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6/14/2019

Proxy Adviser ISS Backs Call for FirstGroup Boardroom Shake-Up

Telegraph.co.uk (06/14/19) Gill, Oliver

Institutional Shareholder Services has backed Coast Capital Management's motion to overhaul the board of rail and bus operator FirstGroup (FGROF). Coast Capital, which is FirstGroup's biggest shareholder, wants to remove six of FirstGroup's directors and replace seven others. Coast also wants the company to exit UK rail and halve itself to focus on North American operations. FirstGroup's chief executive has attacked Coast's proposals as self-interested and erroneous, but the company has implemented some of its suggestions. ISS linked FirstGroup's problems to "strategic missteps, poor operational execution, and a lack of focus on the company's core businesses" under former CEO Tim O'Toole, and wrote that Coast's critique raised "fair questions" regarding the company's current strategy, though it does not demonstrate the need for dramatic board change. Ultimately, ISS supported Capital's proposal to replace one long-term director, James Winestock, with ex-Arriva CEO David Martin, noting that Winestock had overseen many of the company's recent failures and that Martin seemed well-qualified to replace him.

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6/14/2019

Pernod Ricard Adds U.S. Premuim Brand Rabbit Hole Whiskey to Its Portfolio

Reuters (06/14/19) Felix, Bate

Pernod (PDRDY) announced on June 14 that it is acquiring Rabbit Hole Whiskey, a high-end maker of bourbon and Kentucky whiskey, as it seeks to expand its portfolio of specialty brands. Pernod would use its distribution network to expand the Kentucky-based brand into new markets. Pernod, which is under pressure from Elliott Management to improve profit margins and corporate governance, did not disclose the value of the deal. "This partnership is the perfect implementation of our long-term investment strategy to create sustainable value," said Pernod Ricard CEO Alexandre Ricard in a statement. "Rabbit Hole is a fast-growing brand, strongly rooted in its (territory) and very well positioned in the high-end bourbon and Kentucky whiskey categories."

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6/14/2019

Barnes & Noble Says It Did Not Get Any Other Bids Before Elliott's Deadline

Reuters (06/14/19) Balu, Nivedita

Barnes & Noble Inc. (BKS) said June 14 that it did not get any other offers from prospective bidders prior to Elliott Management's "keep-shop" deadline, which was 11:59 p.m. EST on June 13. Elliott, which offered $475.8 million to take the bookstore retailer private, had a provision in place that would have entitled the hedge fund to a payment of up to $4 million if the retailer reached a deal with a third party prior to the deadline. Now that the deadline has passed, the breakup fee would be $17.5 million. Investor Richard Schottenfeld said June 13 the bookstore chain is worth more than Elliott's offer and he could potentially enter into talks with the company's board for its sale.

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6/14/2019

Video: Barclays Isn't Europe's JPMorgan, but It's Not Deutsche Bank Either

Bloomberg (06/14/19) Bramson, Edward

Investor Edward Bramson says that Barclays Plc (EROTF) should leave or reduce much of its investment banking business to realize more value. With the stock trading at 0.5 times its tangible equity, an important measure of profitability, the market clearly sees a problem. Jonathan Tyce, Bloomberg Intelligence senior banks analyst, reviews what the future holds for the corporate and investment bank at Barclays. He discusses the situation on "Bloomberg Markets: European Open."

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6/14/2019

Sony CEO's Choice: Stay Together or Bend to Loeb's Breakup Push

Wall Street Journal (06/14/19) Mochizuki, Takashi

Daniel Loeb is calling on Sony (SNE) to break up the conglomerate. In a letter to investors, Loeb's hedge fund, Third Point, said Sony should spin off its semiconductor unit and consider shedding stakes in Spotify Technology (SPOT) and a Sony financial unit that sells life insurance in Japan. Although Loeb did not reveal his ownership stake in Sony, he has invested $1.5 billion in the company, which had a market capitalization of about $64.6 billion as of Friday's close. Last month, Sony CEO Kenichiro Yoshida said the semiconductor unit's image sensor business was key to developing new businesses in artificial intelligence, providing little indication that he is interested in splitting up the company. Loeb's proposal focuses on parts of the conglomerate that could be hived off without disrupting the synergy between entertainment hardware and software, unlike his engagement with Sony in 2013. Sony rejected that call to split off its music and movie units, saying they had synergies with videogames, televisions, and headphones.

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6/13/2019

Red Robin Issues Statement in Response to Vintage Capital

Business Wire (06/13/19)

Restaurant chain Red Robin on June 13 issued a statement in response to a 13D filing by Vintage Capital Management LLC, saying "Red Robin welcomes open dialogue with its shareholders and appreciates input towards the goal of enhancing shareholder value. In multiple conversations with Vintage, we have expressed our openness to Vintage's participation in our ongoing search to identify a world-class CEO, and to maintaining a constructive dialogue. Given our dialogue to date, we were surprised by the content of the letter we received today, as Vintage has not been willing to propose any CEO candidates. As discussed with Vintage, we retained The Elliott Group in April 2019 to assist in our CEO search process, and the Search Committee is interviewing a number of highly qualified and interested candidates. We are pleased with our progress to date and confident we will identify an excellent leader for Red Robin. Concurrent with our CEO search process, Red Robin has a strategy in place to drive renewed growth and shareholder value, and we continue to execute on our 2019 strategic priorities, including stabilizing dine-in revenue by reinforcing Red Robin's compelling Value proposition; continuing building To-Go and Catering business; improving the Guest experience and recapturing Red Robin's known-for "Gift of Time" convenience; implementing digital platforms and restaurant technology solutions; and selectively refranchising and reassessing our real estate portfolio. Led by our Chair and independent directors, our Board is actively engaged in driving our strategic plan and remains open to all opportunities to create value. The Board comprises established industry leaders with diverse perspectives and operational expertise, including in the retail and restaurant industries. The Company's Board of Directors is focused on enhancing shareholder value and is mindful of its fiduciary duties to all shareholders. Consistent with its fiduciary duties, the Board would of course consider any bona fide offer made by Vintage."

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6/13/2019

HomeStreet Sends Letter to Shareholders

Business Wire (06/13/19)

In a June 13 letter to investors, HomeStreet Inc. (HMST) defends itself in a proxy contest with Roaring Blue Lion, urging shareholders to re-elect Chairman and CEO Mark Mason, lead independent director Donald Voss, and independent director Sandra Cavanaugh to its board. The letter argues that HomeStreet's nominees have made major contributions to the company's shareholder engagement program and corporate governance enhancements. The company states that Institutional Shareholder Services (ISS), Glass, Lewis and Co., and Egan-Jones Proxy Services have all supported the re-election of its nominees. The letter also recommends that shareholders vote against Roaring Blue Lion's proposal to split the chairman and CEO roles, which it says would be counterintuitive to its ongoing governance reform initiatives. The letter concludes by asking shareholders to support its proposal to make Washington state the exclusive forum for actions against the company, which will help the company manage litigation expenses and prevent multi-forum litigation.

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6/13/2019

Daniel Loeb's Third Point Calls for Breakup of Sony—Again

Wall Street Journal (06/13/19) Thomas, Patrick

Third Point LLC said in a June 13 letter to investors that Sony's (SNE) stock is undervalued and that the company's portfolio needs to be less complicated. Third Point said it has invested $1.5 billion in developing its stake in the company. Third Point called on Sony to spin off its semiconductor business and sell off stakes in Sony Financial and other units in order to position itself as a leading global entertainment company. This marks the second time in six years that one of the world's highest-profile investors has engaged the Japanese electronics giant. Last time, though, Loeb pushed for a very different kind of shake-up, advocating a spin-off of entertainment assets. According to Loeb, the semiconductor division is "often treated by investors as an afterthought" and should be spun off into a Japan-listed company known as Sony Technologies. The hedge fund has also called on Sony to consider selling its ownership interests in M3, Olympus, and Spotify Technology. By selling off these stakes, Third Point said Sony can "meaningfully reduce complexity" that has been a significant negative factor in the company's valuation. Sony said it will take the input of shareholders "seriously" and "engage in constructive dialogue" with shareholders. Meanwhile, Third Point has nothing but praise for Sony's Hollywood studio, noting that Sony Pictures is one of the few independent film studio franchises not owned by a major telecommunications or media conglomerate such as AT&T Inc. (T), Comcast Corp. (CMCSA), and Walt Disney Co. (DIS). And while Third Point is pushing for change, Sony executives announced in May they are looking at ways to create stronger links within its business, especially content, intellectual property, and direct-to-consumer services. The company also stated last month that it is considering joining with long-time game console system rival Microsoft Corp. (MSFT) on cloud and game-streaming technology.

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6/13/2019

Jana Builds Stake in Callaway and Plans to Push for Sale

Bloomberg (06/13/19) Deveau, Scott

Jana Partners has purchased a stake in Callaway Golf Co. (ELY) and is calling for the sporting goods company to conduct a strategic review, including weighing a possible sale. Jana said in a regulatory filing June 13 that it bought a 9.5% stake in Callaway Golf because it thinks the shares are undervalued. Jana intends to hold discussions with management about ways to boost the company's performance, including selling all or part of it. Callaway Golf, which has a market value of approximately $1.7 billion, was up about 16.4% on the news and traded up 14.1% at 11:53 a.m. in New York on June 13, its biggest gain since 2018. The shares had declined approximately 21% in the past year through the June 12 close. Although Callaway Golf doesn't comment on individual investors, its board and management are open to dialogue with all shareholders, according to spokesperson Scott Goryl. Jana is partnering with a number of consumer industry executives in the investment, including former Jarden Corp. (JAH) CEO James Lillie, former Nike Inc. (NKE) executive Cynthia Davis, and former vice chairman at Ralph Lauren Corp. (RL) Roger Farah. Callaway Golf in May said it was cutting its quidance for the Jack Wolfskin clothing line. Steven Zaccone, an analyst with JPMorgan Chase & Co. (JPM), said that move in the first full quarter of owning the brand will propel the "show me" narrative for investors debating the merits of the acquisition, according to a May 10 note to clients. After meeting with management, Zaccone said he was "incrementally more comfortable" with the guidance for the unit in light of the macro weather issues in Central Europe and China. The lower forecast was not a signal of underlying brand weakness, he noted.

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