5/20/2025

Toyota Group to Borrow up to $21bn to Take Toyota Industries Private

Nikkei Asia (05/20/25) Suga, Kyohei

Toyota Motor (TM) and other Toyota group companies are considering borrowing up to 3 trillion yen ($20.7 billion) from financial institutions to help take machine maker and parts supplier Toyota Industries private, Nikkei has learned. A special purpose vehicle funded by the companies will launch a tender offer for Toyota Industries (TYIDY). Toyota Industries is expected to accept the buyout proposal. In typical cases of acquisition by a special purpose vehicle, the company that is purchased bears the debt obligations. The acquisition is estimated to cost 6 trillion yen, with loans covering about half. One plan calls for raising the money from Japan's biggest lenders like MUFG Bank. The rest would come from Toyota Motor, other group companies and members of Toyota's founding family, including Toyota Motor Chairman Akio Toyoda. Toyota Industries formed a committee to deliberate whether the proposal would enhance its corporate value. The company originally spawned what became the Toyota group, and it is a major shareholder in Toyota Motor with 9% of outstanding shares in the Japanese automaker. In 2024, activist investors increased pressure on Toyota Industries. The U.K.'s Asset Value Investors urged the company to end its parent-subsidiary listing with Aichi Corp., and France's Longchamp pushed for more aggressive share buybacks. Toyota Industries would escape such shareholder pressure by delisting, but it would assume the debt burden from the bank loans. To repay the debt, Toyota Industries may consider options like relisting or selling parts of the company. In addition to manufacturing forklifts, Toyota Industries also is involved in automotive operations, such as producing engines and the Toyota RAV4 sport utility vehicle. Recent precedent exists for Japanese founding families trying to take listed companies private. The founding family of Seven & i, parent of the operator of the 7-Eleven convenience store chain, tried to delist the company, but the plan hit a roadblock over raising the necessary 8 trillion yen. The large amount of funds needed for the Toyota Industries plan may similarly become an obstacle to privatization.

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5/20/2025

Elliott Director Nominees Send Letter to Phillips 66 Shareholders

PRNewswire (05/20/25)

Elliott Investment Management L.P. , which manages funds that together make it a top-five shareholder in Phillips 66 (PSX), today issued a letter to shareholders from its four highly qualified nominees — Brian Coffman, Sigmund Cornelius, Michael Heim, and Stacy Nieuwoudt — in connection with the Company's 2025 Annual Meeting of Shareholders on May 21. or more information, including how to vote on Elliott's GOLD proxy card, please visit Streamline66.com. The letter notes that "Over the past several weeks, we have greatly appreciated the chance to meet with many of you and hear your perspectives. We hope what has come through in these conversations is our enthusiasm about Phillips 66 and its significant value-creation potential. The opportunity to help realize this value is why we agreed to take part in this campaign. With the annual meeting nearly upon us, we want to convey for a final time the reasons we believe our election would help drive positive change at the Company. First, we would bring complementary and relevant skills and experiences to the Phillips 66 Board. Brian has decades of leadership experience in refining, including running some of Phillips 66's own assets while at its predecessor company, ConocoPhillips. Sig served as CFO of ConocoPhillips and has overseen complex portfolio transformations. Mike is a proven midstream operator and one of the founders of Targa Resources, which is among the sector's most successful companies. And Stacy brings an investor's mindset from her years covering the energy sector at leading institutions. All four of us have served on the boards of companies in various stages of development and maturity, facing differing needs and challenges. Together, we would bring a diverse and additive set of skills to the Phillips 66 boardroom. Second, we believe that closing the performance gap between Phillips 66 and its competitors is readily achievable. Here we see a company with high-quality assets, talented employees and a storied legacy — an enormous amount of potential waiting to be unleashed. By refocusing on operational excellence, improving accountability and enhancing corporate governance, there is a clear path to unlocking the Company's substantial upside and returning it to its rightful place among the industry's leaders. Like you, we are investors in Phillips 66 – if we didn't believe in the opportunity at this Company, then we wouldn't have invested a significant amount of our own time and money in this endeavor. Finally, if elected, we are fully prepared to hit the ground running and work constructively with the incumbent directors to strengthen Phillips 66. We are each independent thinkers and would enter the boardroom with open minds about the best way forward for all shareholders. That said, make no mistake — while we are ready to put the back and forth of the proxy contest behind us, all four of us fundamentally believe that change is needed at Phillips 66. That means we will ask the hard questions, seek to improve the Company's credibility with its shareholders and insist on a thorough and clear-eyed evaluation of its current structure and operations." The letter concludes by asking shareholders for their support "to elect all four of us to the Board of Phillips 66. Together, we can help to unlock the tremendous value that the Company's people and its assets can deliver. Shareholders deserve a stronger, more valuable Phillips 66."

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5/20/2025

Elliott Faces First-ever U.S. Proxy Vote in Phillips 66 Battle

Bloomberg (05/20/25) Risser, Nathan; Tse, Crystal

After more than a hundred campaigns engaging U.S. companies, Elliott Investment Management is heading into its first ever proxy vote on home ground. The activist investor will face off with Phillips 66 Wednesday, as it battles to get four of its board nominees elected at the U.S. refiner’s annual shareholder meeting. The vote follows a multi-year campaign that’s focused on Phillips 66’s financial underperformance compared to its peers, as well as its conglomerate business model and governance practices. At the core of what has become an increasingly contentious and personal war of words is a debate over what a refiner should be. “Both camps have dug into their side very heavily,” said TD Cowen managing director Jason Gabelman. Central to Elliott’s thesis, outlined in a sweeping 138-page slide deck released in April, is that the third-largest U.S. refiner by capacity should focus on its core business of turning crude oil into fuel. Phillips 66’s leaders “do not want to be refiners” Elliott wrote, claiming that mismanaged refineries drive poor operating performance compared to peers Valero Energy Corp. (VLP) and Marathon Petroleum (MPC). “We don’t believe that the best way to compete is to look exactly like everyone else,” said Phillips 66 Chief Executive Officer Mark Lashier. As the remaining votes trickle in — and with leading proxy advisors backing Elliott’s candidates — the odds are increasingly in favor of the activist investor heavyweight, which manages more than $72 billion in assets and has $2 billion invested in Phillips 66. Elliott’s nominees Brian Coffman, Sigmund Cornelius, Michael Heim, and Stacy Nieuwoudt made a final pitch to Phillips 66 shareholders in a letter on Tuesday, saying they would bring skills and experience to the company’s board; help close the performance gap with competitors; and work constructively with incumbent directors. If no settlement is reached before Wednesday, when the votes are tallied, it will mark a clear break with Elliott’s usual game plan. The activist investor has only pursued a proxy contest to this stage of the proceedings three other times in the U.S., it said in a May 2 letter, and none reached a vote — though some negotiations have gone down to the wire. Lashier is open to a settlement if a resolution can be found that benefits Elliott, the refiner and its shareholders, he said, while declining to provide details of what a middle ground would look like. Voting by passive investors Vanguard Group Inc., Blackrock Inc., and State Street Corp. — which collectively own more than 23% of the stock — will be critical to the outcome. Another 25% of shares are owned by retail investors, who don't always turn out to cast ballots. The result will alter the trajectory of Phillips 66, either giving its executives license to continue down their path of further integration, or backing Elliott's mandate of divestments and a return to the company's refining roots. Phillips 66, with a roughly $50 billion market valuation that makes it one of the most valuable U.S. independent refiners, has touted its integrated business model as a safeguard against fluctuations in the refining margin cycle. “That's our competitive edge,” said Lashier. It's a message the refiner has been keen to drive home, mentioning its integrated refining strategy 12 times on its earnings call last month, including four times in a 1,700-word answer Lashier gave to an analyst's question about Elliott. Elliott wants the company to become what's known as a pure-play refiner, unencumbered by non-core assets like gas stations and pipelines. When it ran a campaign against Phillips 66 rival Marathon Petroleum in 2019, Elliott successfully pushed for the $21 billion sale of that company's Speedway retail operations, with the proceeds ultimately used to fund share buybacks. Over the last five years, Phillips 66's shares have climbed about 56%, compared to almost 100% for Valero and more than 340% for Marathon. One problem for Phillips 66's pitch is that its integrated system hasn't been a benefit in recent economic downturns, where it underperformed Marathon and Valero, according to a Bank of America Corp. analysis. As Elliott's proxy battle has progressed from slide decks to press releases and even podcasts, there's been little for Phillips 66 to fall back on. The Houston-based refiner did announce the sale of a stake in its German and Austrian retail business last week for about $1.6 billion. But the value of about 970 gas stations pales in comparison to the $40 billion-plus of cash that Elliott thinks the refiner could generate by selling or spinning off its midstream business. Also on the chopping block if Elliott wins could be a chemicals joint venture with Chevron Corp. (CVX). Elliott values Phillips 66's stake in the joint venture at about $13 billion and Chevron has told the refiner it is interested in a buyout. “We think that those assets are so valuable that it would be difficult for any competitor to come up with cash to meet our expectations” CEO Lashier said. Proxy advisers have been supportive of Elliott's candidates and could hand the activist investor an advantage. Elliott usually likes to work behind the scenes. But this campaign has been conducted largely in public after Phillips 66, in Elliott's view, avoided engaging with the activist. Lashier said the company had met with Elliott almost 30 times over the past 18 months. A proxy filing shows that several meetings took place during the period that related to board candidates. The proxy fight has also pulled Phillips 66's normally behind-the-scenes traders into the spotlight. Elliott, which itself runs a commodities trading business, said the refiner's commercial organization is viewed as “unsophisticated.” It's also said the company's traders are not compensated appropriately, which is leading to a flight of talent. The refiner has defended its business.

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5/20/2025

Victoria's Secret Adopts 'Poison Pill' After Australian Billionaire's Firm Raises Stake

Reuters (05/20/25)

Victoria's Secret (VSCO) adopted a shareholder rights plan on Tuesday, after Australian billionaire Brett Blundy's investment firm increased its stake in the lingerie maker. The "poison pill" plan, known as a limited-duration shareholder rights plan, was adopted to "guard against tactics to gain control of the company without paying all shareholders an appropriate premium for that control," Board Chair Donna James said. Under the plan, Victoria's Secret said it will issue one right per share on May 29, which would become active only if a shareholder acquires a 15% or more stake. Blundy-controlled BBRC International Private Limited has increased its stake in Victoria's Secret since March, the apparel maker said. As of April this year, the investment firm holds about 10.31 million shares, or about a 13% stake in the lingerie maker. BBRC bought Victoria's Secret shares for nearly three years without the required filings, which was in violation of U.S. antitrust rules, the specialty retailer said. The investment firm has now corrected its paperwork, which will enable it to acquire up to 49.99% of voting stock once a mandatory waiting period ends at 11:59 p.m. ET on May 21, Victoria's Secret added. Victoria's Secret's poison pill comes at a time when the lingerie maker has been grappling with tepid demand, as consumers avoid expensive purchases amid rising tariff uncertainty and fears of an economic recession. BBRC, which recently launched a new lingerie and beauty business, has a history of taking control of retail brands, Victoria's Secret said. Blundy's investment firm has also backed consumer companies such as shoe brand Bared Footwear and Oz Hair & Beauty.

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5/20/2025

Former Dye & Durham CEO Wants Changes, Says He May Call Special Meeting

Reuters (05/20/25) Herbst-Bayliss, Svea

Former Dye & Durham (DYNDF) Chief Executive Officer Matthew Proud told the Canadian legal software maker he is ready to call a special shareholder meeting unless the board considers changes he is proposing, according to a letter seen by Reuters. Plantro Ltd, a company controlled by Proud which owns 12% of Dye & Durham, urged the board in a letter sent on Tuesday to stop searching for a new CEO and give the job to the interim chief, Sid Singh. It also wants the board to add four new directors, divest the financial services division, and later this year begin work on selling the remaining core business. The board currently has seven directors. If the board refuses, "Plantro is prepared to requisition a special shareholder meeting to nominate a majority slate of independent, highly qualified directors with proven Canadian public company experience and institutional knowledge of the company," the letter said. Plantro said it is ready to "engage constructively," but also said the board has only until the close of business on Thursday to respond to its letter. Proud, who stepped down as CEO six months ago, is ratcheting up pressure days after the company reported third quarter fiscal 2025 earnings, and its stock price tumbled 50% in the last six months, valuing the company at roughly $441 million. At December's annual meeting, activist investor Engine Capital won control of the board through a proxy fight. Even with new directors, the letter said investors are "in limbo" because the board failed to offer a vision for the future, has not explained past performance, and is resisting a "sale process that could generate returns for all shareholders." The company acknowledged in February it had received an unsolicited takeover bid for C$20 a share but it was not engaging with the party. Dye & Durham last year hired Goldman Sachs as a strategic adviser to review options but in November said it was pausing its review after feedback from shareholders.

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5/20/2025

UK's Smiths Group Projects Top-end Annual Sales Growth, Limited Tariff Hit

Reuters (05/20/25)

Britain's Smiths Group (SMIN) said on Tuesday annual organic revenue growth would reach the top end of its 6%-8% forecast range, after demand for its baggage-screening kits and explosives detectors helped third-quarter sales jump 10.6%. The engineering company said it expects limited impact from tariffs as a "significant majority" of its products sold in the U.S. are produced there, and would also manage the impact through pricing actions and surcharges. "The group is closely monitoring the potential indirect macroeconomic impact of tariffs on demand, inflation and supply chains, and has not seen any material changes in customer behavior to date," it said. Shares in Smiths, which generates about 45% of its sales in the U.S., rose 4% in early trading. The company's annual forecast, which includes expected margin expansion of 40-60 basis points, incorporates the direct impact of the current tariffs in place, Smiths said. JPMorgan analysts noted that Smiths' current forecast implied fourth-quarter organic revenue growth of about 3%, which they called "cautious" given the uncertain economic environment. Smiths said it still aims to sell the division which supplies electronic components by the end of 2025, and then separate the business which makes airport baggage-screening kits and explosives detectors through a demerger or sale. In January, the company announced plans to break up after engagement from U.S. activist investor Engine Capital and focus on industrial technologies through its John Crane and Flex-Tek businesses.

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5/19/2025

Activist Takes on Swatch Maverick as Omega Empire Falters

Financial Times (05/19/25) Ruehl, Mercedes

When Nick Hayek was asked last year why Swatch Group (SWGAY) did not engage more with the financial community, the watchmaker’s maverick chief executive told investors that if they did not like the way the company was managed, they could invest elsewhere. They appear to have done exactly that. Shares in Swatch, owner of 16 watch brands including Omega, Longines, and Tissot, have dropped 24% in the past 12 months. That has extended a poor run in which the Swiss group’s shares have fallen from a peak of nearly SFr600 in 2014 to SFr147.85, valuing the company at SFr7.7 billion. The group’s weak performance — net profit tumbled 75% to SFr219 million ($261 million) last year — is partly down to shrinking demand from Chinese consumers, amid a broader slowdown in luxury spending. But some analysts and investors argue that many of Swatch’s problems are homegrown. Hayek has served as chief executive since 2003 and his sister, Nayla, has chaired the board since 2010. Oliver Müller, founder of LuxeConsult, a consultant to the watch industry, said the Hayeks were running Swatch like a family business rather than a public company. Steven Wood, founder of U.S. investment firm GreenWood Investors, which owns 0.5% of Swatch shares, is pushing to be elected to the board of directors at Swatch’s annual meeting on Wednesday. Wood said this month that Swatch was “only being run for one shareholder,” a thinly veiled reference to the Hayek family, which owns 25% of Swatch’s shares but controls 44% of the voting rights. Hayek, 70, revels in needling the Swiss business establishment. The Swiss watchmaking industry owes a significant debt to Swatch. The Biel-based company’s embrace of quartz technology in the 1980s helped make Swiss watches accessible to the masses and stave off an existential threat from cheap Asian manufacturers. Founder Nicolas Hayek, Nick’s father who died in 2010, is widely credited with transforming Swatch into a global symbol of Swiss innovation and craftsmanship. That dynamism has been lost under today’s management, according to Roce Capital co-founder Michael Niedzielski, a former Swatch shareholder. “The communication with the investor community is poor and they do not take feedback,” he said, adding that “disastrous” working capital management had drained free cash flow over the past decade. Another former Swatch investor said they had wanted to see the executives leading its various brands given more control over their strategy, “but the Hayek family did not allow it.” Meanwhile, any attempt to offer advice to management on refreshing the portfolio to try and boost growth was rebuffed, according to a Switzerland-based investment banker. “They shut down any attempt to meet with them and offer advice,” they said. Swatch said analysts are invited to participate in calls with executives twice a year and that investors visit the company “very frequently.” It also defended the company’s working capital management, pointing out that trade receivables were equivalent to only 31 days of outstanding invoices at the end of December. Swatch’s brands collectively cater to virtually every corner of the market. The group sells everything from £44,000 Breguet timepieces right down to £50 watches under the Swatch brand. However, the Swiss watch industry has been in decline since enjoying a pandemic-era boom, and faces fresh challenges in the form of U.S. tariffs and the impact of a strong franc on export values and profitability. Caroline Reyl, head of premium brands at Pictet Asset Management, said the “very high end” is the only part of the watch market in growth, “namely Patek Philippe, Rolex, and Audemars Piguet.” “This polarization effect of a few brands dominating is only increasing,” she added. Swatch’s high-end brands, however, have fallen out of favor. Jean-Philippe Bertschy, head of Swiss equity research at Vontobel, says Patek Philippe and Breguet were both making about $300 million to $400 million in annual sales 20 years ago. Since then, the bank estimates Patek Philippe’s sales have grown roughly sevenfold to almost $2.3 billion, while Breguet’s annual sales have fallen by almost half to $221 million. “There is no other company that has seen sales decrease in watches by as much in the past few years,” Bertschy said, adding that “investors have really started to lose patience.” Hayek has previously said his family is “not at all dissatisfied with Swatch Group” and that he is more concerned with the company’s long-term development than short-term share price moves. “If you are a shareholder with us, you can be sure that you are part-owner of a company that is solid and will not get into trouble if a storm comes up. That’s a big difference compared to some of our competitors,” he added, referring to Swatch’s robust balance sheet. Swatch still retains some structural advantages over rivals. Its 150-plus production sites make almost all of the components in its watches, as well as those sold by third-party watchmakers. Micro Crystal, another Swatch business, is also regarded as a leader in the production of quartz crystals used in watches and smartphones. But analysts have called for Swatch to focus on revitalizing other brands to capture more of the relatively resilient high-end market. Breguet, which currently loses money, is perceived as a neglected brand with huge potential, because of its 250-year history and association with European sovereigns such as Queen Marie Antoinette and Napoleon Bonaparte. For now, Hayek appears trapped in an unhappy marriage with the public markets. Swatch's chief executive has repeatedly raised the prospect of taking the company private, but no deal has materialized and he is now facing a threat to his grip on the company. Wood is seeking to be elected to Swatch's board of directors on Wednesday as a representative for holders of so-called bearer shares, which represent 55% of Swatch's share capital, but carry a minority of voting rights. Swatch's board has recommended shareholders vote against Wood's resolution for several reasons, including that he is neither a Swiss national nor a Swiss resident. Regardless of which way the vote goes, a consensus is forming that Swatch is in need of a shake-up. But with no known succession plan, many observers have given up hope of a quick turnaround. “Omega, Longines, Breguet are among the most prestigious brands in the industry [but] unfortunately they are consistently losing market share,” said Vontobel's Bertschy. “We strongly believe that some changes in corporate governance are urgently needed.”

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5/19/2025

HG Vora Issues Statement Regarding PENN Entertainment’s Revealed Intent to Add Director After 2025 Annual Meeting to Avoid Shareholder Accountability

Business Wire (05/19/25)

HG Vora Capital Management, LLC today issued the following statement regarding the acknowledgement buried in PENN Entertainment, Inc.’s (PENN) May 19 letter that it “will continue to consider opportunities to further refresh the Board” after the 2025 Annual Meeting of Shareholders to be held on June 17. On April 25, PENN’s Board unilaterally reduced the number of seats up for election at the Annual Meeting, which HG Vora believes was done to deprive shareholders of their fundamental right to elect three directors of their choosing. “PENN’s statement today reflects its continued and ongoing assault on shareholder rights and demonstrates the lengths this Board will go to entrench itself. PENN’s statement suggests that it is going to expand the Board by adding back the seat that it removed last month and unilaterally name a director of its choosing for a three-year term – all after the 2025 Annual Meeting. These self-serving actions have no legitimate corporate purpose and are being done to deprive shareholders of the right to vote or oppose the nomination of a third director. This is simply unacceptable and should not be tolerated," according to the statement. “HG Vora has nominated a highly qualified third independent director candidate in William Clifford and is now fighting in court for injunctive relief to have all votes for him counted at the Annual Meeting. Accordingly, HG Vora filed a motion on May 14 for expedited relief and a rapid trial in federal court in Pennsylvania, which PENN is opposing. HG Vora did not seek a preliminary injunction so the Board would not have the excuse to delay the Annual Meeting and avoid seating the other two HG Vora-nominated director candidates – Johnny Hartnett and Carlos Ruisanchez. Importantly, because of PENN’s history of using the corporate machinery to thwart the will of shareholders, and its track record of value destruction, HG Vora believes shareholders should not tolerate such a manipulation of the electoral process and that PENN’s Board has forfeited the right to select directors without shareholder input.” VOTE THE GOLD PROXY CARD TODAY TO SEND A MESSAGE TO PENN THAT GENUINE CHANGE IS NEEDED.

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