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4/30/2025

RWE Faces Growing Investor Criticism as Renewable Returns Dwindle

Reuters (04/30/25) Steitz, Christoph

RWE's (RWEG) investors will crank up the pressure on Germany's top power producer on Wednesday, demanding bolder moves to close a valuation gap with rivals including bigger share buybacks and even a special dividend. The German utility, also the world's second-largest developer of offshore wind farms, has been subject to growing criticism over its capital allocation strategy, most notably from Elliott. The U.S.-based investor last month disclosed a stake of close to 5%, currently valued at around 1.28 billion euros ($1.46 billion), urging the group to significantly increase a standing share buyback program of up to 1.5 billion euros. More sobering returns on clean energy projects across the industry, partly caused by higher interest rates, have forced RWE to join rivals in paring back ambitious investment programs and seek alternatives to increase value. Several of RWE's peers, including Enel (ENEI), Iberdrola (IBE), and Endesa (ELE) have either implemented or announced buybacks. Renewable projects have also come under pressure from high inflation, geopolitical tension and uncertainty over renewable energy regulation in some markets. "The tailwind has turned into a strong headwind," Ingo Speich, head of sustainability and corporate governance at RWE investor Deka said, according to the manuscript of a speech to be held at the group's annual general meeting later. He said the cut in RWE's spending plans freed up cash for buybacks of 1 billion to 1.5 billion euros per year, adding this was a safer way to create shareholder value than chasing projects with uncertain returns. RWE currently trades at an EV/EBITDA multiple of 7.4, according to LSEG data, a discount to Iberdrola's 9.6 and SSE's (SSE) 8.8. RWE has said buybacks would remain part of its future strategy, but has so far not amended its current program. Henrik Pontzen of Union Investment called for a special dividend, adding this way shareholders could directly benefit. "If capital cannot currently be invested profitably, it should be distributed," he said in prepared remarks.

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4/30/2025

RWE's Top Shareholder Group Opposes Call for More Share Buybacks

Reuters (04/30/25) Käckenhoff, Tom; Steitz, Christoph

RWE's (RWEG) municipal shareholders, the biggest investor bloc in Germany's top power producer, are opposed to calls for more share buybacks, including from activist investor Elliott Management, saying they would drain cash needed for renewable investments. The rare comments by the Association of Municipal RWE shareholders (VkA), which together hold around 14% in the utility, provide support for RWE management amid growing investor criticism of its capital allocation. RWE in March followed peers in cutting investments due to falling returns for renewable projects, prompting some investors to urge the group to increase and speed up an existing 1.5 billion euro ($1.7 billion) share buyback program instead. These included Elliott, which holds close to 5% in RWE and is currently also running a high-profile campaign for change at oil major BP Plc (BP). Elliott has said RWE shares are undervalued and has expressed "disappointment with the lack of clarity" over RWE's commitment to shareholder value. Other investors, most notably Deka Investment, Selwood Asset Management, and Enkraft Capital, have also asked the group to expand buybacks to boost its shares, with Union Investment even calling for a special dividend. "The municipal shareholders do not support demands for a special dividend or share buyback programs," Detlef Raphael, VkA's managing director, told Reuters, marking the first time RWE's municipal shareholders have commented on the matter. "The moment I give out money or buy back shares on a large scale, I lack the capital for investments in renewable energies," he added. "The municipalities are supporting RWE's path." The VkA represents shareholding cities, municipalities, districts, and associations, mainly from North Rhine-Westphalia where RWE is based. RWE said at its annual general meeting on Wednesday that it would decide in early 2026 whether to extend its share buyback program, which is currently intended to run until the second quarter of next year. At the AGM, shareholders approved a resolution that would allow the company to buy back up to 10% of its share capital over the next two years.

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4/30/2025

Southwest Airlines to Divest Renewables and SAF Projects: Industry Sources

Fastmarkets (04/30/25)

Southwest Airlines (LUV) is in the process of divesting all investment in renewables and sustainable aviation fuel (SAF), according to multiple industry sources. The divestment comes at the behest of activist investor Elliott Investment Management, sources said, a group that has recently brought about a slew of changes to longtime policies at Southwest. The activist investor “has come in and demanded that all SAF purchases have to be at parity with the cost of jet fuel, full stop,” one source said. “It kneecaps their ability to source SAF.” “They’re shopping around SAFFiRE Renewables, trying to sell it,” a second source said. SAFFiRE Renewables was purchased by Southwest Airlines just over one year ago, in March 2024. SAFFiRE is currently building a pilot SAF production plant near Liberal, Kansas, that will produce very low carbon intensity cellulosic ethanol from corn stover, which can be used to produce SAF via the alcohol-to-jet (AtJ) pathway. The Kansas pilot plant project is supported by the US Department of Energy and uses technology from the DOE’s National Renewable Energy Laboratory. The original plan was for SAFFiRE’s cellulosic ethanol to be converted into SAF by LanzaJet, which is in the process of starting up a commercial-sized AtJ pilot plant near Soperton, Georgia. SAFFiRE Renewables is a wholly owned subsidiary of Southwest Airlines Renewable Ventures (SARV), which is itself a wholly owned subsidiary of Southwest Airlines. One source thought that SARV could also be brought to an end, but this point was less certain. When Southwest purchased SAFFiRE last year, Bob Jordan, Southwest’s chief executive officer, said that “championing SAF is a key pillar of Southwest’s Nonstop to Net Zero plan and our work toward a sustainable future for air travel.” Southwest has a standing agreement with Valero Energy from October 2024 to purchase a minimum of 3.6 million gallons of neat SAF over a two-year period, with delivery at Chicago Midway International Airport. The airline uses about 240 million gallons of fuel at Chicago Midway each year. According to its most recent annual report, Southwest Airlines spent $5.8 billion on fuel in 2024, which accounted for 21.4% of its operating expenses. This percentage is the second lowest reported by Southwest in fifteen years, only slightly higher than the one given for 2020, when global air travel was significantly affected by the outbreak of the Covid pandemic. Fuel has been declining as a percentage of annual operating expenses for Southwest since 2011, when it accounted for 38% of expenditures. In the same report, the company said “even a small change in market fuel prices can significantly affect profitability.” Within the report, the company also gave extensive reasoning for why its ability to utilize SAF could be limited, and that the company may instead use carbon offsets to achieve mandatory climate obligations or voluntary climate goals. In 2024 Southwest consumed 2.19 billion gallons of fuel, according to the company’s annual report.

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4/30/2025

Smith & Nephew Boosted by Orthopedics Sales amid Tariff Concerns

The Times (London) (04/30/25) Ralph, Alex

Stronger-than-expected quarterly sales in the orthopedics division of Smith & Nephew (SNN), its largest business, and reassurance over full-year guidance despite a potential $20 million hit from a tariffs war has lifted its share price. The FTSE 100 medical equipment company posted first-quarter revenue of $1.4 billion, up 3.1% on an underlying basis and ahead of City forecasts. It included growth of 3.2% in Smith & Nephew’s orthopedics business, helped by what it called a “sustained improved performance in U.S. hip and knee implants.” The performance of the Watford-based group’s orthopedics business has come under renewed scrutiny since Cevian Capital, the activist investor, emerged with a stake last July. The investment has raised questions over the benefits of a break-up of one of London’s oldest listed companies. The group remains committed to the turnaround of the division, the largest of its three units, but said recently it could consider options if its growth in the U.S. orthopedics reconstruction market does not “sustainably improve” or does not result in a re-rating in the shares. The reassuring trading update on Wednesday helped lift shares in Smith & Nephew 5.8%, or 58p, to £10.54 on the London Stock Exchange. Smith & Nephew  is one of the world’s largest medical equipment companies. It also operates wound care and sports medicine businesses. The group employs about 17,000 people across more than 100 countries and in Hull is developing a new research and development and manufacturing facility. The company’s chairman is Rupert Soames, chairman of the CBI, one of Britain’s big business lobbying groups. Deepak Nath, Smith & Nephew’s chief executive, said: “While uncertainties exist around the imposition of tariffs, we remain confident in our outlook for another year of strong revenue growth and a significant step-up in trading profit margin.” Full-year guidance of underlying revenue growth of about 5% and trading profit margin expansion to between 19% and 20% was reiterated. The outlook was unchanged despite an expected net impact of $15 million to $20 million from tariffs this year “based on announced measures, and mitigations.” Just over half of Smith & Nephew's group revenues are in the U.S. and two thirds of the products it sells within the country are manufactured there. It also has manufacturing sites in the UK, Costa Rica, Malaysia, China, and Switzerland. “We are working to mitigate tariff impacts from products and raw materials imported into the U.S., including leveraging our global manufacturing network in terms of mix and supply routes,” the company said.

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4/29/2025

IAC Adds New Board Member After Activist Buys Into Barry Diller-Led Conglomerate

The Hollywood Reporter (04/29/25) Weprin, Alex

IAC Inc. (IAC) has an activist investor, and will add a new board member after engaging in talks with the investment firm. The Barry Diller-led conglomerate says that Tor R. Braham will join its board after the company had “constructive engagement” with the firm Arkhouse. The company also says that it will adopt a director resignation policy “for nominees who receive less than a majority of votes cast in uncontested director elections,” a move that could portend further changes to the board down the line. “We look forward to welcoming Tor Braham to the Board,” said IAC board nominating committee chair Bonnie Hammer in a statement. “We believe Mr. Braham’s background in technology and capital markets as well as his board service experience will be valuable as IAC continues to execute its strategy.” “We’ve enjoyed the open, thoughtful dialogue with IAC and are confident that Tor Braham will be a strong addition to the boardroom as the Company works to create value for all shareholders,” added Gavriel Kahane, Managing Partner at Arkhouse. Arkhouse is a “significant shareholder” in IAC, and is said to have been focused on a disconnect between IAC’s market value and the value of its underlying assets. In particular, IAC’s stake in casino giant MGM has been a flashpoint for investors, with the book value of that stake of similar scope to IAC’s total market cap. The firm has traditionally operated in the real estate sector, though the firm added Elliott Management veteran Richard Mansouri to help it expand its purview earlier this year. Diller has been running IAC himself since earlier this year when former CEO Joey Levin exited. Diller now has the business leaders reporting directly to him. Activists appear to be circling companies with exposure to the media business amid an uncertain macroeconomic environment, with Warner Bros. Discovery (WBD) also adding a new board member last month after facing engagement from Sessa Capital.

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4/29/2025

Match Settles Dispute with Anson Funds, Adds New Director to Board

Reuters (04/29/25) Herbst-Bayliss, Svea

Online dating company Match Group (MTCH) will add a consumer-technology executive to its board and lay the groundwork for all directors to stand for election annually, ending a dispute with shareholder Anson Funds. The company, valued at $7.6 billion, said on Tuesday that Kelly Campbell, the former president of NBCUniversal's Peacock, will become a director. Anson, which owned roughly 0.6% of Match at the end of December, according to a regulatory filing, was pushing to elect three directors to shake up what it called an outdated and insular board. The two sides have now settled on an information sharing agreement that will end a potentially disruptive fight for the company and possibly move closer to Anson's goals for management to rethink capital allocation, cut costs and consider a strategic review of its MG Asia business. Match is the parent company of dating sites Tinder, Hinge, and OkCupid and has seen its stock price tumble nearly 70% over the last five years. As part of the agreement, the company said in a regulatory filing that board member Alan Spoon, whose term expires at the annual meeting, will not stand for re-election. Anson and other investors had also criticized Match's practice of having only a certain number of directors stand for election annually, a practice that has become a flash point in governance circles because shareholders generally want all board members to stand for election annually. "The Board is committed to strong corporate governance practices," Match said in a statement, laying the groundwork for a shift to annual elections. Match joins a growing list of companies that have found common ground with critical investors at a time when volatile markets and uncertain policy directives from the White House are forcing them to pay even closer attention to their business, clients and shareholders. Earlier this week, restaurant chain Portillo's (PTLO) settled a dispute with Engaged Capital, which had nominated two directors to the company's board.

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4/29/2025

Engine Capital Seeks Board Changes at Lyft

Pymnts.com (04/29/25)

Engine Capital, which invested in Lyft Inc. (LYFT) in 2024 and has about a 1% stake in the company, said Tuesday that it aims to elect two candidates to the rideshare company’s board of directors and address Lyft’s “governance and capital allocation shortcomings.” Engine Capital said on Tuesday that it believes Lyft should implement a $750 million accelerated share repurchase program, eliminate the dual class share structure and de-stagger the board. Engine Capital said in a release and in a presentation that it favors these changes because Lyft’s capital structure is “completely unoptimized,” its co-founders who own 2.3% of the company have 30% voting power, and its staggered board structure in which directors are elected in phases prevents full board turnover in a single election. “Engine’s multiple attempts to work constructively with Lyft to strengthen the Board were met by entrenched directors who rejected Engine’s highly qualified candidates without even meeting with them,” the firm said in the release. Lyft said in an emailed statement that the company’s board and management team “are focused on customer obsession and executing for drivers and riders” and that this resulted in record gross bookings, adjusted EBITDA and free cash flow in 2024. “Last year, we surpassed every target we provided at investor day; earlier this year, we announced an inaugural share buyback program; and a couple weeks ago, announced plans to acquire European-based FREENOW,” the statement said. “We are now, more than ever, operating from a position of strength, and are confident in our future.” In a proxy statement filed with the SEC on April 24, the company said its board unanimously recommends a vote “for” each of Lyft’s director nominees and “strongly urges” stockholders not to sign or return any blue proxy card or voting instruction card sent to them by Engine Capital. In a letter included in the proxy statement, Lyft CEO David Risher wrote that Lyft is proud of the progress it made in 2024 and is excited about 2025 and beyond. “We’re already undertaking many of the actions suggested by Engine — and, because we constantly dive deep to understand the needs of our customers and shareholders, we were executing these moves long before they were suggested,” Risher wrote.

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4/29/2025

Pfizer Eyes Smaller Drugmakers After Failure of Obesity Pill

Bloomberg (04/29/25) Garde, Damian

Pfizer Inc. (PFE) expects to pull off two or three deals totaling as much as $15 billion this year to replenish its pipeline following the failure of its closely watched obesity pill. “We’re going to be very prudent,” Chief Executive Officer Albert Bourla said in an interview. “We don’t want to take it all in one product. That’s a lot of risk.” The drugmaker has struggled amid declining demand for its Covid-19 vaccines and treatments, while patent losses are expected to erode sales by more than $15 billion through the end of the decade. A series of multibillion-dollar acquisitions has yet to yield new blockbusters, and Pfizer’s stable of drugs in development hasn’t won over Wall Street. The recent failure of its obesity pill, the company’s best shot to break into the explosive market ruled by Eli Lilly & Co. (LLY) and Novo Nordisk A/S (NVO), has intensified the pressure on Bourla. Pfizer’s home-grown obesity medicines are years away from potential approval, and analysts have speculated the company might buy its way back into contention by acquiring a smaller obesity player like Viking Therapeutics Inc. (VKTX) and Structure Therapeutics Inc. (GPCR). “Investors are just not excited about the current Pfizer business or the pipeline,” Mizuho analyst Jared Holz said. “You could argue that nothing that they’ve done over the past few years has really worked, and to just watch your stock make new multiyear lows, that can’t be the endgame here.” Meanwhile, Pfizer is slashing at least another $1.2 billion from its spending, it said in a statement Tuesday. The cuts come on top of an already announced effort to save $6 billion by the end of 2027. The company said it would reinvest some $500 million back into research and development. Pfizer’s first quarter revenue of $13.7 billion fell short of analysts’ $14 billion average estimate, while adjusted earnings of 92 cents per share came in ahead of expectations. The company maintained its 2025 outlook of between $61 billion and $64 billion and adjusted per-share earnings of $2.80 a share to $3 a share. Chief Financial Officer David Denton said the company is “currently trending toward the upper end” of the per-share earnings guidance range. Its Covid business, which once drove annual revenue to $100 billion, has dramatically faded since the heights of the pandemic. In the first quarter, its Covid vaccine revenue was $565 million, beating estimates of $325 million. But Paxlovid, the company’s pill to treat infections, brought in $491 million, far below Wall Street’s $902 million forecast. Last year, activist investor Starboard Value LP disclosed a $1 billion stake in the company, accusing management of squandering more than $20 billion of value and saying that replacing Bourla “could make sense.” Pfizer got a reprieve in January when Starboard didn’t nominate its own slate of directors to the company’s board, though the activist could still agitate for changes next year. Pfizer has been in frequent conversation with Starboard, Bourla said. The company has implemented some of the activist’s suggestions, he said, declining to discuss specifics.

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