Media Center

1/23/2020

Prompted by New Regulation, South Korean Firms Scout Outside Directors

Korea Herald (01/23/20) Ji-hye, Shin

After a recent change in regulations limiting tenures of outside directors, South Korean companies are quickly searching for new members prior to their general shareholders meetings in March. South Korea's cabinet on Jan. 21 approved revisions to the enforcement decrees of the Commercial Act, Capital Market Act, and National Pension Act. The revisions, which were designed to reinforce shareholders' rights, limit people who have worked at an affiliate within three years from becoming a member of a company. Meanwhile, outside directors are also banned from serving for six years at a single firm and nine years total when including an affiliate company. Experts said South Korean companies would have to scramble to be in compliance with the new laws by the spring shareholders meeting season. According to the Korea Listed Companies Association, a total of 566 South Korean companies must appoint at least 718 new outside directors by March. For 87.3% of those companies, it will be a tall order, because they are small or midsized and could have trouble attracting interest as they cannot pay as much as larger firms.

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1/23/2020

Sysco to Outsource Customer Service Positions in Latest Cost-Cutting Move

Houston Chronicle (01/23/20) Takahashi, Paul

Sysco (SYY) recently announced that it will outsource all of its U.S. customer service employees as part of its efforts to streamline its business amid rising operating costs. The company began looking for efficiencies after investor Nelson Peltz became a major shareholder and won two seats on the board in 2015. Peltz's Trian Partners is Sysco's fourth-largest stockholder. In an internal memo to employees, Sysco said it has partnered with Cognizant (CTSH) to manage its customer service as part of a new "centralized customer care model" allowing for extended hours and a single point of contact for customers. According to Sysco, this will result in the "difficult, but necessary action" to eliminate customer service positions from all of its U.S. subsidiaries and its customer service office in Cypress.

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1/23/2020

Xerox Escalates HP Takeover Fight With Push to Replace Board

Bloomberg (01/23/20) Deveau, Scott

On Jan. 23, Xerox Holdings Corp. (XRX) said it plans to nominate 11 directors to replace the board of HP Inc. (HPQ). The move comes after HP rejected Xerox's $22-a-share takeover offer and refused to engage in talks. Xerox hopes that replacing HP's entire board through a proxy fight will push the deal through. "HP shareholders have told us they believe our acquisition proposal will bring tremendous value, which is why we lined up $24 billion in binding financing commitments and a slate of highly qualified director candidates," said Xerox Vice Chairman and CEO John Visentin. The deal has the support of Carl Icahn, who owns about 11% of Xerox and has a 4.3% stake in HP. HP responded that "these nominations are a self-serving tactic by Xerox to advance its proposal, which significantly undervalues HP and creates meaningful risk to the detriment of HP shareholders." Xerox's director nominees are Betsy Atkins, CEO of Baja Corp.; George Bickerstaff, co-founder and managing director of M.M. Dillon & Co.; Carolyn Byrd, CEO of GlobalTech Financial; Jeannie Diefenderfer, formerly of Verizon (VZ); Kim Fennebresque, former CEO of Cowen Group; Carol Flaton, who has served as a managing director at AlixPartners; Matthew Hart, former president and COO of Hilton Hotels; Fred Hochberg, chairman and president of the Export-Import Bank of the United States during the Obama administration; Jacob Katz, who was chairman of Grant Thornton; Nichelle Maynard-Elliott, who most recently served as executive director of mergers and acquisitions for Praxair Inc.; and Thomas Sabatino Jr., who most recently served as executive vice president and general counsel of Aetna Inc.

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1/22/2020

AT&T Finds a New Way to Help Grind Down Its Debt Mountain

Bloomberg (01/22/20) Moritz, Scott

At the end of 2019, AT&T (T) took a collection of cell-tower rent payments that it will receive in the future, rolled them into a subsidiary, and sold shares of the unit to investors for $6 billion. The new entity is called AT&T Investment & Tower Holdings LLC, and the preferred shares pay as much as 5% annually. The move is part of an ongoing effort to turn various assets into cash that it can use to pay down debt. AT&T's debt reached $200 billion after its 2018 purchase of Time Warner in an attempt to become a modern media colossus. AT&T has promised shareholders including Elliott Management Corp. that it will lower its leverage ratio to between 2 and 2.25. With the tower receivables, AT&T raised $6 billion up front, which requires an interest payment of about 5%. While that is a higher interest rate than nearly any loan AT&T could have received, it does mean that the $6 billion will not add to the company's $165 billion debt pile. One analyst said the move is "a bit of a surprise" for a high-grade debt company like AT&T, but noted that its timing is ideal if AT&T wants the action to stay below the radar.

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1/22/2020

Atlas and Blue Wolf Correct Verso's Misleading Comments Regarding Settlement Discussions

PRNewswire (01/22/20)

Lapetus Capital II LLC (Atlas) and BW Coated LLC (Blue Wolf), which owns 9.43% of the outstanding stock in Verso Corp. (VRS), have issued a statement to clarify recent comments made by Verso regarding settlement negotiations. The statement says that while Atlas has sought to resolve its dispute with incumbent directors in a consensual manner, Verso "continues to try to misdirect stockholders by diverting attention from the Board of Directors' abysmal governance practices, indefensible capital allocation strategy, and poor operational track record." Two days ago Verso proposed increasing the board size "yet again" in an attempt to manipulate Verso's governance without stockholder approval. Atlas believes Verso's proposal to expand the board is an attempt to dilute the impact of the stockholder vote, noting that Verso has already nearly doubled the size of the board since Atlas and Blue Wolf nominated director candidates and has agreed to sell a significant portion of the company's assets. The statement cites comments by Institutional Shareholder Services and a ruling by the Delaware Court of Chancery that underline the presence of poor governance and entrenchment motives at the board level.

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1/22/2020

Proxy Solicitor Morrow Sodali Hires Schulman From MacKenzie

Reuters (01/22/20) Herbst-Bayliss, Svea; DiNapoli, Jessica

Proxy solicitor Morrow Sodali has hired Paul Schulman from rival MacKenzie Partners. Schulman reportedly will serve as co-head of Mergers & Acquisitions, Activism and Contested Situations, along with Morrow veteran Michael Verrechia. Morrow worked with Newell Brands (NWL) during its battle with Starboard and Luby's (LUB) when it was engaged by Bandera Partners.

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1/22/2020

Keith Meister's Corvex Shot the Lights Out Last Year

Institutional Investor (01/22/20) Taub, Stephen

Keith Meister's Corvex Management posted its best-ever gains in 2019, up 40% from the year before. It is not clear exactly what investments drove returns or how much leverage it used, but it appears that MGM Resorts International (MGM) played a significant role in driving performance. The hospitality giant accounted for about 22% of Corvex's U.S. common stock portfolio for most of last year, and shares of MGM surged about 37% in 2019. Corvex also benefited from a stake in Madison Square Garden (MSG), acquired in the third quarter; its shares rose 18% after a decline in August and gained 10% for the year. Zendesk became Corvex's fourth-largest position in the third quarter, and the stock gained 5% in the fourth quarter. In October, Corvex teamed up with Jericho Capital Asset Management to take a combined 14.5% stake in Forescout Technologies (FSCT), which it said was undervalued. Corvex said that it and Jericho "believe that combining their complementary expertise, skill sets, and perspectives will be beneficial in discussions" with the company. Forescout's stock finished the year at $32.80, up around 30% from the recent purchase price. On the other hand, shares of Diamondback Energy (FANG), Corvex's second-largest common stock long for most of last year, fell about 1% last year.

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1/22/2020

Jeff Ubben Gives Up Role as ValueAct Chief

Financial Times (01/22/20) Fortado, Lindsay

Jeff Ubben has stepped down as chief executive of ValueAct Capital in a shakeup of the company's upper leadership. Ubben will continue to oversee the ValueAct Spring Fund, the impact investing fund that counts for about $1 billion of the $16 billion the group manages. His protégé Mason Morfit, currently the president of the group, will become chief executive of the company and continue in his role as CIO of the flagship Master Fund. Two of the group's longstanding partners, Allison Bennington and Greg Spivy, are leaving, while partner Brandon Boze was promoted to president. Morfit said the changes would free him up to focus more on investing and allow the group to promote some of its "Generation 3" partners, who are mostly in their mid-thirties. The changes come about two years after Ubben first stepped back from daily oversight of the group's main portfolio. Under Ubben, ValueAct pioneered a style of investing that pushed for change at companies in a friendly manner that was later adopted by many of its competitors. ValueAct's Master Fund was up 32% last year and its Spring Fund returned more than 30%, putting both in line with the S&P 500's 31.5% total return for the year. The biggest gains in the main fund came from ValueAct's investments in Citigroup (C), Seagate Technology (STX), Olympus (OCPNY), KKR (KKR), and CBRE (CBRE).

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1/22/2020

Elliott Sells Stakes in Hyundai Motor Companies

Reuters (01/22/20) Lee, Joyce

A South Korean newspaper recently reported that Elliott Management sold all of its shares in Hyundai Motor Group (HYMTF) companies last year, noting that Elliott was not on the December 2019 year-end list of shareholders in the group. The newspaper said that a recent recovery in Hyundai share prices may have influenced the move. A 2018 shareholder vote on a proposal to restructure Hyundai Motor Group had been canceled after Elliott put forth its own plan for changes at the group, but shareholders rejected its proposal for a massive special dividend and board seats in March 2019. As of November 2018, Elliott held more than 2.5% of common stock in Hyundai Mobis, 3% in Hyundai Motor, and 2.1% in affiliate Kia Motors.

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