Bed Bath & Beyond Overhauls Board Amid Investor Pressure

Wall Street Journal (04/22/19) Chin, Kimberly

Under pressure from investors to turn around its operations, Bed Bath & Beyond Inc. (BBBY) said on April 22 that it will make a series of changes to its board, including the appointment of five new independent directors. The retailer's board will now comprise 10 directors that will vary in race, gender, ethnicity, and experience level, with an average tenure of less than four years. Nine of those directors will be independent, and six will be women, the company said. Meanwhile, five of its current independent directors will step down, and co-founders Warren Eisenberg and Leonard Feinstein will retire from the board and move into the role of co-chairmen emeriti. Effective immediately, Patrick Gaston, current lead independent director, will be named independent chairman. Among other things, Bed Bath & Beyond will form a committee and undergo a strategic review of the whole business; appoint committee chairs to its board audit and compensation committees, which also will be reconstituted; and create a new executive compensation plan that better aligns compensation with the company's performance and long-term shareholder value creation. Legion Partners Asset Management LLC, Macellum Advisors GP LLC, and Ancora Advisors LLC—which control a combined 5% stake in the company—have criticized the company for failing to adapt over time and eroding value for shareholders by allowing costs to increase. They called for CEO Steven Temares to be replaced and nominated a slate of directors for the board. The investors have so far declined the retailer's invitation for them to participate in its plans to overhaul the board.

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Ancora Gets Its Engagement Together

Crain's Cleveland Business (04/21/19) Nobile, Jeremy

A record 935 public companies were engaged by investors globally last year, up from 609 in 2013. For Ancora Advisors, the strategy is fueled by increased levels of capital being put to work. "We have gone up the food chain because we have more assets to deploy," said Ancora Chairman and CEO Fred DiSanto. "And we're looking at names where clearly there has been some egregious intermingling of both board and management teams." Ancora, part of an investor group that owns 5% of Bed Bath & Beyond Inc. (BBBY), and fellow investors have been pressuring the retailer to replace its 12-person board, and the firm offered up 16 candidates for those board seats. "We just took a position and said we are going to be aggressive," DiSanto said. Meanwhile, the firm has sent a letter to J. Alexander's Holdings Inc. (JAX), where it has an 8.6% stake, offering to take the restaurant company private by acquiring it for $11.75 per share in cash, or $186 million. This marks the first time Ancora has pursued a public-to-private deal. DiSanto said, "Here's a company with a very good brand and good restaurants. They just need to be private." Meanwhile, Jim Chadwick, Ancora's director of alternative investments, noted, "In situations where there is a lack of cooperation from either management or the board, yet Ancora remains convinced that the stock is meaningfully undervalued based on unlocking potential catalyst events, then we would be taking a public-activist posture. We almost always start out constructive, and it's only when things break down we end up in filings."

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Shareholder Adviser ISS Backs Barclays in Bramson Battle

Financial Times (04/19/19) Crow, David; Walker, Owen

Institutional Shareholder Services (ISS) is siding with Barclays (BCS) in its battle over a board seat sought by Edward Bramson, stating that he has "not presented a sufficiently compelling case" in his campaign to convince other investors to vote him on to the board at the May 2 annual meeting. Bramson, whose Sherborne Investors vehicle holds a 5.5% stake in the U.K.-based lender, is calling on Barclays to boost overall returns by scaling back its underperforming investment bank. Meanwhile, Barclays CEO Jes Staley has pledged to protect Britain's last remaining global investment bank from further cuts. ISS said in a note to its clients on April 19, "The dissident campaign—which is built on a brief investor letter disclosed a few weeks before the annual meeting—falls short of what can reasonably be expected from a shareholder trying to address issues at a £28 billion systemically important bank." The proxy adviser also urged shareholders to give incoming Chairman Nigel Higgins more time to address the bank's issues, noting that he "seems acutely aware of investor discomfort with past performance." Glass Lewis also has recommended that investors vote against Bramson, citing his "questionable share ownership framework." The firm said, "While [Mr. Bramson's] current campaign should serve as something of a clarion call for management...we ultimately believe support for [his] proposal would entail considerably greater risk and uncertainty."

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Bill Ackman Thanks Warren Buffett for Pershing Square's Turnaround

Yahoo! Finance (04/19/19) La Roche, Julia

Pershing Square Capital Management CEO Bill Ackman attributes his huge comeback to years of studying his mentor, Warren Buffett. Although the hedge fund is up more than 40% year-to-date, Ackman is not actively raising capital. At the 13D Active-Passive Investor Summit, Ackman noted that "one of the most instructive things" from his career has been reading the legendary investor's letters from the Buffett Partnership, the fund he ran before Berkshire Hathaway (BRK-A, BRK-B). After several years of outperformance, Buffett told his investors in May 1969 that he would close the partnership, giving partners the option to take their cash out or keep their investment for shares in Berkshire Hathaway. "A bunch of people wanted cash and spent another 50 years seeing their therapists for one of the dumber decisions that they made," Ackman said. "Since 1969, Berkshire is one of the greatest investments of all time. I think it's instructive. And, I think what Mr. Buffett realized in 1969 is that being a long-term investor with short-dated capital is just ultimately going to lead to a bad outcome at some point in time." He said the mission at Pershing Square is to have a permanent capital structure, and the firm took a step in that direction by launching a publicly-traded fund in 2014 with the long-term plan to have a majority of capital in that vehicle. Pershing Square Holdings (PSHZF), the public vehicle, now represents 80% of the firm's capital.

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