BT Shareholders Call on Next Boss to Consider Split
" Financial Times (08/20/18) Mooney, Attracta; Fildes, Nic"
BT shareholders are urging the next CEO to consider splitting up the business. The telecoms company is searching for a replacement for Gavin Patterson, who was ousted in June but remains in place until a successor is found. Patterson had presented the company’s largest restructuring plan in a decade, which included a proposal to cut 13,000 jobs in order to improve its financial performance. Chairman Jan du Plessis has said a new CEO will need to inherit the strategy, arguing that investors had supported the plan. However, some shareholders want more drastic steps to be taken and have proposed separating BT's Openreach engineering unit. A top-10 shareholder said that following du Plessis's appointment as chairman last year, along with a new CEO, it is ideal timing to re-examine the structure of the business. “They should analyze the strategy and come back and tell more about what they want to do. It should be their decision, but there is more chance of [a split] happening now with a new CEO and chairman,” the shareholder said. Activist investors and private equity firms have started pushing the issue in other European markets. Elliott bought shares in Telecom Italia partly to demand a faster spin-off of its network into a separate business, while Macquarie and a group of pension funds acquired TDC in Denmark this year and placed the network into a separate division.
Major MidSouth Shareholder Urges Sale, Blasts Bank's Turnaround Efforts
" Acadiana Advocate (LA) (08/17/18) Boone, Timothy"
Jacobs Asset Management (JAM) sent fellow shareholders a letter last week urging MidSouth Bancorp's (MSL) board of directors to pursue a sale. Sy Jacobs, founder and managing partner of JAM, said he was frustrated with the bank's performance and lack of action taken to create shareholder value. JAM owns a 7% stake in MidSouth, making it the second-largest shareholder. Jacobs said that while MidSouth has posted major losses over the past 18 months, the rest of the U.S. banking industry has enjoyed record profits and rising stock prices. Banks have used the profits to acquire other entities. While shares of MidSouth closed Friday at $14.85, Jacobs said he estimates banks could be willing to pay $19 to $20 per share for the company. MidSouth has a responsibility to pursue swapping an “unprofitable, shrinking, inwardly-focused bank” into a “profitable, growing” bank. “If it does not, we look forward to exercising our rights as shareholders and having our voice and vote heard at next year's annual meeting,” the letter said. It added that MidSouth's plans to improve its financial standing have gone awry. “Clearly the restructured board and management team had a poor grasp on the scope of the turnaround plan necessary when capital was raised in 2017,” the letter said. “Given how badly the plan has gone we question whether there was purposeful deception or just plain delusion. Wherever the truth lies, you have blown your second chance with shareholders and don't deserve to remain independent.”
DAVIDsTEA 12% Shareholder Requests Information Regarding Recent Adverse Developments
" MarketWatch (08/17/18)"
TDM Growth Partners, a 12% shareholder in DAVIDsTEA Inc. (DTEA), has sent a letter to the independent directors questioning adverse developments since Herschel Segal gained control of the company on June 14. The letter points out that "In the short period of time since Mr. Segal has controlled the business: The previous CEO, Mr. Joel Silver, was terminated immediately after the AGM. Three out of the six most senior executives in the Company have resigned. ... Two of the five independent directors have resigned, including the lead independent director Bill Clemen. DTEA is in breach of the NASDAQ listing requirements, having an insufficient number of Independent Directors on its Audit Committee—NASDAQ has warned that DTEA will be delisted unless the breach is cured. The share price has declined from $3.95 on the day prior to the AGM to $2.52 as at the date of this letter, a 36% decline. These developments appear to confirm the fears which TDM and its fellow shareholders expressed prior to Mr. Segal taking control of the Company." The letter goes on to ask which independent director now is the lead independent director, and who is leading the search for a new CEO. The letter also seeks clarification on why Silver was terminated and why two board members resigned only six weeks after they joined the board. The letter additionally seeks clarification on the July 31 DTEA press release rejecting a lawsuit brought against Hershel Segal and his private company Rainy Day Investments, by Porchlight Equity, a 12.8% shareholder.
ASX CEO Says Sense Will Prevail on Governance Principles
" Australian Financial Review (08/16/18) Eyers, James"
ASX CEO Dominic Stevens said the ASX Corporate Governance Council will strike a sensible final position in upgrading its governance principles, and it will maintain boards' discretion not to adopt parts of the guidance. "It's not the ASX—these are corporate governance principles put together by a broad church of investors, directors, and professionals working in the market, and we see that as a great forum for building the principles," he said. "As with all good consultations, it's shown a wide range of views, and has been a good discussion, and that's the point. ASX has confidence, as with the last three of these that have been done, we think it will come back down to an outcome where there will be broad consensus of all the members."
The Stilwell Group Sends Fourth Letter to Shareholders of Wheeler Real Estate Investment Trust and Files Definitive Proxy Materials
" PR Newswire (08/16/18)"
The Stilwell Group announced Thursday it has penned an open letter to shareholders of Wheeler Real Estate Investment Trust Inc. (WHLR) and filed its definitive proxy statement for the election of three director nominees at the 2018 annual meeting. In the letter, Stilwell notes it is WHLR's largest shareholder and has over two decades of experience investing in financially related companies, including placing at least 20 representatives on company boards. "In our experience, bad corporate governance is a big, red flag for corporate problems. The red flag flies at WHLR—where the directors have an inflated view of themselves," the letter states. "While WHLR's common shares were plummeting, our board of directors deemed themselves deserving of outsized raises. Between 2016 and 2017, the board members voted themselves a disturbing jump in compensation." For example, board member Stewart Brown received a 228% increase, it notes. "We can't think of any reason why our Company's board deserved such a handsome reward for its abysmal performance," Stilwell says, adding that board members declined to respond to private requests for information about these numbers. "Do you think our directors deserve a raise? We think they deserve to be replaced. It's no wonder they don't want us on the board; we would have never permitted such behavior," the letter concludes.
Ackman Enters Lowe's Ownership With Nearly 1% Stake
" Winston-Salem Journal (NC) (08/15/18) Craver, Richard"
Bill Ackman acquired a nearly 1% stake in Lowe's Cos. Inc. (LOW) during the second quarter, and more than doubled his holdings in United Technologies Corp. (UTX). Ackman said in a letter to shareholders this month that the Lowe's and UTC investments "have been positive contributors to year-to-date performance and are well aligned with...core investment principles." Ackman said Lowe's competitive struggles with Home Depot (HD) is the primary reason for his decision to take a stake. "Lowe's profit margins and sales productivity are substantially lower than Home Depot's, and it trades at a substantially lower earnings multiple," he said. He supported naming Marvin Ellison, a former Home Depot executive, to be Lowe's president and chief executive. "We expect that Mr. Ellison can close the performance gap, and the market will revalue Lowe's accordingly," he said. Meanwhile, UTC is waiting for final regulatory approval for its $30 billion purchase of Rockwell Collins Inc. (COL). Ackman wants UTC to consider splitting itself into three or four parts. UTC Chairman and CEO Greg Hayes says the company's board of directors and management are reviewing options. UTC's four primary operating segments are Climate, Controls, and Security; Pratt & Whitney aviation equipment; UTC Aerospace Systems (which Rockwell would join); and Otis elevators. Ackman says the four segments "all benefit from favorable long-term growth trends and recurring long-term cash flows. Each of these businesses has materially different capital requirements, competitive characteristics, and investor constituencies, and we believe that they will be more likely to achieve fair value as independent companies." Daniel Loeb's Third Point also has communicated with UTC, the company confirmed May 4. Loeb has called for UTC to split the company into three parts, according to media reports.
Ackman Won't Reveal New Mystery Stake in Pershing Square
" New York Post (08/15/18) English, Carleton"
Bill Ackman has acquired a major new position that accounts for about 10% of Pershing Square's portfolio, but declined to reveal the details. “We're not yet ready to disclose the company, but it certainly meets our standards,” Ackman said in a call with investors Wednesday, adding that the mystery investment is “quite undervalued” and has “lots of opportunity for improvement.” Ackman's fund could use some upside. Although it is up 13.6% this year, assets stand at about $8 billion, down from a peak of $20 billion in July 2015. Departing investors forced Pershing Square to sell down some of its winning position in Automatic Data Processing (ADP), Ackman said. We “are not saying we don't like the investment. In fact, we like it a lot, but we do need to manage the portfolio overall,” he said. ADP shares are up almost 27% since Pershing Square unveiled its stake in the company last August. Ackman was unsuccessful in wining board representation in November but said he is “pleased” with his conversations with management since then.
Investor Is Buying Up Stock in KC's Fastest-Growing Company
" Kansas City Business Journal (08/15/18) Reuter, Elise"
Engaged Capital upped its holding in Aratana Therapeutics Inc. (PETX) to 6.8% in early August, becoming the company's third-largest shareholder. In March, the fund revealed a 4.7% stake in the animal health company and nominated three of its own candidates to the board. However, the two sides agreed to a deal ahead of Aratana's annual shareholder meeting that installed two of Engaged Capital's nominees on the board and increased the number of board seats from nine to 10. "We invested in Aratana as we see significant value to be realized in the company's innovative therapeutic portfolio," said founder Glenn Welling in a release. He added that Engaged Capital’s nominees, Lowell Robinson and Craig Barbarosh, "will bring an objective and valuable perspective into the boardroom for shareholders with a disciplined focus on cost and capital allocation, along with a sense of urgency in delivering on the value of Aratana's unique assets." Per the agreement, Engaged Capital cannot increase its stake beyond 9.9% without board approval. It also agreed to vote for the directors recommended by Aratana's board during the 2018 shareholder meeting. However, both of those stipulations will end next year, a month before the deadline to nominate directors at Aratana's 2019 shareholder meeting. Separate from the deal, Aratana agreed in July to establish a strategic review committee that includes Aratana CEO Dr. Steven St. Peter, one of Engaged Capital's nominees. He said in the company's second quarter earnings call that "Aratana has been exploring a wider set of business opportunities and outcomes."
Starboard Value Halves Its Stake in Newell: Filing
" Reuters (08/14/18) Herbst-Bayliss, Svea"
Starboard Value sold half of its stake in Newell Brands (NWL), some 9.8 million shares, in the second quarter, according to a filing with the Securities and Exchange Commission. The hedge fund called for CEO Michael Polk and the entire board to be replaced earlier in the year when it held a 3.8% stake in Newell. Starboard struck a deal that gave it two board seats in April. Since January, Newell's stock price has declined 34%, and in the last five days, it has fallen 10%. Starboard also has sold half of its stake in mall operator Macerich (MAC), after nominating directors for the firm in April, and has sold 60% of its position in drugmaker Depomed (DEPO), after winning board seats last year.
Diamondback to Acquire Energen as Oil Patch Consolidation Continues
" Wall Street Journal (08/14/18) Maidenberg, Micah"
Diamondback Energy Inc. (FANG) will buy Energen Corp. (EGN) in an all-stock deal valued at $9.2 billion, amid pressure in the sector to control rising costs. In May, Corvex Management LP and Carl Icahn expressed interest in buying Energen themselves, though Icahn said at the time it would be more logical for a strategic buyer to acquire it at a good price. As of last week, Icahn and Corvex owned stakes in Energen, including derivatives, of 8.9% and 7.9%, respectively. Corvex and Elliott Management Corp. have both urged Energen to sell before, and Energen’s board includes Icahn Capital LP’s former senior managing director, Vincent Intrieri. The deal gives Diamondback 85% more acres in the Midland and Delaware basins, both of which are part of the Permian Basin, plus 57% more high-performing acres than it currently controls. Diamondback said it believes the deal would generate at least $3 billion in cost savings over time. The acquisition values Energen at $84.95 a share, a 19% premium to the stock’s closing price Monday. Energen shareholders will receive 0.6442 share of Diamondback stock for each Energen share they own. If the deal is completed, Diamondback shareholders would own roughly 62% of the combined company, with Energen stock owners controlling the rest.
Nielsen Should Get a Break From the Market
" Wall Street Journal (08/15/18) Back, Aaron"
Although Nielsen Holdings (NLSN) has struggled as a public company, a breakup may not be the best option. Elliott Management said Monday it has acquired an 8.4% stake in Nielsen and will push the company to consider strategic options, including a sale. Nielsen has two segments: a media and television rating business, which it calls its “watch” business, and a unit that tracks purchases of groceries and other consumer goods, called “buy.” This latter business has been the weak spot, and Nielsen has blamed disruption in the consumer-goods industry. However, Elliott reportedly believes Nielsen is also losing market share to smaller data provider IRI, due in part to underinvestment in data automation and analytics. The truth is likely somewhere in between. Companies are under pressure to cut costs, though at the same time they need market data more than ever to make accurate judgments about consumer trends. Nielsen's data is still the gold standard for the industry, and is more international than IRI's. The next question is if it makes sense to divest the “buy” business. One reason to keep them together is they have the same clients. To plan advertising campaigns, clients need to know not only what media is being watched, but also what products are selling and to whom. A breakup of the company would cause these natural synergies to be lost. In addition, the “buy” business may not fetch a great valuation on its own. A return to private-equity ownership would give Nielsen some breathing room, but any deal should keep watch and buy together.
Icahn Backs Down on Cigna-Express Scripts Deal
" Wall Street Journal (08/13/18) Lombardo, Cara"
Carl Icahn no longer plans to solicit proxies to vote against the $52 billion Cigna-Express Scripts deal, after two proxy-advisory firms recommended shareholders support the transaction. His decision marks a dramatic reversal of his position a week ago when he urged the health insurer's shareholders to vote against it. Near the end of this year's first quarter, Cigna (CI) agreed to acquire Express Scripts (ESRX), one of the largest U.S. pharmacy benefits managers. The health insurer, which now needs shareholder approval to close the deal, is holding a special meeting on Aug. 24 so investors can vote on it. Icahn holds 0.56% of Cigna's shares. One of the risks he pointed to is Amazon (AMZN), which recently purchased online prescription drug company PillPack. Icahn believes Amazon could one day put Express Scripts out of business. Another prominent hedge fund, Glenview Capital Management LLC, said last week it backed the deal. The fund has a $1.3 billion stake split between the two companies. Meanwhile, Institutional Shareholder Services and Glass Lewis' opinions hold significant sway with shareholders. Such proxy advisory firms rarely recommend their clientele, which include big institutional investors, vote against proposed mergers. In turn, major institutional shareholders often vote in line with the proxy-advisory firms' opinions.
Elliott Unleashes a Record Nielsen Rally by Urging Sale
" Bloomberg (08/13/18) Deveau, Scott; Mutua, David Caleb"
Paul Singer's Elliott Management Corp. acquired an 8.4% stake in Nielsen Holdings Plc (NLSN) and called for a sale of the consumer-data giant, sparking the biggest stock rally since it first went public. Elliott said it will "encourage the issuer to undertake a full strategic review of, and initiate a process to explore, the sale." Elliott built up its position on July 26, the day Nielsen reported bad news that plunged the company into upheaval and erased $2.7 billion of its market value. The company reduced its profit forecasts for the year and said its chief executive officer will retire. It also said it was considering options for its Buy segment, which tracks consumer purchases. "Elliott Management knows their way around the media business," said Douglas Arthur, a managing director at Huber Research Partners LLC. "What's important now is for them to figure out who'll be the buyer and what's going to happen to [its $8.5 billion of] debt." Nielsen shares rose 17% today to $25.67, the biggest intraday gain since the company's 2011 initial public offering. The stock had dropped 40% this year through Friday.
Elliott Management to Push Nielsen Holdings to Sell
" Wall Street Journal (08/12/18) Lombardo, Cara"
Elliott Management Corp. has acquired an 8.4% stake in Nielsen Holdings PLC (NLSN), according to a filing Monday, and plans to push the TV-ratings company to sell itself. Numerous private-equity firms have expressed interest in Nielsen and bidders could include Elliott, according to sources. The company has been struggling in a rapidly changing retail environment, and it recently announced CEO Mitch Barns would step down at the end of this year. It has begun a search for his successor. Elliott believes the company's “buy” segment has failed to keep up with competitors such as IRI, which has invested in data-intensive offerings, while Nielsen has continued to depend on its employees to provide analysis to clients, sources said. The fund wants Nielsen to launch a strategic review of the entire business rather than just the “buy” segment. Meanwhile, a Nielsen spokeswoman said the firm's board of directors continues to evaluate how to best position the business and is open to the views of its owners, including Elliott.
Icahn Dealt Another Blow as Glass Lewis Supports Cigna Deal
" Bloomberg (08/11/18) Deveau, Scott"
Glass Lewis & Co. has advised Cigna Corp. (CI) shareholders to vote for the company’s $54 billion deal for Express Scripts Holding Co. (ESRX) at an Aug. 24 shareholder meeting. The proxy advisor's recommendation—which echoes that of Institutional Shareholder Services Inc.—marks a setback for Carl Icahn's efforts to block the deal. “We find the proposed merger both strategically and financially compelling, structured in a reasonable manner from a valuation standpoint for Cigna shareholders,” Glass Lewis said in its report Friday. Icahn, who owns a 0.56% stake in Cigna, has argued the insurer is “dramatically overpaying” for Express Scripts. While he has admitted he faces an uphill battle to upend the deal, the billionaire investor has urged Cigna investors to vote against it, based in part on the threat from Amazon.com Inc. (AMZN) to Express Scripts's future. Icahn said he believed Cigna should pursue a multiyear partnership rather than a takeover, and use its cash to buy back shares. He said he believes Cigna could be worth $250 a share on a standalone basis and that Express Scripts, which he holds a short position in, would be worth less than $60 a share. Cigna closed Friday at $183.28 while shares in Express Scripts ended the trading day at $83.64. Glass Lewis said it believed the merger was set at a reasonable price, and would create a more diverse and integrated business model in the changing healthcare industry.
Thyssenkrupp Needs New Strategy, Targets Not Enough: Investor
" Reuters (08/11/18) Käckenhoff, Tom"
A Thyssenkrupp shareholder is unsatisfied with mid-term targets announced last week and is calling for a strategy overhaul led by a new CEO. Union Investment owns just a 0.2% stake in the German conglomerate, but has been one of its most vocal shareholders and repeatedly pressed management to seek a deeper restructuring. “Thyssenkrupp needs a strategy shift. This is easier to achieve when someone new comes in from the outside,” said fund manager Ingo Speich said. Thyssenkrupp has been in crisis after both its CEO and chairman stepped down in July following shareholder pressure to boost the share price, which has dropped one-third since 2011. A recent profit warning has escalated matters for interim CEO Guido Kerkhoff, who served as CFO but has taken the helm until a long-term successor is found. “(Kerkhoff) stands for the old strategy. It would send a stronger signal to capital markets if the new CEO came from the outside,” Speich said. “A good combination could be a new external CEO who will be supported by Kerkhoff.” Speich, along with bigger shareholders Cevian and Elliott, does not support an outright breakup of the company but said there should be a more active management of its portfolio. “This includes replacing some areas or strengthening them via acquisitions. This could also result in the addition of jobs,” he said.