% of the company, have been engaged in an increasingly contentious proxy fight since early April when the hedge fund nominated eight candidates, including Starboard research director Peter Feld, to the board. Investors are slated to vote on the board's composition on May 28. ISS said GCP's performance has been disappointing since the company was spun out of W.R. Grace (GRA) four years ago. "The reported financial results continue to be mixed at best, with very limited evidence of stabilization within just a few parts of the business," ISS said. Starboard garnered significant backing for its campaign when Standard Industries and its affiliated entity 40 North Management, which collectively own 24.4% of GCP's stock, announced their support for the hedge fund in April. Standard Industries, 40 North, and Starboard altogether control about 33% of GCP's shares, strengthening their position to lobby for changes to the board. Gabelli Funds and JP Morgan Asset Management are among GCP's top 10 investors, as are BlackRock (BLK), Vanguard, and State Street.

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5/15/2020

Tough Choices at Cuisine de France Owner as Activists Park on Front Lawn

Irish Times (05/15/20) Brennan, Joe

Cobas Asset Management and Veraison Capital are pushing for changes at Swiss-Irish baked goods group Aryzta (ARZTY). Cobas and Veraison, which hold a combined 17.3% stake in Aryzta, argue that the company is trading at a significant discount to its intrinsic value and that its value has declined significantly compared to the overall market since its 2018 share sale. "Trust in Aryzta must be rebuilt. The shareholder group is convinced that the food industry offers sustainable value creation potential even in the environment currently shaped by Covid-19," Cobas said in a statement. "The shareholder group believes that Aryzta should be more focused and significantly reduce the complexity of the group." Since taking over in 2017, CEO Kevin Toland has overseen almost €400 million of asset sales, reducing net debt and pursuing a cost-cutting program designed to deliver €200 million of savings in the three years to July 2021. However, the asset disposal program has come at a massive cost, as the 2018 sale of the problematic Cloverhill Bakery facilities in Chicago was at a deep discount. Earlier this year, Aryzta completed the disposal of most of its 49% in French frozen foods group Picard for a total of €247 million, which falls well short of the €447 million Aryzta spent buying into Picard five years ago. The asset sales and emergency capital increase have allowed the group to reduce its reported net debt to less than two times earnings from almost four times in the middle of 2018, but that ignores almost €900 million of subordinated debt. The value of these bonds has fallen sharply in recent months, and shares in Aryzta are down 70% this year and 85% from where they were trading at the time of the 2018 rights issue. The entire market value of the company now is about €305 million, or about 60% of what was raised at the time. Aryzta announced on Wednesday that it had hired Rothschild & Co. last month to review "all strategic and financial options" by the end of July.

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5/14/2020

HC2 Holdings Reaches Settlement With MG Capital for Board Seats

Reuters (05/14/20) Herbst-Bayliss, Svea; Mathew, Rebekah

HC2 Holdings (HCHC) on Thursday announced a settlement with MG Capital to bring four newcomers onto the company board. This concludes a proxy contest between first-time activist and MG director Michael Gorzynski, who runs MG Capital, and HC2 CEO Philip Falcone. Gorzynski had criticized Falcone's handpicked board for poor governance, conflicts of interest, and overlooked regulatory issues, and lobbied for his removal. Gorzynski stated that he wanted to reduce HC2's annual costs and refocus on HC2's core assets. MG Capital has been given two seats, with Gorzynski receiving the first one and the second going to Kenneth Courtis, one of MG's six director candidates. Avram Glazer, who owns an HC2 stake of about 5.3%, also joined the board and was appointed its chairman. In April, HC2 said it planned to put Glazer, the executive co-chairman and director of soccer club Manchester United (MANU), onto its slate for investors to vote on at the annual meeting in July. The fourth board seat went to Shelly Lombard, a representative of HC2 shareholder JDS1. HC2 said its board will expand from six members to 10 after the new additions, and lose three seats after the annual meeting. As part of the agreement, MG has withdrawn its consent solicitation and nomination for election of directors at the 2020 annual meeting. HC2 Interim Non-Executive Chairman Warren Gfeller will maintain his directorship, as will Wayne Barr. Proxy advisers ISS and Glass Lewis backed MG's campaign, with ISS advising that shareholders elect three MG directors but not Gorzynski. Glass Lewis, meanwhile, supported all six MG directors to replace the entire board.

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5/14/2020

Phil Falcone Hangs Onto HC2 Board Seat in Battle

Institutional Investor (05/14/20) Celarier, Michelle

Phil Falcone will retain his board seat at HC2 Holdings (HCHC), avoiding removal that MG Capital (DLP) founder Michael Gorzynski pursued, according to a settlement announced on Thursday. Gorzynski lobbied to replace HC2's entire board of directors, including Falcone, with the backing of three proxy advisers. Institutional Shareholder Services and Glass Lewis also questioned Falcone's suitability as HC2's CEO. However, Gorzynski only won two board seats, and two new directors were appointed by HC2. Investors' disappointment with this news was evident yesterday when HC2 stock fell more than 20%, closing at $2.40 per share. Falcone had in recent months strived to improve his chances of reelection by agreeing to separate the roles of chairman and CEO. HC2 nominated Lancer Capital's Avram Glazer as new chairman, with Falcone staying CEO while Glazer also obtained a 5.3% stake in HC2. Falcone later added two more new board members to HC2's proposed slate, including independent consultant Shelly Lombard at the request of Julian Singer, who recently filed a 13D announcing a 6.4% share. The settlement directs both Glazer and Lombard to join the HC2 board, along with Gorzynski and Kenneth Courtis from the MG Capital side. Although the board will immediately expand to 10 members, three of the current directors announced that they will not seek reelection at the annual meeting on July 8. "Ken and I want to thank the board for carrying out HC2's director refreshment process in a thoughtful manner," said Gorzynski in a joint statement with HC2. "We no longer view ourselves as MG Capital nominees, but rather HC2 directors firmly committed to advocating for stockholders' best interests in the boardroom."

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5/12/2020

Hedge Funds, Go Home — Japan Is Closing the Door

Bloomberg (05/12/20) Trivedi, Anjani

Japan recently detailed new rules restricting overseas investment through amendments to its Foreign Exchange and Foreign Trade Act, which aims to preserve industries in the interest of national security. The government also clarified exemptions that establish whether outside investors are subject to the rules. Bloomberg Opinion columnist Anjani Trivedi notes, "The changes underscore Japan's sharp retreat from the encouraging reforms undertaken since 2015." She argues that these reforms had been succeeding. According to Trivedi, "Shareholder proposals for auditor or director changes were up, as were returns. Hedge funds such as Dan Loeb's Third Point LLC and Paul Singer's Elliott Management Corp. have all had their eyes on the likes of Sony Corp. (SNE) and Softbank (SFTBY). On Tuesday, London-based [investor] Asset Value Investors Ltd. took on elevator and escalator maker Fujitec Co. to improve governance and returns." However, she notes that "of the 10 largest companies on the Tokyo Stock Exchange, seven fall into the core category. Health care and pharmaceutical companies, which currently have a small weight, are expected to be added as the importance of the viral outbreak increases. That's also a sector hedge funds are active in." Japanese companies already are struggling due to the Covid-19 pandemic, and Trivedi believes "the new rules will make this worse, dashing the prospects of change at progressive companies that might have been willing to take certain types of activist hedge funds onto their boards." She adds, "Japan has always had a top place in the minds of foreign investors. It will be harder to justify now. Hedge funds and other investment managers may find it's best to watch from the sidelines."

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5/20/2020

NBIM to Explain Votes Against Company Boards

Pensions & Investments (05/20/20)

Norges Bank Investment Management as of May 20 plans to publish and explain all votes against company boards at shareholder meetings. The firm, which operates the assets of the 10.2 trillion Norwegian kroner ($986 billion) Government Pension Fund Global, will publish the reasoning behind its votes against a company board one day after shareholder meetings. "In most cases, we will support the board's recommendation," NBIM stated. The firm is hoping the move to be more transparent over its voting decisions will aid the market in better understanding its views. "As a global investor, we depend on an efficient voting process," Carine Smith Ihenacho, chief corporate governance officer, said in the statement. "We see that in several markets, there are still manual voting processes, several layers of intermediaries, and a lack of electronic solutions. We depend on issuers, investors, business participants, and regulators cooperating to make relevant information available, propose improvements, develop good electronic voting solutions, and modernize frameworks." NBIM also published on May 20 four position papers delineating its perspectives on board independence, multiple-share classes, shareholder rights in equity issuances, and related-party transactions. The perspectives outlined in the papers "will serve as a basis for our discussion with boards," NBIM said. With respect to board independence, the position paper said a board should "guide company strategy and monitor management performance without conflicts of interest. A majority of shareholder-elected board members should be independent of management, dominant shareholders, and business relationships." And "in majority-controlled companies, at least a third of board members should be independent." Further safeguards should be implemented where board decisions "are particularly vulnerable to conflicts of interest," with management not serving on audit or compensation committees, for instance.

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5/18/2020

Responsible Executive Compensation During Times of Crisis

Harvard Law School Forum on Corporate Governance (05/18/20) Ganu, Shai; Delves, Don; Resch, Ryan

Public pronouncements on how companies are reacting to the outbreak of the coronavirus have stressed the connections between financial decisions (such as share buybacks), employee actions, and executive compensation.  Sacha Sadan, director of corporate governance at Legal & General Investment Management, recently encouraged companies not to focus solely on their shareholders, but to address all stakeholders, especially their employees, supply chain relationships, and the environment and the communities in which they operate.  And Michelle Edkins, BlackRock's (BLK) global head of investment stewardship, has emphasized that companies can still demonstrate that they have effective leadership during the pandemic.  "The concept of long-term sustainability would suggest that companies that come through this crisis and do well would be exactly the kind of companies you would look to as role models," according to Edkins.  Companies and their boards will need to be more sensitive about how they are viewed by investors and other constituents.  Past downturns have fueled concerns that large corporations and their executives will unfairly benefit from the health crisis.  Executive compensation plans can serve as an important tool for addressing these concerns.  Boards and management can take a principles-based approach to executive compensation, focusing on creating alignment, clarifying objectives, setting strategy, establishing priorities, defining accountabilities, motivating performance, and reflecting the company's purpose and values.

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5/18/2020

Truce Sorely Wanted on Proxy Proposal Championed by SEC

Pensions & Investments (05/18/20) Croce, Brian

There is hope that a compromise will be reached on the Securities and Exchange Commission's (SEC's) contentious new proposed rulemaking around proxy advisors. In November, the SEC put forth proposed rules that would allow companies to review and revise proxy recommendations before they're sent to clients. Corporate players say the proposal would let companies correct errors in reports before votes are cast, while investors and proxy advisers say it's a solution in search of a problem and would hurt the independence of proxy recommendations. The SEC is now expected to remove the pre-review section from its proposal and instead move forward with a contemporaneous review period and "speed bump" concept. In a March 10 speech, SEC Commissioner Elad L. Roisman described the speed bump idea as a time period during which the proxy voting advice business would have to disable any automatic submission features. Business groups have expressed support for both the initial proposal and the potential compromise. Several investor groups said the compromise sounds promising, but said they do not want the SEC to interfere with proxy voting platform technology. Elliott Management Corp. submitted a comment letter on March 30 in which it said that if the SEC does move forward with the speed bump rule, it should initiate a separate rule-making process. Furthermore, Elliott wrote, "the requirement that proxy advisory firms must notify their clients of an issuer's objections to the content of the report is a form of compelled speech and is prohibited by the First Amendment." Proponents of the SEC's proxy proposal say another rule-making process is unnecessary for the speed bump because its central ideas are included in the original SEC proposal. Proxy advisers disagree, arguing that the mechanics of the proxy voting process are extremely complex, time-sensitive, and critical to their corporate governance.

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5/14/2020

Carl Icahn Stuck Between a Rock and a Hard Place With Hertz

GuruFocus.com (05/14/20)

Hertz Global Holdings Inc. (HTZ) is likely to face bankruptcy in the coming weeks. As of May 8, the situation had come to a three-way standoff between Hertz's creditors, lenders, and investors. Due to pressure from those who hold its asset-backed securities, Hertz has been given until May 22 to come up with $400 million. The company's banks will have to decide between allowing this funding or letting the company file for bankruptcy. Meanwhile, investors including Carl Icahn, who has a 39% stake in Hertz, could invest more in the company to keep things rolling and protect their investments. In the last week alone, Hertz has lost an estimated $35 million for Icahn across his 55 million shares. Hertz could raise money by selling off its rental fleet, but for this to work, it would need to get close to retail value, which has become difficult as used vehicle sales have dropped drastically during the pandemic. If Icahn decides not to invest more money, he could watch his investment disappear entirely in the event of bankruptcy. According to GuruFocus, Hertz has three severe warning signs of extremely low interest coverage, increased long-term debt, and declining revenue per share. It faces a cash-to-debt ratio of 0.05, which is lower than 89.58% of its competitors, alongside an equity-to-asset ratio of 0.07, which is lower than 94.47% of other companies in the industry. With an Altman Z-Score of 0.54, the rental car company finds itself falling well into the realm of distress, which implies that bankruptcy could be a definite possibility in the next two years.

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5/14/2020

Nelson Peltz Says He's Bullish on a Vaccine, Putting New Money to Work, and Voting for Trump

CNBC (05/14/20) Franck, Thomas

In an interview with CNBC, Trian Partners CEO Nelson Peltz said he is optimistic that a Covid-19 vaccine will be developed reasonably soon. Peltz also said he is deploying the fund's capital in new investments and that Trian has "a couple of candidates that we really like," because the recent market sell-off made the equities a compelling buy. In the interview, Peltz acknowledged Warren Buffett's advice to invest cautiously and said that he is entitled to his own opinion, which includes buying two specific companies he likes. Though the billionaire investor said he wasn't buying the stock market outright, he said he is optimistic about the Covid-19 vaccine outlook. Peltz said he was uplifted by a conversation he had with pharmaceutical giant Pfizer's (PFE) chief financial officer, who said he expects to have three to four potential coronavirus remedies in development by July. Peltz also praised the Trump administration and said that he plans to vote to reelect the president in November. The investor's comments contrast sharply with those of other major hedge fund managers, including Appaloosa Management's David Tepper, who told CNBC that this is the second-most overvalued market he has ever seen. Duquesne Family Office's Stanley Druckenmiller said earlier in the week the risk/reward for owning stocks right now is "as bad as I've seen it in my career."

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