13D Monitor Real-time Activist Newsfeed


Alden/MNG Prepares to Run Activist Slate for Gannett Board Seats
" New York Post (01/17/19) Kelly, Keith J."

Sources say Alden Global Capital, the hedge fund that controls MNG Enterprises, is preparing to run an activist slate of candidates to pressure the board at Gannett (GCI) if it balks at the $1.36 billion takeover offer. Gannett said it received the unsolicited bid from MNG on Jan. 15, but pledged only to review the $12-a-share offer. In its offer letter, MNG Chairman Joe Fuchs writes, "If the board refuses to engage with us in good faith and in a timely fashion, we reserve our rights to take action to protect the value of our investment, which may include seeking changes to the composition of the board." Sources say Alden expects the company to balk at the offer. The deadline for nominating new board members at Gannett is Feb. 7.

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."

Apollo Close to $10.6B Deal to Buy Arconic
" New York Post (01/17/19) Kosman, Josh"

Apollo Global Management (APO) reportedly is close to a deal to buy Arconic (ARNC) for $10.6 billion, or about $22 a share. Arconic has not yet approved the deal, but sources say the aluminum giant told Apollo and the company's top shareholder Elliott Management to finish the necessary paperwork so it can clear the deal this weekend. The deal would be one of the biggest leveraged buyouts since the 2008 financial crisis. To get the deal done, sources say Elliott has agreed to take on the risks stemming from the 2017 Grenfell Tower fire in London by acquiring majority control of the construction division saddled with the Grenfell liabilities. However, they note that the hedge fund has argued with two other prospective bidders, Blackstone Group and Carlyle Group, about the size of the guarantee it would provide. One of the sources said Elliott was planning to put forward much less than the $1 billion-plus that Blackstone and Carlyle felt would be needed to protect Arconic from potential litigation, but now the deal will include more than $1 billion to cover potential liabilities; however, that may include insurance.

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.

Trian to Skip PPG Board Challenge After New Commitments: Sources
" Reuters (01/17/19) Herbst-Bayliss, Svea; Roumeliotis, Greg"

Trian Fund Management LP will not challenge PPG Industries Inc.’s (PPG) board of directors at its 2019 shareholder meeting after the company met some of the hedge fund’s demands and announced new financial targets, sources said Thursday. Trian asked PPG last October to replace its CEO Michael McGarry with former CEO Chuck Bunch, examine how it uses its balance sheet, consider a break-up of the company, and put the board up for re-election every year. PPG presented financial targets for 2019 on Thursday and said it would explore separating its architectural from its industrial coatings, as well as destagger its board and remove super majority voting. The company also said Thursday that the U.S. Attorney's office for the Western District of Pennsylvania is looking into improper accounting practices from 2017 into which the U.S Securities and Exchange Commission (SEC) opened a probe in June. PPG on a conference call with analysts said it was fully cooperating with the investigation. Trian will not submit its own nominees to challenge PPG's board of directors at the company's upcoming shareholder meeting, the sources said. The deadline for nominations is at the end of this week.

Elliott Investment Pernod Pledges to Further Improve Governance
" Reuters (01/18/19) Vidalon, Dominique; Denis, Pascale"

French spirits group Pernod Ricard (PDRDY) on Friday vowed to improve its governance, amid pressure from Elliott. The statement follows news reports the company was likely to make board changes, a move Jefferies analysts said would be an “early win” for the hedge fund. Elliott in December unveiled a roughly 2.5% stake in Pernod and has called on the company to raise profit margins and improve governance. It believes Pernod's 14-member board needs to be more diverse and have more independent voices, as many directors are linked to the Ricard family. So far, the two sides have described talks as cordial and constructive. Yet there are doubts that Elliott can change much as the Ricard family controls 15% of Pernod's shares and 21% of voting rights, while long-time investor GBL owns a 7.5% stake and has said it backs the firm's strategy. The French state also warned in December it wanted “big French companies to have stable and long-term shareholders” and not to be “subject to pressure from shareholders who want short-term profitability.” One unknown is why Elliott is so far taking a less confrontational approach with Pernod than with some other investments. Sources say Elliott could be testing a new template for negotiations with other French companies.

Telecom Italia Profit Warning Exposes Shareholder Divisions
" Reuters (01/18/19) Flak, Agnieszka"

Tensions between Telecom Italia’s (TIM) top two shareholders intensified Friday after the Italian phone group warned of a decline in 2018 profit and said its domestic business would remain under pressure this year. In an unscheduled release of preliminary results late Thursday, TIM said it expects to report 2018 organic core earnings of around 8.1 billion euros ($9.2 billion). The figure represents a drop of less than 5%, a source said, despite an improvement in its Brazilian unit. TIM has been mired since early last year in a battle between shareholders Vivendi and Elliott over how to revive the embattled company. Vivendi, which owns 24% of TIM, again criticized Elliott over TIM's poor results. “We are very, very angry because there's been a lot of time wasting since Elliott took over ... we are concerned there is no plan in place and they are putting the blame on the previous management,” a spokesman for the French media group said. Vivendi and Elliott will again face off on March 29 when shareholders are asked to vote on Vivendi's request to replace five of the Elliott-appointed directors. The French investor also pledged to call another shareholder meeting in the summer if results do not improve.

Gulfport Pledges Share Buybacks After Hedge Fund Demand
" Reuters (01/17/19) Herbst-Bayliss, Svea"

Natural gas and oil firm Gulfport Energy Corp. (GPOR) Thursday said it will buy back $400 million of shares, just hours after Firefly Value Partners called for it to do so, arguing that a large share buyback could spark a doubling of Gulfport's share price. Firefly has an 8.1% stake in Gulfport. Gulfport said it will buy back the shares in the next two years and said it bought $90 million worth of shares at the end of 2018. "I want to underscore our commitment to further enhancing shareholder value with a newly authorized $400 million stock repurchase program to be executed within the next 24 months," stated CEO David Wood. Firefly had said Thursday morning it wanted Gulfport, which has a market capitalization of $1.5 billion, to buy back $500 million of shares. Firefly criticized how Gulfport had allocated capital and noted that current board members might not be committed to pushing for improvements. The hedge fund said directors do "not seem up to the task of fixing the company's capital allocation strategy and regaining investors' trust," adding that it may be time to add a shareholder to the board who can encourage the group to call for these changes. "We propose an action plan that we believe allows Gulfport to create at least $9 per share of value for stockholders (over 100% of the current market capitalization) over the next 12 months," Firefly's letter said.

Pernod Ricard to Reshuffle Board After Elliot Takes Stake—Report
" Reuters (01/17/19) White, Sarah"

Pernod Ricard (PDRDY) reportedly will reshuffle its board in the coming weeks, following Elliott's December disclosure that it had built a stake of slightly more than 2.5% in the French family-backed spirits group. Among those who could take a step back is Vice Chairman Pierre Pringuet. The hedge fund has called on Pernod Ricard to improve its profit margins and governance, deeming that the board was too close to the Ricard family. Sources say Elliot and Pernod managers met on Jan. 15 and agreed to continue discussions.

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.

PPG Paints Itself Into a Corner
" Wall Street Journal (01/17/19) Wilmot, Stephen"

PPG Industries (PPG) said Jan. 17 it would consider splitting its architectural paints used for buildings from its industrial ones, which cover cars, aircraft, and the like. Trian Fund Management last October revealed a 2.9% stake and called for a "strategic review of the portfolio," the ouster of Chairman and CEO Michael McGarry, and corporate governance reforms. Two years ago, PPG seemed a beneficiary of activism rather than a victim. It made three bids for underperforming European competitor Akzo Nobel and was supported by leading Akzo shareholder Elliott Management. But Akzo Nobel fended them off, forcing the hedge fund to call for a portfolio split instead. Soon thereafter, PPG's fortunes began to slip with the revelation of accounting irregularities followed by a substantial profit warning. The company now likely must acquiesce to Trian.

PPG Weighs Splitting Building and Product-Coating Units
" Wall Street Journal (01/17/19) Hufford, Austen"

PPG Industries Inc. (PPG) announced it is conducting a review of its paint and coatings business that could result in a split of the company, following pressure from Trian Fund Management LP. PPG makes coatings and paints of two kinds: for walls and rooms of buildings and homes; and for products such as cars and smartphones. The company said it would decide whether those architectural and industrial coatings businesses should be separated by the end of the second quarter. PPG in recent years sold and spun off assets to focus on those two businesses. Trian, who reportedly owns a 2.9% stake in the company, has called for PPG to be broken up along those lines and for CEO Michael McGarry to resign. PPG said that month that its board unanimously supported McGarry. “We are very appreciative of the input and constructive dialogue that we have with all of our shareholders,” said McGarry, without specifically mentioning Trian. Jean-Marie Greindl, PPG's head of architectural coatings, departed on Jan. 9, though the company did not reveal why. PPG's shares fell 2% in premarket trading on Thursday as the company also said it saw slowing global economic growth and demand declines for its products in some countries.

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. Puts Itself Up for Sale
" Crain's Chicago Business (01/16/19) Marek, Lynne" (CARS) announced Thursday it has been exploring "strategic alternatives," including a potential sale of the company, since Sept. 28 when its board authorized the process. The move comes after Starboard Value purchased a stake in the company early last year and started pushing for changes to boost the value of the company's stock. In a December letter, Starboard told that if it cannot improve its stock performance it should consider selling itself or overhauling management. has appointed Starboard representatives to the board and been in talks with the investment firm. Last month, let go of 126 employees to reduce its workforce by 8%. It currently has about 1,500 employees. "The company has not set a timetable for the conclusion of its review of strategic alternatives," said.

Ashland Mails Letter to Shareholders Highlighting Industry Analyst and Shareholder Support
" Globe Newswire (01/17/19)"

Ashland Global Holdings Inc. (ASH) has sent a letter to shareholders defending its performance and criticizing Cruiser Capital Master LP's efforts to gain board representation. Ashland notes that its strategy and portfolio transformation are driving strong results and that numerous independent industry analysts have backed Ashland's strategic plan. It also states that it pledged to appoint two new independent directors to the board in consultation with Neuberger Berman, one of the company's largest and long-term shareholders, and with input from other shareholders. Meanwhile, Ashland says, replacing the board with Cruiser's candidates "could derail the company's strong progress." The company's 2019 annual meeting of stockholders is slated for Feb. 8.

Judge Says Papa John's Founder Entitled to Corporate Records
" Associated Press (01/16/19)"

A Delaware judge has ruled that Papa John's (PZZA) embattled founder John Schnatter is entitled to corporate records that the company has refused to turn over to him.  Schnatter, who sued Papa John's International Inc. in 2018, claims he needs the records to inform himself in order to fulfill his corporate duties and to ensure that other members of Papa John's board of directors are doing the same.  The company counters that Schnatter, who was pressured to step down as chairman back in the summer, wants the records to further his own interests.  The two sides had resolved disputes over 13 of 17 categories of documents.  The judge ruled Jan. 15 that the company failed to prove that Schnatter's purpose for seeking to inspect the remaining four categories of documents was improper.

Japan Crafts Governance Reforms, With 2020 Set as Target Year
" Nikkei Asian Review (01/17/19) Shiraiwa, Hiona"

A Japanese government panel has released a package of corporate governance reform proposals. One would be to require larger corporations—both listed and unlisted—to have outside directors. Under the proposal, companies must have outside directors if they have at least 500 million yen (US$4.6 million) in capital or at least 20 billion yen in total debts. Current law mandates firms that meet those conditions but do not have outside board members explain to shareholders why they have not done so. More than 90% of companies listed on the Tokyo Stock Exchange already have an outside director, but 2.3% do not, mentioning reasons such as costs or a lack of appropriate candidates. Japan's government plans to submit relevant legislative revisions soon, with 2020 as the target year for implementation.

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.

Waterton Seeks to Replace Board, CEO at Canadian Miner Hudbay
" Wall Street Journal (01/16/19) Thomas, Patrick"

Waterton Global Resource Management Inc. is launching a proxy fight with Hudbay Minerals Inc. (HBM), calling on the Canadian mining company to replace eight of its 10 board members and its CEO. The private-equity firm has a nearly 12% stake in Hudbay and is its second-largest shareholder, according to FactSet. Waterton has recommended that Hudbay replace CEO Alan Hair with Peter Kukielski, former CEO of mining company Nevsun Resources Ltd. (NSU). According to a Hudbay spokesman, "Waterton's attempt to seize control of a majority of the board is particularly concerning, given that its interests may not be aligned with those of other shareholders." In a letter to shareholders on Jan. 16, Waterton said it believes Hudbay is failing to live up to its full potential due to a culture of entrenchment and that Hudbay needs more board members with experience in South America, where it has mining operations.

Glass Lewis Recommends Bandera Nominee to Luby's Board
" Business Wire (01/16/19)"

Luby's Inc. (LUB) stockholder Bandera Partners LLC says Glass Lewis recommends that its clients vote FOR Bandera nominee Jeff Gramm on the GOLD proxy card at Luby's 2019 annual meeting on Jan. 25, and not to vote the white proxy card. Bandera believes stockholders seeking change at Luby's should vote for all four of its nominees on the GOLD proxy card. According to the Glass Lewis report, "Having evaluated the arguments made by the Dissident and the incumbent board's response, we find that the Company's disastrous financial performance combined with an insufficient turnaround plan suggest that additional oversight and fresh perspective on the board are warranted...The incumbent board and management team have delivered very poor shareholder returns relative to peers and broader market indices over the long-term and the Company's operational fundamentals have deteriorated, with shrinking revenue and mounting losses in recent periods. There is ample room for shareholder concern that the incumbent board and management team have not presented a clear and compelling plan to turn the business around, in our view."

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.

BLR Partners and Josh Schechter Intend to Vote Against a Proposed Combination Transaction Involving Sierra Income and Medley Management
" PRNewswire (01/15/19)"

BLR Partners and Josh Schechter own more than 2% of Medley Capital Corp. (MCC) and intend to vote against the proposed combination transaction with Sierra Income and Medley Management.  "Inexplicably, the four 'independent directors' Arthur Ainsberg, Karin Hirtler-Garvey, Mark Lerdal, and John E. Mack have approved a transaction that we believe facially is not in the best interests of shareholders, that transfers significant value to hopelessly conflicted insiders, and that represents a complete abdication of their fiduciary duty to protect the interests of shareholders generally," they said in a letter.  They called for the "immediate resignation of each of the independent directors who we believe have forfeited their rights to serve as directors by approving an 'inside deal' without running a process to maximize shareholder value.  We believe their conduct has irrevocably undermined shareholder trust in their independence and judgment."  Three other shareholders already have publicly stated the same intention to vote against the proposed combination transaction while providing a long list of justifications for their decision.

Capital Senior Living Shareholder Pushes for Board Changes
" Senior Housing News (01/15/19) Sudo, Chuck"

Cove Street Capital is calling for “commensurate change” in the board of Capital Senior Living (CSU), despite a recent shakeup in top leadership at the Dallas-based senior housing operator. Cove Street upped its stake in Capital to 8.5% last September and is urging the company to explore strategic alternatives. In November, it was reported that Capital Senior Living was exploring strategic alternatives and might be entertaining interest from private equity buyers. In a letter dated Jan. 11, Cove Street Principal Jeffrey Bronchick wrote that Capital Senior Living's board “must take at least partial responsibility for the poor results and dismal price of the company's equity.” Bronchick also suggested Capital's board begin a process to “de-stagger” its members, starting with this year's nominees, and continuing until all members are elected annually. Finally, Bronchick noted that Cove Street provided a resume for an “extremely strong” board candidate it worked with in the past and who has corporate governance background in private and public finance. The letter applauded the recent appointment of Kimberly Lody as Capital's new president and CEO, however, stating that she seems to be “a perfectly reasonable candidate for this position.”

Slow Gains for Women and Minorities on Boards of Big U.S. Firms, Study Says
" New York Times (01/15/19) Olson, Elizabeth"

The percentage of women and minorities on the boards of America's biggest public companies has edged up in the last couple of years, according to a study by Deloitte and the Alliance for Board Diversity. However, researchers note that "advancement is still slow" and an overwhelming majority of corporate directors at such firms continue to be white males. The study shows that females and minorities occupied 38.6% of board seats at Fortune 100 companies in 2018 versus 35.9% two years prior. At Fortune 500 companies, that figure increased to 34% from 30.8% over that same time span. "Our goal is to get to 40% diversity so we can have fair representation on Fortune 500 corporate boards," remarks Linda Akutagawa, the group's chairwoman.

Exclusive: Jana Liquidates Two Hedge Funds
" Reuters (01/15/19) Herbst-Bayliss, Svea"

Jana Partners LLC is shuttering two stock-picking hedge funds after seeing losses and will concentrate instead on its main strategy of investing in a few companies and urging management to improve their performance. The Jana Partners and Jana Nirvana funds will be liquidated, the firm told its investors in a letter. It will instead concentrate solely on its Jana Strategic Investment (JSI) fund, which manages $1.5 billion, and will also launch the Jana Impact Capital fund later in 2019. That fund will concentrate more on social activism. "We will transform into a firm solely dedicated to our core competency of shareholder engagement," founder Barry Rosenstein and his team said in the letter. Investors in the funds that are being liquidated will be offered the opportunity to move into the firm's activist funds. "This is where we have delivered our best returns for investors, developed a real competitive advantage, made our mark on numerous industries, and where we see our future and the richest opportunity set," the letter said.

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.

OSC Seeks to Lighten Regulatory Load on Companies
" Financial Post (01/14/19) Shecter, Barbara"

The Ontario Securities Commission (OSC) recently kicked off a broad consultation aimed at reducing costly and outdated rules, as well as lightening the regulatory burden on companies. Maureen Jensen, chair of the OSC, said the consultation will focus on finding opportunities to "streamline and improve" disclosure to investors, who she said ultimately bear the cost of unnecessary or outdated regulations. Jensen added that the consultation is being done "with the support of our government."

Proxy Advisory Firm ISS Backs Two Dissident Nominees in Luby's Fight
" Reuters (01/14/19) Herbst-Bayliss, Svea"

Institutional Shareholder Services (ISS) is recommending that shareholders elect two dissident nominees at Luby's Inc. (LUB)—Jeff Gramm, whose hedge fund Bandera Capital is running the proxy contest, and his father, Philip Gramm, a former U.S. senator from Texas. Bandera has asked shareholders to elect four dissidents. According to the proxy advisory firm's report, "The incumbent board has overseen alarming underperformance over the past decade and deteriorating financials over the past five years." Luby's share price has fallen 37% in the last 52 weeks. Further, ISS said current board members are out of touch with shareholders' concerns and that "further change is not only warranted, it is overdue."

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.

Telecom Italia Shareholders to Vote on Vivendi's Board Demands in March
" Reuters (01/14/19) Flak, Agnieszka"

Telecom Italia (TI) is setting the stage for a new showdown between top investor Vivendi and U.S. hedge fund Elliott by calling a March 29 shareholder meeting to vote on Vivendi's request to replace five board members. Vivendi, which owns a 24% stake in Telecom Italia, called for the replacement of five of the board members put forward by Elliott, citing a "substantial lack of independence." The two investors have long been battling over how to revive Italy's biggest phone company, and another change in board composition could impact Elliott's ability to pursue a more radical plan that includes spinning off its network infrastructure, selling assets, and converting savings shares into ordinary ones. Elliott urged shareholders not to "turn the company back over to Vivendi," but instead give the new board and the new CEO time to execute their strategy and create value. Telecom Italia said it would combine a regular annual shareholder meeting on financial results scheduled for April with the one on Vivendi's requests.

Hedge-Fund-Backed Media Group Makes Bid for Gannett
" Wall Street Journal (01/14/19) Lombardo, Cara"

Media group MNG Enterprises has offered $12 a share for USA Today publisher Gannett (GCI), a 23% premium over Friday's closing price of $9.75. Better known as Digital First Media, the large newspaper chain has quietly built a 7.5% position in Gannett's stock. MNG is urging the McLean, Va., company to review its strategic alternatives, including a potential sale. Alden Global Capital, a New York hedge fund that focuses on investing in distressed companies, is the largest shareholder of the media group. Founded by investors Randall Smith and Heath Freeman, Alden is known for slashing costs at its media investments through layoffs and the use of zero-based budgeting. MNG said it has approached Gannett several times about a deal over the past few years but has been rebuffed. Gannett said its board would review the proposal to determine the course of action that is in the best interest of the company and shareholders.

New Petrobras CEO Pushes to Oust Board Members: Sources
" Reuters (01/11/19) Nogueira, Marta; Gaier, Rodrigo Viga"

The new chief executive of Brazil's Petroleo Brasileiro (PBR) wants to oust two board members. Within Petrobras, the pressure from Roberto Castello Branco is viewed as a threat to corporate governance rules that were approved as the company sought to shield itself from undue political influence. Branco is seeking the resignation of Segen Estefen and Durval Soledade Santos, whose mandates were only supposed to end in 2020. Chairman Nelson Guedes and board member Francisco Petros resigned earlier in January, and Jeronimo Antunes was appointed as interim chairman. Petrobras is a state-controlled oil company. The government can call for a shareholders' meeting to elect new board members if the board members do not agree to resign. With the departure of Estefen and Santos, the new government would designate four of 11 board members at Petrobras, given the recent resignation of two other board members.

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.”

Investors in Tussle at Telecom Italia, Chaired by Fulvio Conti
" Sunday Times (London) (01/13/19) Woods, Ben"

Vivendi has accused Telecom Italia's chairman Fulvio Conti of failing to represent all shareholders, escalating the boardroom fight at the Italian telecoms provider. The French investor has accused the chairman of carrying out “absurd time-wasting tactics” after it called for an extraordinary shareholder meeting last month to try to regain board control. Vivendi, which owns a 24% stake, has been locked in a tussle with Elliott Advisors, which owns 9%. Vivendi's control was diminished in May when a majority of shareholders voted for Elliott to take control of the board. Vivendi has called for a shareholder vote to try to remove five Elliott-backed board members—including Conti—and appoint five new members in their place. However, it expects the board will not choose to hold an immediate vote when it discusses the issue Monday. Vivendi said: “The chairman feels he no longer represents Telecom's shareholders as a whole and is therefore trying to avoid a democratic vote.” Meanwhile, Conti contended: “I work in the interest of all shareholders.”


M&A Heats Up for Battered Mining Companies
" Wall Street Journal (01/18/19) Ramkumar, Amrith"

The mining industry is seeing a surge in engagement. Private-equity firm Waterton Global Resource Management is pushing Hudbay Minerals (HBM) to overhaul its board and replace its chief executive in a proxy fight with the Canadian base metals company. Hedge-fund manager John Paulson, who has been engaged in a six-month proxy fight with Detour Gold, overthrew part of the Canadian gold miner's board in December. Deals also are on the rise. The value of mining deals surpassed $10 billion in September for the first time in nearly four years, then topped that threshold again in November and then in January, according to Dealogic. Still, the industry continues to suffer from tepid metals prices, battles with emerging-market governments over reserves, and dwindling supplies. Mining's growth potential does not stack up relative to other industries, says Lucas Pipes, a mining analyst at B. Riley, but shares look cheap and there is a lot of opportunity. "For long-term investors, the sector may not have ever been more attractive than at this time," according to Pipes.

Top 10 Topics for Directors in 2019
" Harvard Law School Forum on Corporate Governance and Financial Regulation (01/17/19) Berchem, Kerry; LaFollette, Christine; Reddick, Frank"

Shareholder activism and Securities and Exchange Commission (SEC) regulation and enforcement will be among directors' top topics in 2019, according to Akin Gump Strauss Hauer & Feld. Last year, activism campaigns rose with regard to the number of companies engaged and the number of board seats won, and traditionally passive and institutional investors were more involved in encouraging company engagement with activists. The SEC took steps to enhance the board's role in evaluating whether to include shareholder proposals in a company's proxy statement, and solicited comments on the possible reform of proxy advisor regulation, so boards and companies should monitor developments in this area. Social issues were at the forefront this year, and likely foretell continued and increased focus on environmental, social, and governance issues, including from regulatory authorities. Boards should anticipate the possibility that allegations of sexual harassment may arise against a top executive. Public companies are facing increasing pressure from corporate governance groups, investors, and regulators to improve gender and other types of diversity on the board. Corporate strategic planning should continue to be a high priority, along with thoughtful efforts to understand company culture. U.S. sanctions, cybersecurity, and the Tax Cuts and Jobs Act also will be issues of concern for directors this year.

Video: Activism in Europe: Combative or Constructive?
" Reuters Breakingviews (01/18/19)"

Activist shareholders are preparing to storm European boardrooms in 2019, according to Reuters Breakingviews. The London Predictions event will discuss what investors want and how companies should respond to them. Panelists include Anne-Sophie d'Andlau, co-founder of CIAM; Rich Thomas, a managing director in Lazard's Shareholder Advisory Group; Leslie McGibbon, who led global communications for AkzoNobel during a high-stakes corporate battle; and Liad Meidar, a managing partner and chief investment officer at Gatemore Capital Management.

Video: How Bad Corporate Governance Is Hurting South Africa
" CNBC Africa (01/18/19)"

Corporate governance in South Africa has been a contentious issue of late, with companies airing their dirty laundry as shareholders speak out against what is seen as maladministration or lack of accountability. Shareholder activist Theo Botha speaks with CNBC Africa.

Hedge Fund Can Give Olympus a Clearer Focus
" Bloomberg (01/16/19) Gopalan, Nisha"

Olympus is shaking up its leadership and board in response to pressure from hedge fund ValueAct Capital Management. Hiroyuki Sasa, appointed chief executive officer a year after the fallout from the company's accounting scandal in 2011, will be replaced by chief financial officer Yasuo Takeuchi. The Japanese camera and medical-device maker also will appoint three foreign board members, including ValueAct partner D. Robert Hale. Although Olympus shares recovered under Sasa's tenure, the company failed to stay free of controversy. But the latest announcement, which includes plans to cut costs and reshape the medical business, have sent the company's shares to their highest level in three years. Investment banks are optimistic, writes columnist Nisha Gopalan. Sasa did not renew a poison pill arrangement, and the board's composition has changed; it is now 55% independent and the average tenure has been halved to three years. "By bringing in ValueAct's Hale and promising to add two more international executives with medical experience (a rare Japanese concession to an ... investor), Olympus is signaling a willingness to further improve its corporate governance," concludes Gopalan.

Out With the Old, in With the New in the Consumer Goods Sector
" Financial Times (01/16/19) Abboud, Leila; Walker, Owen; Fontanella-Khan, James"

Increased pressure from investors and evolving shopping habits in the smartphone era have resulted in a changing of the guard at the world's leading consumer goods companies. In the last six months, CEOs have departed at Unilever (UN), PepsiCo (PEP), British American Tobacco (BTI), and Beiersdorf (BDRFY). These departures followed earlier shake-ups at Nestlé (NSRGY), Mondelez International (MDLZ), and Campbell Soup (CPB). This week, Reckitt Benckiser (RBGLY) CEO Rakesh Kapoor and JAB Holdings Chairman Bart Becht both announced their resignations. "One can't help but feel that an era is ending," said Jefferies consumer analyst Martin Deboo. "The next generation of managers will need to be digital savvy in [a] way the current ones perhaps could not be." Much of the industry has imposed significant cost cuts, often under pressure from such investors as Dan Loeb's Third Point—which secured two board seats at Campbell; and Paul Singer's Elliott Management—which recently launched a campaign against Pernod Ricard (PDRDY). Observers note that even the threat of an activist investor can be enough to spur action, which could be behind Kapoor's departure. Buchanan Harvey's Samuel Johar says, "There has been dissatisfaction among shareholders with Rakesh for a while and the board has moved to address it. If they had allowed it to fester then they might well have faced an activist challenge and they would have lost control of the agenda."

2019 Proxy Letter—Aligning Corporate Culture With Long-Term Strategy
" Harvard Law School Forum on Corporate Governance and Financial Regulation (01/15/19) Taraporevala, Cyrus"

State Street Global Advisors (SSGA) plans to focus on corporate culture as a priority engagement topic in 2019. Intangible assets such as corporate culture are driving a greater share of corporate value as the challenges of change and innovation grow more acute. Through engagement, however, SSGA has found that few directors can adequately articulate their company's culture or demonstrate how they assess, monitor, and influence change when necessary, writes Cyrus Taraporevala, SSGA's president and CEO. SSGA has created a framework for companies to evaluate the alignment of corporate culture with their long-term strategy and for directors to guide senior management in its implementation. The Framework for Assessing and Monitoring Corporate Culture is based on insights gathered from years of engagement, and will help companies address the issue by conducting an analysis to determine whether culture and strategy are aligned, implementing mechanisms to influence and assess progress, and improving reporting that can help directors discuss their role in influencing and monitoring corporate culture. SSGA also provides examples of some best practices related to culture that it has identified through engagement. The investment manager is calling on boards to proactively review and monitor corporate culture, evaluate alignment with strategy, and incentivize management to take corrective action, if necessary. SSGA hopes "that prioritizing corporate culture in our stewardship program and providing transparency into our approach to engagement on this topic will lead to meaningful conversation about an intangible, yet critical component to the long-term success of a company," concludes Taraporevala.

Olympus Shares Should Come Down From the Mountain
" Wall Street Journal (01/16/19) Wong, Jacky"

Foreign investors have scored a rare win in Japan. Olympus has appointed a new management team and says it will reform its corporate structure. Moreover, Olympus will appoint three outside directors, including one from San Francisco-based hedge fund ValueAct, which owns a 5% stake in the medical-device maker. The company was hit by an accounting scandal in 2011 involving more than $1 billion of hidden losses, and was fined $85 million in December for failing to file reports with U.S. regulators about infections linked to its medical devices. Foreign investors own around half of Olympus, and might have sided with ValueAct due to the company's recent troubles. Foreign investors have become more prominent in Japan as the government pushes for corporate-governance reform. A record number of Japanese listed companies received proposals from shareholders during annual general meetings last year, according to Goldman Sachs. More investors are voting against resolutions that are not aligned with their interests.

Video: Investors Are Getting a 'Win-Win' Trade in This Dollar Tree Battle
" CNBC (01/15/19)"

Jim Cramer says Starboard Value's involvement in Dollar Tree (DLTR) is bringing some trading opportunities into focus.

Shutdown Ties Companies’ Hands on Unwanted Shareholder Proposals
" Wall Street Journal (01/15/19) Rubin, Gabriel T."

Publicly traded companies could have to put shareholder proposals to a vote if the government shutdown does not end soon. That is because the Securities and Exchange Commission (SEC), which is operating with minimal staff, must approve requests by companies to exclude proposals from a vote at annual shareholder meetings. The SEC each winter handles a flood of requests from corporations to keep unwanted initiatives off the proxy ballots that every public company is required to put before its stockholders. “Companies are stuck in limbo right now,” said Tom Quaadman, executive vice president at the U.S. Chamber of Commerce, a trade group. “They are going to become more vocal if the shutdown continues.” Proposals are frequently excluded from ballots by the SEC, such as if they have been voted on before by a company's shareholders or if they are deemed to not be economically relevant to a company's performance. Companies are supposed to file requests to the SEC for exemptions at least 80 days before they send out proxy materials to shareholders, to give commission staff sufficient time to consider the applications. The SEC typically responds within 30-45 days, though more complex issues can take nearly the entire 80 days. Companies with meetings in March and April still have time to exclude proposals, provided the government shutdown ends in the near future, and have some recourse to prevent votes on proposals even if it continues.

Breakingviews: Citigroup Is in a Good Place to Do Better
" Reuters (01/14/19) Currie, Antony"

Citigroup (C) chief executive Mike Corbat is doing well at making the bank more efficient, but he has a year to do better. Last week he agreed to give ValueAct access to confidential information for a year, which will ramp up the pressure to catch up with rivals. Earnings published Monday chart Citi's slow but undeniable improvement: its return on tangible common equity was 10.9%, higher than a year ago. Yet there may be more flab to trim, and giving ValueAct access to inside information could help identify it. Citi's results suggest two obvious areas to focus on. First, the consumer bank. Its costs were a reasonable $55 for each $100 of revenue in 2018. But rivals run leaner operations despite having a far smaller credit-card unit, which is usually a higher-margin business. Similarly, Citi's corporate and investment bank relies more on the lower-cost transaction-services business than its rivals, yet is no more efficient. Citi could save $4.5 billion a year by bringing its retail-banking efficiency ratio down to 57%, for example, and shaving 4% off its investment-banking costs to best Bank of America (MER-K). Of course, banks need to invest, and that could account for some costs. But an extra set of experienced, independent eyes from ValueAct will be useful, and the fund will get to vet Citi's decision-making process and strategy as well as the numbers.

Corporate Governance Failures and Interim CEOs
" Harvard Law School Forum on Corporate Governance and Financial Regulation (01/14/19) Mussalli, George; Cukurova, Sevinc"

The appointment of an interim CEO has been linked to poor performance. Researchers from PanAgora Asset Management analyzed the characteristics of boards that appointed interim CEOs to run big U.S. companies in the Russell 3000 index during 2000-2017. They found that directors in these boards were less connected and have shorter tenure, which are most likely manifestations of poor management quality. Furthermore, interim CEO appointments are believed to be caused by lack of a proper CEO succession plan, which is a common problem in the corporate world. CEO duality is typically associated with the promotion of effective CEOs as part of a succession plan, so it is unsurprising that CEO duality is the strongest predictor for appointment of permanent CEOs. Overall, the research suggests that better corporate governance could help companies avoid the interim CEO episode. The researchers also discovered that once the interim CEO is appointed, board connectedness significantly shortens the search for a permanent one.

Aratana Therapeutics COO Retires; Key Investor Shrinks Stake
" Kansas City Business Journal (01/11/19) Lieberman, Lily"

The recent retirement of Aratana Therapeutics Inc.’s (PETX) COO, along with key stakeholder Engaged Capital slashing its stake, indicates that the once-imminent sale of the animal health company may be less likely. COO Brent Standridge left the company Dec. 31, according to a Jan 4. filing with the Securities and Exchange Commission (SEC). A company spokeswoman said Standridge is retiring to spend more time with his family and that Aratana has no plans to hire a new COO at this time. In November, Seeking Alpha reported that Aratana could be getting a buyout from Engaged Capital. But during the past few months, the hedge fund has reduced its stake in Aratana by about half. In August, Engaged Capital owned 8.1% of Aratana. But as of Jan. 10, that stake had fallen to 4.1%, according to an SEC filing. A source familiar with the investment said the market engaged in “a gross overreaction” by pegging issues of the stock price to the divestment. “They're still a significant shareholder at 4.1%,” the source said, noting that Engaged Capital remains the fifth-largest Aratana stakeholder. “There's just a portfolio rebalance.” Engaged Capital approached Aratana in March. By early April, it held a 5.2% stake. The fund nominated three of its board candidates before Aratana's annual shareholder meeting in late July. However, Aratana struck a deal May 18 with Engaged Capital, agreeing to increase the number of board seats from nine to 10 and adding two candidates from Engaged Capital's slate.

The Merger That Made a U.S. Gas Giant Is Failing
" Wall Street Journal (01/13/19) Matthews, Christopher M."

When EQT Corp. (EQT) agreed to purchase Rice Energy Inc. (RICE) for $6.7 billion a little more than a year ago to create the nation's biggest natural-gas producer, it promised that the combined company would be able to make more by spending less. However, those promises have yet to be realized. EQT shares have declined approximately 42%—accounting for EQT's spinoff of its pipeline business in November—since the deal closed in late 2017, and the efficiencies executives expected have failed to come to fruition. The two shale drillers' combined market value has lost approximately $4 billion since the deal was announced in June 2017, including accounting for the spinoff. The venture officially turned contentious in December, when the brothers who ran Rice Energy moved to boot EQT's current management and take over the merged company. The brothers have earned the support of both Elliott Management Corp. and D.E. Shaw Group. The brothers are soon expected to present their ideas for proposed changes to EQT's board of directors. Investors in recent years have increasingly lost patience with shale companies, which have spent about $100 billion more than they've made over the last decade. Many shale companies have explored consolidation, hoping that bigger combined landholdings and scale would help them turn fracking more profitable. In a letter to EQT sent Friday, D.E. Shaw said the company's recent letter to shareholders was "little more than an announcement of layoffs" and didn't cover the issues behind its weak performance. D.E. Shaw reiterated its backing of the Rice team. "If a constructive resolution isn't reached swiftly, then the answer is simple: let shareholders vote," D.E. Shaw said in the letter.

Activist Shareholders Step Up Pressure on U.K. Boards
" City A.M. (01/13/19) O'Dwyer, Michael"

Shareholder activism spiked in the U.K. last year as investors launched campaigns at 25 companies, spending $7.35 billion (£5.72 billion) on shares, according to research by investment bank Lazard. "Shareholder activism in the U.K. is at a record level and is continuing a trend that began to play out in 2017," said Richard Thomas, head of the European shareholder advisory practice at Lazard. "In 2018, activism has increasingly been used as a tactic to reshape business strategies and drive M&A activity across sectors, particularly those most affected by tech disruption and market dislocation," he added. Eleven U.K. companies faced activist campaigns in 2017, less than half of last year's number. The growth in activism in 2018 raises the prospect of further disruption for management of U.K. companies this year. "If we look at the US, there was an uptick in activist campaigns in 2015 which was followed by an increase in aggressiveness and public pressure the following year. We could see a similar trend in the UK this year," said Rich. Investors in U.K. companies accounted for more than 10% of activist campaigns globally in 2018. One third of global campaigns worldwide related to mergers and acquisitions while activist investors also secured 161 board appointments globally, a new record.

The Board, CEO Misconduct, and Corporate Culture
" Harvard Law School Forum on Corporate Governance and Financial Regulation (01/12/19) Hays, Laurie"

More than 400 business executives and employees, including prominent CEOs, have been accused of misconduct in the past year and a half. In several cases, the resulting crises have fallen squarely in the lap of boards of directors. Columnist Laurie Hays cites an online poll by the National Association of Corporate Directors, which revealed that nearly 50% of directors said their board's tendency to focus on known risks—or those management already has identified—creates a sizable barrier to its ability to oversee disruptive risks. Meanwhile, a new survey by Edelman finds that almost 66% of investors polled believe maintaining a healthy company culture and enforcing a corporate code of conduct at all levels of the business impact their trust significantly in that company.

Shareholder Activists Zoom In on Prospect-Rich Japan
" Financial Times (01/10/19) Lewis, Leo"

Observers says 2019 looks promising for shareholder activism in Japan, with the pool of potential prospects expanding in recent months. The percentage of stocks in the Tokyo Stock Exchange's first section trading below their book value has risen to nearly half from less than one-third at one point in 2017, and in the second section, fully two-thirds of stocks are now trading below book. Forward price-to-earnings ratios fell last year as well. In December, the Singapore-based fund Effissimo, for instance, increased its stakes in some large Japanese corporations, and it already has substantial stakes in more than 20 Japanese companies. Meanwhile, analysts say there are signs of a qualitative change in the way activist campaigns are being waged in Japan, with the tactics becoming more nuanced, the prospect selection slowly becoming more realistic, and the demands expanding beyond calls for share buybacks and higher dividends. In addition, active funds increasingly are under pressure to declare how they vote while the votes of passive funds likely will align with the recommendations of proxy advisors. These changes will turn extraordinary general meetings into potentially significant threats.

Looking Ahead: Key Trends in Corporate Governance
" Harvard Law School Forum on Corporate Governance and Financial Regulation (01/10/19) Gregory, Holly J."

Corporate boards and management teams must be able to navigate ongoing changes in technologies, business models, and competitive conditions and assess corporate opportunities and risks in a dynamic and uncertain political, social, and business environment while also adapting to changing expectations and pressures related to corporate governance processes and relations with influential shareholders and other key constituents. However, it can be difficult for boards to resolve shareholder pressures that conflict with director viewpoints, given that shareholders have gained more power over the last two decades. For instance, institutional investors owned 70% of U.S. public company shares last year, and 91% participated in proxy voting, compared to retail shareholder participation at 28%. Further, companies have had to deal with the rise of proxy advisory firms that serve to coordinate proxy voting; the dismantling of classic corporate defenses, such as classified boards and poison pills; and the rise in shareholder engagement and negotiation of governance processes. Other trends of note in corporate governance include the potential reform of proxy voting and regulation of proxy advisors and shareholders' increased focus on ESG issues.

Opinion: Elliott’s QEP Bid Says It All About Frackers in 2019
" Bloomberg (01/10/19) Denning, Liam"

Frackers are having a great week, courtesy of oil pushing back above $50 a barrel. One of them, QEP Resources Inc. (QEP), got some more specific help in the form of a takeover offer from Elliott Management Corp. The hedge fund's strategy looks two-pronged. The most straightforward element is a bet on QEP's valuation. While exploration and production stocks haven't kept pace with oil's recovery over the past two years or so overall, QEP has really slumped, which is presumably why Elliott showed up in the first place. The other prong is flushing out another bidder. In its letter to the board, Elliott urges QEP to open a data room for the core Permian assets and hire advisers to “oversee the process with us and potentially others.” Altogether, it is a push in the direction of putting the entire company up for sale. Many firms, QEP included, have changed their tune in the past 12 to 18 months, emphasizing returns and payouts. But it is early days compared to the long period of value destruction that came before. Moreover, almost half the respondents to the Dallas Fed's latest survey of oil bosses said they were prioritizing growth this year. The resulting ennui on the part of public markets makes E&P companies a target-rich environment for activists and private equity. In theory, it should also make smaller companies such as QEP attractive takeover candidates for the larger producers that have begun consolidating the fractured, capital-hungry Permian shale basin. Elliott's offer, both as potential transaction and tactical move, captures all of this.

Activist Shareholders Score With Record Moves in 2018
" Financial Times (01/10/19) Fortado, Lindsay"

Data from Lazard shows that recent successes have emboldened activist investors, pushing up the number of companies engaged in 2018 to a record high of 266 from 188 in 2017. The amount of capital invested in these companies reached a high of $65 billion. According to Jim Rossman, head of shareholder advisory at Lazard, "Activists have been able to act with a bit more confidence because of the support they're getting from the investor community." Last year, some of the biggest campaigns were Third Point's proxy fight with Campbell Soup (CPB), Pershing Square and Third Point's efforts to drive United Technologies (UTX) to split into three separate businesses, and Elliott's push at Pernod Ricard (PDRDY) to improve its profit margins. Bill Anderson, global head of Evercore's activism and raid defense business, said, "Activism levels continue to increase, driven by attempts to force sales to financial sponsors as well as an uptick in European campaigns. Over 20% of the S&P 500 have a leading activist in their stock, so 2019 should be another year of heightened activist pressure." Lazard's research found that the most common objectives for activist campaigns last year were a sale of the company, a boost in an acquisition offer, and urging a break-up or divestiture, and Europe and Asia Pacific accounted for one-third of all campaigns, marking the highest levels ever in those regions. Dominating the activist landscape was Paul Singer's Elliott Management, which launched 22 new campaigns last year, followed by ValueAct with nine.

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