4/29/2029

Shareholder Activism in Asia Drives Global Total to Record High

Nikkei Asia (04/29/29) Shikata, Masayuki

Activist shareholders had their busiest year on record in 2024, with the Asia-Pacific region making up a fifth of campaigns worldwide, pushing some companies higher in the stock market and spurring others to consider going private. The worldwide tally of activist campaigns rose by six to 258, up by half from three years earlier, according to data from financial advisory Lazard. Campaigns in the Asia-Pacific tripled over that period to 57, growing about 30% on the year. Japan accounted for more than 60% of the regional total with 37, an all-time high. Activity is picking up this year as well in the run-up to general shareholders meetings in June. South Korea saw 14 campaigns, a jump of 10 from 2023. Critics say South Korean conglomerates are often controlled by minority investors that care too little about other shareholders. Australia and Hong Kong saw increases of one activist campaign each. North America made up half the global total, down from 60% in 2022 and 85% in 2014. Europe had 62 campaigns last year. The upswing in Japan has been fueled by the push for corporate governance reform since 2013 and the Tokyo Stock Exchange's 2023 call for companies to be more mindful of their share prices. The bourse has encouraged corporations to focus less on share buybacks and dividends than on steps for long-term growth, such as capital spending and the sale of unprofitable businesses. Demands for capital allocation to improve return on investment accounted for 51% of activist activity in Japan last year, significantly higher than the five-year average of 32%. U.S.-based Dalton Investments called on Japanese snack maker Ezaki Glico (2206) to amend its articles of incorporation to allow shareholder returns to be decided by investors as well, not just the board of directors. Though the proposal was rejected, it won more than 40% support, and Glico itself put forward a similar measure that was approved at the following general shareholders meeting in March. U.K.-based Palliser Capital took a stake last year in developer Tokyo Tatemono (8804) and argued that more efficient use of its capital, such as selling a cross-held stake in peer Hulic, would boost corporate value. Activist investors are increasingly seeking to lock in unrealized gains from rising land prices, reaping quick profits from property sales that can go toward dividends. Companies in the Tokyo Stock Exchange's broad Topix index had 25.88 trillion yen ($181 billion at current rates) in unrealized gains on property holdings at the end of March 2024, up about 20% from four years earlier. After buying into Mitsui Fudosan (8801) in 2024, U.S.-based Elliott Investment Management this year took a stake in Sumitomo Realty & Development (8830) and is expected to push for the developer to sell real estate holdings. This month, Dalton sent a letter to Fuji Media Holdings (4676), parent of Fuji Television, calling for it to spin off its real estate business and replace its board of directors. Activist campaigns have sparked share price rallies at some companies. Shares of elevator maker Fujitec (6406) were up roughly 80% from March 2023, when it dismissed Takakazu Uchiyama -- a member of the founding family -- as chairman under pressure from Oasis Management. The rise in demands from activists "creates a sense of tension among management, including at companies that don't receive such proposals," said Masatoshi Kikuchi, chief equity strategist at Mizuho Securities. Previously tight cross-shareholdings are being unwound, and reasonable proposals from minority investors are more likely to garner support from foreign shareholders. Some companies are going private to shield themselves from perceived pressure. Investments by buyout funds targeting mature companies in the Asia-Pacific were the highest in three years in 2024, according to Deloitte Touche Tohmatsu. Toyota Industries (6201) is considering going this route after facing pressure from investment funds last year to take steps such as dissolving a parent-child listing with a subsidiary and buying back more shares. Toyota Industries holds a 9% stake in Toyota Motor (7203). The automaker "may have proposed having [Toyota Industries] go private as a precautionary measure," said a source at an investment bank.

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6/3/2025

Commentary: BP Needs to Scrap Its Big Oil Mentality, and Its Buybacks

Reuters (06/03/25) Bousso, Ron

Reuters columnist Ron Bousso writes that BP Plc (BP) has jumped from crisis to crisis in recent years, severely eroding the British firm’s stature as one of the world's leading oil companies. Given the increasingly challenging dynamics in today’s oil market, BP may finally need to accept that it is no longer a true oil major and can’t keep managing cash like one. The exclusive Big Oil club of Exxon Mobil (XOM), Chevron (CVX), Shell (SHEL), TotalEnergies (TTEF), and BP has for decades been synonymous with sprawling upstream and downstream oil and gas operations, solid balance sheets and long-term strategies that have helped generate sizeable, stable shareholder returns. But BP hasn't ticked most of these boxes for years, having dealt with a succession of crises over the past 15 years that have slashed its market cap and left it financially vulnerable and lacking clear strategic direction. Most recently, a failed foray into renewables and a management scandal saddled the company with a ballooning debt pile as it struggles to revert back to oil and gas. CEO Murray Auchincloss acknowledged the need for change when he unveiled in February a fundamental strategy reset that includes reducing spending to below $15 billion to 2027, cutting up to $5 billion in costs and selling $20 billion of assets in an effort to boost performance and rein in ballooning debt. The plan also reset the rate of shareholder returns to 30-40% of operating cash flow. But the reset has done little to alleviate investor concerns. BP's shares have declined by 18% since the strategy update, underperforming rivals. Piling on the pressure, Elliott Management, which has recently built a 5% position in the company, has indicated it wants BP to cut spending even more. While it may be challenging for the 116-year-old company to admit that it can no longer carry the same financial heft it once did, accepting reality will offer the company’s leadership an opportunity to reduce some of its commitments to investors, particularly its share repurchase program. All energy majors today have multi-billion-dollar buyback programs that send capital back to shareholders, helping to attract investors who may be wary about the future of fossil fuel demand. But BP's buybacks feel like a luxury that is out of synch with its financial woes. In its first quarter results released in February, BP said it would buy back $750 million over the following three months. That was lower than the $1.75 billion in the previous three months, but even at this reduced rate, this would still total $3 billion per year. That doesn’t seem prudent, especially given the 20% drop in oil prices to around $65 a barrel this year and the darkening economic outlook. Auchincloss' financial objectives assume a Brent oil price of $70, meaning the Canadian CEO will most likely struggle to meet his targets without borrowing further. Removing the annual $3 billion buyback would certainly upset investors, but it would go a long way towards reducing BP’s net debt to between $14 and $18 billion by 2027, compared with $27 billion at the end of March 2025. The “ground zero” of BP's financial decline was the deadly 2010 Deepwater Horizon disaster in the Gulf of Mexico, which generated $69 billion in clean-up and legal costs. The company continues to pay out over $1 billion per year in settlements. The financial shock forced BP to sell billions of dollars of assets and issue huge amounts of debt to foot the bill. Its market value dropped to around $77 billion today compared to $180 billion in 2010. BP's debt-to-capitalization ratio, known as gearing, reached 25.7% at the end of the first quarter of 2025, significantly higher than those of other oil majors, including Shell’s 19% or Chevron’s 14%. And, importantly, BP's current $27 billion net debt figure omits several major liabilities held on its books. This includes $17 billion in hybrid bonds, an instrument that has qualities of both equity and debt, including a coupon that must be paid or accrued. While companies may issue hybrids for many reasons, including maintaining flexibility, they often do so in part because rating agencies do not treat hybrids as regular debt, which flatters the issuer's leverage ratios. Anish Kapadia, director of energy at Palissy Advisors, calculated BP's adjusted net debt hit $86 billion at the end of the first quarter of 2025, when including net debt, hybrids, Gulf of Mexico liabilities, leases and other provisions. Ultimately, cutting the buybacks should enable BP to tame its huge debt pile and repair its balance sheet faster. That, in turn, should create a strong foundation for rebuilding investor confidence. The departure of current BP Chairman Helge Lund in the coming months could be a good opportunity for the company to consider such radical change. It’s unclear who will take this job, but one qualification for whoever succeeds Lund should be a much-needed sense of financial realism.

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6/3/2025

Investors Say They’re Moving Away From ESG as ‘an Umbrella Concept’

Bloomberg (06/03/25) Raimonde, Olivia

While institutional asset owners such as pension funds and insurers say they remain committed to sustainable investing, they’re less wedded to ESG as “an umbrella concept.” They now widely treat ESG as three separate parts as opposed to a single strategy, according to a survey by Morningstar Inc. (MORN) of 25 asset owners across North America, Europe and the Asia-Pacific region. Until recently, the anti-ESG push has been concentrated in the U.S. “Mainly, the asset owners seem less concerned about what ESG is called versus how it is implemented across their global portfolios,” according to the Morningstar report released on Tuesday. The environmental part of ESG is the primary focus for investors ahead of social and governance-related issues, with the majority viewing “climate as a material investment factor.” The report quotes an official from a superannuation fund in Australia who’s committed to climate investment strategies. The official says “our approach to climate risk is that it’s an unrewarded or consistently under-rewarded risk in portfolios.” Jennifer Boscardin-Ching, a clean energy and environmental specialist at Pictet Asset Management, said she always wants to know how much of a company’s capital expenses are earmarked for green projects before making a sustainable-investment decision. “What is the business model?” she said. “What is the balance sheet.” The survey found that many asset owners feel ESG has become a polarizing marketing term that’s left the investment industry “open to concerns of oversimplification or accusations of greenwashing.” Many said “sustainable investing” and “responsible investing” are more appropriate terms. ESG has been widely misunderstood, said Peter Krull, the director of sustainable investing at Earth Equity Advisors. It’s really just “a risk-management tool,” he said. Asset owners also are increasingly concerned these days about rising geopolitical tensions caused by the Trump administration-led trade war, the Russia-Ukraine conflict and US-China relations. The result is many investors are “waiting for more clarity before making short-term portfolio moves,” according to Morningstar. An official at a US corporate pension plan said it’s currently “very difficult to join the dots” to determine what it all means for the financial markets.

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6/3/2025

SEC’s Uyeda Expresses Concern over Proxy Firms’ Influence, Expects to Consider Reforms

Pensions & Investments (06/03/25) Degen, Courtney

Securities and Exchange Commission (SEC) Commissioner Mark Uyeda said June 3 “there’s reason to be concerned” about the influence of proxy-advisory firms, and he expects the securities regulator to consider further reforms to the proxy-voting process. In March — when Uyeda, a Republican, served as the agency’s acting chair, before the Senate confirmed Chair Paul Atkins — the SEC reimposed guidance from the first Trump administration making it easier for public companies to gain permission to exclude shareholder proposals on company proxy statements. However, an April report from the Business Roundtable urged the SEC to further reform the proxy-voting process, including prohibiting “robo-voting”: the practice of mechanically voting in line with proxy-adviser recommendations. The group of more than 200 CEOs also requested the SEC require vote recommendations to be supported by economic analysis and to address conflicts of interest. “I expect continuing thought on where we go from here,” Uyeda said of the proxy-voting process, speaking at the U.S. Chamber of Commerce Capital Markets Summit in Washington. The Republican commissioner referenced earlier remarks earlier in the day from Nelson Griggs, president of Nasdaq, as Griggs said there’s a lack of transparency and access to proxy firms for many companies that work with them. The remarks from Uyeda and Griggs come just days after Jamie Dimon, chair and CEO of J.P. Morgan Chase & Co. (JPM), on May 30 advocated for eliminating proxy firms, calling them a “cancer.” Congressional Republicans have also been critical of proxy-advisory firms as of late. On May 20, three GOP senators sent a letter to Institutional Shareholder Services and Glass, Lewis & Co., expressing concerns over what they view as the firms’ outsized influence and pressing them for information. That followed a House hearing April 29, when Republicans urged reforms at the SEC and in Congress regarding proxy-advisory firms.

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5/31/2025

From Cemetery Markers to Battery Tech, Matthews Bets Big on Reinventing Itself

Pittsburgh Post-Gazette (05/31/25) Grant, Tim

For generations, Matthews International Corp. (MATW) has been known in Pittsburgh — and beyond — as the company that makes caskets and cemetery markers. These days it’s doing much more than burying and memorializing the dead. Matthews has been busy reinventing itself while staring down some of the most powerful forces in business. The 175-year-old company is fending off a $1 billion lawsuit from Tesla (TSLA), which claims Matthews stole trade secrets tied to battery technology. Matthews stock recently hit a 52-week low, while it just sold a profitable packaging business to help pay off debt. And earlier this year, an activist hedge fund tried — and failed — to oust its CEO, Joseph Bartolacci. “I’ve got Goliath on my shoulders stomping everyday,” said Bartolacci, 65, who has led the company as CEO for 20 years. “That’s what gets me up every day. It also doesn’t let me sleep well at night, but that’s a different discussion.” Under Bartolacci’s watch, the company has been quietly transforming into a technology-driven industrial player, placing big bets on the future of manufacturing, logistics, and energy storage. Bartolacci said he believes the Tesla lawsuit rattled investors, contributing to Matthews stock being dragged down. But he also acknowledges a deeper challenge — as Matthews has expanded beyond its core funeral business, its operations have become more complex and more challenging for investors to analyze and value. Bartolacci believes the recent activist takeover attempt was driven, in part, by the company’s complexity. It left an opening for critics who don’t fully grasp the long-term strategy. “They want to break up the whole thing,” he said. “That’s not our interest. We’re Pittsburgh. We want to make sure this business stays here for the next generation, if possible.” Barington Capital Group, which lost the high-profile board fight at Matthews International in late February, criticized Matthews' underperformance and pressed the company to sell some assets and replace Bartolacci. After losing the battle, instead of selling some or all of its shares — which often happens when investors lose proxy battles — Barington did the opposite. The hedge fund increased its holding in Matthews stock by 40%, to 798,617 shares, during the first three months of the year, according to a 13-F filing. Following the proxy fight, Matthews announced earlier this month that it had sold its SGK Brand Solutions packaging division for $350 million, with the proceeds from the sale earmarked mainly for paying off company debt, thus solidifying its other businesses. Matthews reported total outstanding debt of $822.2 million and cash of $40.2 million as of March 31. Securities analysts indicate a general “Buy” consensus on Matthews stock, with an average price target around $40, which implies a 100% upside from the stock's current price near $20. The company's transformation is being led by its fast-growing Industrial Technologies segment — which bridges the company's historic roots and its forward-looking innovation. The Industrial Technologies segment includes its product identification business (which dates to the company's founding in 1850) as well as new developments in energy and warehouse automation that Matthews either developed in-house or acquired over the past two decades. Industrial Technologies generated $433 million in sales last year, representing 24% of Matthews total $1.8 billion 2024 revenue. Still, the bulk of Matthews' revenue continues to come from its Memorialization segment, which includes cemetery products, caskets and cremation equipment. That segment accounted for $829.7 million in revenue, or 46% overall, in fiscal 2024. Matthews' SGK Brand Solutions division — which it recently sold — accounted for 29.6% of revenue last year. Matthews is banking on its Industrial Technologies segment turbo-charging growth — and it's backing that bet with innovation. The company holds a patent for a new printhead technology designed to help businesses lower costs, reduce environmental impact and critically prepare for the 2027 deadline when all companies will be required to use 2D barcode to ship goods. While Matthews has not launched its product yet, it's engineered to print 2D barcodes directly on products at full production-line speeds. Matthews is a leading provider of advanced marking and coding systems that print expiration dates, lot numbers and barcodes on consumer products, from soda cans to cereal boxes and pharmaceutical vials. “The technology that exists today hasn't caught up to what the market needs,” Bartolacci said. “We have a solution. Others will come, but we're already there. This is something that's taken the better part of 10 years to develop.”

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5/30/2025

J.P. Morgan's Dimon Slams Proxy Firms as a 'Cancer,' Urges Elimination

Pensions & Investments (05/30/25) Degen, Courtney

Jamie Dimon, chair and CEO of J.P. Morgan Chase & Co. (JPM), advocated May 30 for eliminating proxy-advisory firms such as Institutional Shareholder Services and Glass, Lewis & Co., calling them a “cancer.” “We need to get rid of people like ISS and Glass Lewis,” Dimon said at the 2025 Reagan National Economic Forum in Simi Valley, Calif., to the sound of applause. “How they seeped into our system … they are a cancer.” Dimon contended that proxy firms use the public pension plans with which they work to promote environmental, social and governance, or ESG, interests, stating that they “look at green stuff and comp (compensation) stuff and social stuff.” Proxy-advisory firms have come under scrutiny from Republicans in Congress recently, as well. Three GOP senators sent a letter to ISS and Glass Lewis on May 20 expressing concerns over what they view as the firms’ outsized influence and pressing them for information. That followed a House hearing on the matter April 29, when Republicans urged reforms in Congress and at the SEC regarding proxy-advisory firms. Institutional investors have historically opposed reforms to proxy firms, as the firms serve as an alternative to the high cost of individually performing the requisite analysis for each ballot proposal at each shareholder meeting. However, Dimon was extremely critical of institutional investors using proxy firms, contending “they automatically vote by ISS and Glass Lewis, which, by the way, violates their fiduciary responsibility.” “And when they say to me, ‘well, we don’t have the manpower.’ You have the manpower to read some proxies,” Dimon continued. “It’s not a big deal, you know?”

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5/29/2025

Analysis: Can Korea Inc Step Up?

The Economist (05/29/25)

South Koreans would rather forget most of the past 12 months, according to this analysis from The Economist, Investors in South Korean businesses, too, have had little to celebrate lately. Even before Donald Trump initiated his trade war on April 2, the benchmark KOSPI 200 index of large companies had fallen by 3% relative to the start of 2024 as rival Asian bourses rose. Japan's Nikkei 225 had gone up by 7%, and mainland China's CSI 300 by 16%; Hong Kong's Hang Seng and Taipei's TWSE Taiwan 50 each leapt by nearly 40%. Between mid-July 2024 and early April 2025 shareholders in Samsung Electronics (005930), South Korea's corporate superstar, saw a third of its market value, or some $160 billion, melt into oblivion. As summer approaches, however, the national mood may be brightening on the streets and in boardrooms alike. A snap presidential election on June 3 promises to usher in a modicum of political stability. Bankers and equity analysts are, for their part, showing signs of optimism. On the surface this corporate confidence seems unwarranted. Relative to both forecast earnings and the book value of their assets, South Korean companies' share prices continue to trail those of their rivals in the rest of the rich world, often by some distance. Stocks in more than half of the KOSPI's 178 non-financial constituents, and the index as a whole, trade at a discount to book value. Still, the optimists may be on to something. For one thing, large South Korean businesses are clustered in industries exposed to the trendiest of 21st-century megatrends. Samsung Electronics and SK Hynix (000660), the KOSPI's two largest members, manufacture high-bandwidth memory (HBM) chips critical to the artificial-intelligence revolution. Samsung Biologics (207940), ranked third by value, is a biotech powerhouse. LG Energy Solution (373220), number four, makes batteries for the green transition. Helpfully, the South Korean firms' competition in many of these areas is limited. Given sky-high barriers to entry in HBM manufacturing, Samsung Electronics and SK Hynix are mainly up against established producers — which is to say themselves. European allies questioning America's trustworthiness under Trump are looking for alternative suppliers of material. Korea Inc also benefits from the even greater geopolitical rift between the West and China. South Korean companies may struggle to compete head to head with Chinese manufacturers, but thanks to growing Western unease over hastening China's rise by patronizing its businesses, they don't have to. There is one other reason to hope for improvement in Korea Inc's prospects. These had been looking so bleak for so long that the country's political and business leaders could not ignore it anymore and finally took action. A year ago the government launched the “Value-Up” program of corporate reform. It is modeled on a similar effort starting in the early 2010s to spruce up Japan Inc. At the time the Nikkei looked as knackered as the KOSPI does now. Barely 85 of its 200-odd non-financial stocks traded above their book value. A typical one had net debt, of 1.7 times operating profit (before depreciation and amortization), and free cashflow running at just 1.7% of revenue — figures close to KOSPI's results today. Then a mix of standards and laws prompted Japanese firms to disclose more information, set performance targets, curb related-party transactions, unwind cross-shareholdings, appoint more independent directors and become less hostile to activist investors. Today the Nikkei's price-to-book ratio averages 1.5 or so, its companies are a third less indebted and generate one and a half times as much free cash as in 2012. In February 2024 the index at last surpassed its previous peak set in December 1989. No less discerning an investor than Warren Buffett is a fan. South Korean bosses are getting the message. Although 75% of the index's market capitalization is in chaebol hands, the groups' current leaders are more open to change and less legacy-obsessed than their grandfathers' founding generation. On May 22, Samsung Biologics said it would spin off its drug-development arm to focus on its core contracting business. Firms have begun paying higher dividends and buying back more shares. So far 120 in the KOSPI have published “Value-Up” disclosures, some even in English. Managements faced 137 shareholder proposals last year, an unprecedented third of them from activist investors. A record 24% were adopted.

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5/27/2025

Analysis: Salesforce CEO Marc Benioff Makes a Discount Data Play With Informatica

Bloomberg (05/27/25) Gould, Ryan; Baker, Liana

No deal ever really dies. The latest proof of that came early Tuesday, when Salesforce (CRM) announced it will pay $25 in cash share to buy data management provider Informatica (INFA). Salesforce CEO Marc Benioff’s thirst for inorganic wasn’t quenched — despite the annoyance of an activist investors — and it looks like his patience has paid off in more ways than one: not only has he agreed terms but the deal is going to cost him a lot less than it would have 12 month ago, with Informatica’s shares having fallen around a quarter in that time. Informatica has long been seen as a takeover target. Its biggest investors are buyout firm Permira and pension fund CPPIB, which took the company public in 2021 only to see the stock struggle. The deal is one of Salesforce’s biggest-ever purchases and will boost its AI agent business. Earlier this year, the company agreed to smaller acquisitions of Own, a data protection and management solutions provider, and Tenyx, a developer of AI-powered voice agents. Informatica does compete against Salesforce’s MuleSoft, so the regulators may poke around a bit before this story ends. At an $8 billion equity value, the transaction is another juicy win for bankers looking to claw back ground after a disappointing start to 2025 for M&A. JPMorgan (JPM) got the nod for Salesforce, with Goldman Sachs (GS) advising Informatica. This is just the latest example of Wall Street charging its deals defibrillator in 2025. Most notably, Google parent Alphabet (GOOG) agreed in March to acquire cybersecurity firm Wiz for $32 billion, reaching an accord less than a year after initial negotiations collapsed. A few more revivals and it will be like the first quarter never happened.

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