'Mmm, Mmm Bad?' Campbell Soup Hit With Critical Video From Third Point
" USA Today (10/18/18) Snider, Mike"
Daniel Loeb's Third Point posted a video on Oct. 18 criticizing corporate leadership at Campbell Soup (CPB) as the hedge fund looks to replace the company's entire board at its Nov. 29 shareholder meeting. The four-minute "Empty the Can" video cites "dismal soup sales" and lowered expectations at Campbell, and takes a jab at the company's iconic "Mmm, Mmm, Good" jingle by ending with the lyrics "Mmm, Mmm, Bad." The video comes a day after family members of company founder John Dorrance, who hold a combined 41% of Campbell's shares, announced their support for the current board; three of those family members sit on the board. In the video, Third Point argues that a "fresh new" board could recruit a new CEO "to turn this company around before it's too late. We know Campbell's can thrive again." The hedge fund owns about 7% of the company's stock.
Golden Nugget Casinos Owner Intrigued by Caesars Merger
" New York Post (10/17/18) Morgan, Richard; Kosman, Josh"
Tilman Fertitta, the billionaire owner of Golden Nugget Casinos, reportedly has approached Caesars Entertainment (CZR) about a merger that would value Caesars at $13 per share. Sources say Fertitta is waiting for a response from Caesars' board about the reverse merger. Under the deal, Fertitta's privately owned hospitality company Landry's would exchange its private shares for stock in Caesars, which would technically be the acquirer but Fertitta would be the company's largest shareholder and, as such, become chairman and CEO. This would give Caesars' shareholders, including Apollo Global Management and TPG Global, smaller stakes in a larger company. Those shareholders, as well as HG Vora Capital, have been receptive to a sale.
AT&T, Bank of America, Coca-Cola, IBM, Johnson & Johnson, P&G, and Other Leaders Sign on to Updated Commonsense Corporate Governance Principles
" MarketWatch (10/18/18)"
CEOs of 20 public companies, pension funds, and investment firms have signed the Commonsense Corporate Governance Principles 2.0, pledging to use these standards to inform the corporate governance practices within their own organizations. Executives who signed on include Jeff Ubben of ValueAct Capital, Larry Fink of BlackRock (BLK), and Coca-Cola (KO) chief executive James Quincey. The principles are intended to promote a constructive dialogue on good corporate governance, create economic growth, and sustain the health of America's corporations and markets. The updated principles include a number of additions and enhancements, including that board members should be prepared to serve for a minimum of three years; if board elections are not annual, companies should explain why; companies should allow some form of proxy access; poison pills and other anti-takeover defenses should be put to a shareholder vote and re-evaluated by the board regularly; and asset managers should disclose if they rely on proxy advisors to inform their decision making.
ABB Working With Credit Suisse, Dyal on Power Grid Options
" Bloomberg (10/17/18) Kirchfeld, Aaron; Porter, Kiel; Foerster, Jan-Henrik"
Swiss engineering company ABB Ltd. (ABB) is working with advisers to prepare the possible separation of its power grid unit, according to sources. A sale of the unit would meet a longtime demand of Cevian Capital AB. The investor became a major shareholder in ABB more than three years ago and began pushing for a breakup of the company, and particularly a separation of its power grids division, which is worth more than $10 billion. The Zurich-based company is receiving advice from Credit Suisse Group AG and Dyal Co. on a possible sale or spinoff of the unit, the sources said, and the board is likely to make a decision by the end of the year on whether to pursue a deal. Infrastructure funds, private equity firms, and some Asian rivals could be interested in the asset, though some could be discouraged by the investment, financing, or regulatory requirements, the sources said. ABB could retain part of the business following any transaction, the sources added.
For Nestle and Unilever, No News Is Good News
" Bloomberg (10/18/18) Felsted, Andrea"
European consumer behemoths Unilever (UN) and Nestle (NSRGY) reported sales growth on Thursday that broadly matched analyst estimates, which was exactly what they needed. A misstep at Nestle could bolster an activist investor; at Unilever, it could attract one. The companies are struggling with poor sales growth as consumers turn to smaller products and as growth in emerging markets slows. Of the two, Unilever is under the greater pressure to produce better operating results after promising to revive its performance after spurning a generous takeover approach from Kraft Heinz Co. (KHC) last year. The Anglo-Dutch conglomerate had planned to simplify its structure into a single holding company in the Netherlands, but was forced to abandon that plan this month amid opposition from big U.K. shareholders. Any drop in performance could encourage an investor to push for another takeover approach. Nestle is in a stronger position. CEO Mark Schneider is seeking to steer a steady course between chasing profit at the expense of the top line growth, and profitless revenue growth. So far, he seems to be doing well, but he cannot afford a misstep. In July, Dan Loeb urged him to accelerate the pace of disposals. Loeb also wants Nestle to divest its 24 billion-euro ($28 billion) stake in L'Oreal SA, something Schneider has so far resisted. Any operational weakness could give the investor motivation to push even harder, by, for example, demanding a board seat.
Corporate Australia Faces Growing Revolt Over CEO Pay
" Sydney Morning Herald (Australia) (10/17/18) Kruger, Colin; Duke, Jennifer"
One of the largest shareholder rebukes over executive pay occurred at Telstra's annual meeting in Sydney on Oct. 16, leading many others to declare that chief executives are overpaid. John Mullen, Telstra's chairman, defended Telstra CEO Andy Penn's AU$4.5 million pay package, but also stated that he thinks executive salaries are too high. He argued that "changing this takes time and needs to be embraced by all of corporate Australia not just one company or one industry, as the marketplace for talent is international and is industry agnostic." Graham Kraehe, who is chairman of Bluescope Steel, Brambles, and a former member of the Reserve Bank board, said he also believes CEOs are paid too much. "Corporate Australia has lost some trust and I think corporate Australia needs to show some leadership in saying this is an issue," he said. During his speech at Telstra's annual meeting, Mullen stressed that "the multiple difference in the U.S. is 300 times between the CEO and the average employee, U.K. is 180 odd, and here we're 50-something. So, we're certainly way down the pecking order in terms of that but still 50 times is a lot." However, the Communications, Electrical, and Plumbing Union of Australia (CEPU), which represents Telstra workers, seized on Mullen's comments. "The top six executives are collectively paid 200 times more than the average Telstra worker," said Shane Murphy who heads the communications branch of the union. "The inequity is ridiculous."
Campbell Heirs to Vote for Own Board, Third Point Calls Move a 'Stunt'
" Reuters (10/17/18) Naidu, Richa; Herbst-Bayliss, Svea"
On Oct. 17, Campbell Soup Co. (CPB) said four key shareholders—Bennett Dorrance, Mary Alice Malone, Archbold van Beuren, and Charlotte Weber, all descendants of former chairman John Dorrance—oppose Third Point's plans to oust the company's entire board. The family members, who own a combined 41% stake in Campbell, plan to vote in favor of the company's existing board at the Nov. 29 shareholder meeting. Third Point, which owns 7% of the company's stock, said in a statement, "This group of billionaire heirs and heiresses are attempting to intimidate smaller shareholders by flaunting their inherited voting bloc as an impenetrable moat." Shares in Campbell dropped 3.9% in morning trading, and Third Point said the decline suggested shareholders are unhappy with these heirs' decision to support the current board. Third Point wants to replace all directors with a 12 person-slate that includes George Strawbridge, another descendant of John Dorrance.
Fujifilm Wins Appeal in Battle With Xerox Over Aborted Merger
" Reuters (10/16/18) Yamazaki, Makiko"
Japan’s Fujifilm Holdings Corp. has won an appeal in its legal dispute with Xerox Corp. (XRX), with a New York court overturning preliminary injunctions sought by an investor that had blocked their planned merger. Xerox this spring terminated a $6.1 billion deal with Fujifilm in a settlement with Carl Icahn and Darwin Deason that also gave control of the U.S. photocopier giant to new management. The ruling by the New York State Appellate Court could give the Japanese firm leverage to bring Xerox management back to the negotiating table. Fujifilm is also suing Xerox in a separate U.S. suit that seeks more than $1 billion, accusing it of breach of contract in abandoning the deal. Its chances of success are, however, unclear as Xerox's new management, backed by Icahn and Deason, is opposed to the proposed merger. Analysts have said the only way for Fujifilm to gain any traction with Xerox now is to raise its offer. Fujifilm said it stands by its view that the original planned merger remains the best option for the shareholders of both companies. The U.S. firm is now led by John Visentin, who worked as a consultant to Icahn in the proxy fight and just this month it appointed Louie Pastor, previously deputy general counsel at Icahn Enterprises, as general counsel. Icahn and Deason own 15% of Xerox.
Demand Grows for SEC Rule on ESG Disclosure
" Pensions & Investments (10/15/18) Bradford, Hazel"
On Oct. 2, a group of institutional investors, asset managers, state treasuries, and Environmental, Social, and Governance (ESG) advocates petitioned the Securities and Exchange Commission to mandate standardized disclosure of ESG information by publicly traded companies. They believe standardized data will provide a better way to review companies' risk management and long-term performance while saving time and trouble. Signers of the petition include the $361.6 billion California Public Employees' Retirement System, Sacramento; New York State Comptroller Thomas P. DiNapoli; Illinois Treasurer Michael W. Frerichs; Connecticut Treasurer Denise L. Nappier; Oregon Treasurer Tobias Read; and the $2.6 billion Seattle City Employees' Retirement System. Asset managers signing the petition include Aberdeen Standard Investments, Calvert Research and Management, Legal & General Investment Management America, and Trillium Asset Management LLC. According to Bryan McGannon, director of policy and programs at US SIF in Washington, many companies already do sustainability disclosure, but "the biggest challenge to investors is consistent data so you can do apples-to-apples comparisons...We realistically believe that we need to build a case and demonstrate that there is a need for this."
Carl Icahn Says Michael Dell Trying to Coerce Dell Tracking Stock Holders With 'Scare Tactics'
" CNBC (10/15/18) Moyer, Liz"
Carl Icahn said Monday that Michael Dell and private equity firm Silver Lake are "manipulating" and "coercing" shareholders of the tracking stock of VMware (VMW) into accepting their buyout offer. By using "scare tactics," he said, Dell and Silver Lake are "literally stealing" $11 billion from shareholders in a plan to take Dell (DVMT) public again. Icahn argues that Dell and Silver Lake are significantly undervaluing VMware, a software company, for their own financial gain. "You've got two guys that are going to make $11 billion," he said on CNBC's Halftime Report. "Eleven billion dollars for doing nothing. It's unrivaled even on Wall Street's standards." Icahn recently revealed an 8.3% stake in VMware. He is seeking to block Dell's plan to return to the public market by acquiring the Dell tracking stock. Dell was also considering an initial public offering if its plan to buy the VMware shares failed. Icahn said in a letter that he would gather votes against the deal. "I intend to do everything in my power to STOP this proposed DVMT merger," the letter stated. "In my opinion, it is better to have peace than war. I still enjoy a good fight for the right reasons, and in the current situation, I do not see peace arriving quickly!"
Westpac to Review Lobby Group Memberships After Shareholder Campaign
" Sydney Morning Herald (Australia) (10/15/18) Williams, Ruth"
Following the commencement of a shareholder campaign in the lead-up to its December annual general meeting (AGM), Westpac (WBK) said it would review its membership of business lobby groups, along with their positions on climate change and other policies. In response, the Australasian Centre for Corporate Responsibility (ACCR) has agreed to withdraw a shareholder resolution calling on the bank to disclose more information about its membership of the Business Council of Australia and other groups. The "adversarial campaigning" of industry groups has contributed to Australia's stalled climate and energy policy debate, according to the ACCR. A similar ACCR resolution will be voted on at Origin Energy's (OGFGY) AGM on Oct. 17, and it has secured the backing of ISS and CGI Glass Lewis. "Shareholders would benefit from increased disclosure on these issues, as it would allow them to better assess the relative risks and benefits of the company's climate change and energy policy-related lobbying activities, and how the company is managing those activities," ISS said in a note to clients. "Therefore, this proposal merits shareholder support."
ESG Strategies Lengthen Hedge Fund Holding Periods
" Financial Times (10/14/18) Devine, Anna"
The findings of a survey of 80 firms globally by the Alternative Investment Management Association are a sign that hedge funds are considering the longer game. Just over a tenth, or $59 billion, of their combined $550 billion under management have been committed to environmental, social, and governance (ESG) strategies. The traditionally shorter-term investment holding periods of hedge funds conflict with the longer-term nature of sustainable investing, says Per Lekander, partner at Lansdowne Partners, a hedge fund in London. Client demand, regulation, and risk management—in addition to the potential for outsized returns—are behind the shift, according to fund managers. However, the appetite for ESG among hedge funds in the U.S. is less clear. The European market is more advanced than the U.S. on responsible investing, says David Silverman, managing director at Blue Harbour Group. "Overall, European companies have superior disclosure of ESG factors in comparison to U.S. peers," he says.
Shareholder Activism: 1H 2018 Developments and Practice Points
" Harvard Law School Forum on Corporate Governance and Financial Regulation (10/14/18) Weinstein, Gail; de Wied, Warren S.; Richter, Philip"
Data from various publicly available sources shows a resurgence in activist campaigns during the first half of 2018 after a decrease in 2016 and 2017. Globally, there were about 150 campaigns in the first half of 2018, up from about 100 in the first half of 2017, with a concentration of activity among several leading activists. Elliott accounted for more than 10% of the total number of new campaigns, and three activists—Elliott, Starboard, and ValueAct—accounted for about 20% of activity. Meanwhile, three activists—TCI, Elliott, and ValueAct—accounted for about 40% of the capital deployed in public campaigns commenced in the first half of 2018, and three activists—Starboard, Elliott, and Icahn—accounted for about 45% of all of the board seats won by activists during that period. The most frequently engaged companies are those with market capitalizations of $100 million to $500 million, and the most common objective of activist campaigns was a matter related to mergers and acquisitions.
ISS, CII Launch Website in Opposition to House Proxy Agency Bill
" Pensions & Investments (10/15/18) Croce, Brian"
Institutional Shareholders Services (ISS) and the Council of Institutional Investors (CII) have launched a website in opposition to a proposed bill that they say would alter the proxy advisory landscape. The website, Protect the Voice of Shareholders, was launched Oct. 2 and "corrects the inaccurate rhetoric pushed by H.R. 4015 proponents," according to an ISS and CII news release. H.R. 4015, the Corporate Governance Reform and Transparency Act of 2017, passed the House of Representatives last year and is now being considered in the Senate. Under the bill, proxy firms would have to register with the Securities and Exchange Commission, disclose potential conflicts of interest and codes of ethics, and publish their methodologies for formulating proxy recommendations and analyses. ISS and CII are opposed to the bill. "While proponents of H.R. 4015 have created the illusion of problems in proxy advising that need fixing by Congress, what they really seek to do is minimize the voice of shareholders and investors on matters like CEO pay," said Ken Bertsch, executive director of CII. "H.R. 4015 would require proxy advisory firms to share their research reports and voting recommendations with the companies that are the subject of their reports and recommendations before they share them with their paying customers, institutional investors. Giving companies the right to review proxy advisors' work before it goes to actual clients is unprecedented interference in the commercial marketplace."
Executive Pay Punishment Looms at Telstra AGM
" Sydney Morning Herald (Australia) (10/13/18) Duke, Jennifer; Williams, Ruth"
On Oct. 16, Telstra (TLSYY) CEO Andy Penn and his embattled executive team will face shareholders at the company's annual general meeting in Sydney. Telstra is facing a big protest vote on its remuneration report, with the proxy advisory firms Ownership Matters, Institutional Shareholder Services, and CGI Glass Lewis recommending that shareholders vote against it. Observers say the company likely will register a "strike" against the report, meaning a vote of more than 25% against its adoption. If Telstra received a second strike next year, the board would face an automatic spill. Although the Australian Shareholders Association has sided with the board, industry insiders anticipate the vote will be a "landslide." In addition to losses in share price, investors are upset that Telstra cut its dividend in February.
Top Firms Failing to Increase Numbers of Ethnic Minority Directors
" The Guardian (10/12/18) Partington, Richard"
Ethnic minorities account for 84 of the 1,048 director positions in the 100 biggest companies on the London Stock Exchange, down from 85 last year, according to a government-backed campaign to improve diversity in the boardroom. Fifty-four of the FTSE 100 companies do not have a single ethnic minority on their board of directors, up from 51 a year ago. Overall, 8% of the directors of the biggest companies are ethnic minorities, and ethnic minorities who are U.K. citizens hold just 2% of director positions. Anglo American Chairman Sir John Parker, who conducted the review, said he did not expect to see significant progress in the first year of the campaign, but he warned companies that he would like to see them take action. The Parker review set a target for companies in the FTSE 100 to appoint at least one board-level director from an ethnic minority background by 2021. A day before the Parker review released its findings, Prime Minister Theresa May unveiled plans to require companies to disclose race pay gap statistics.
Solutions for Fixing Proxy Process Are Often Radically Different
" Compliance Week (10/11/18) Mont, Joe"
Investors, issuers, and other market participants are set to offer their ideas for improving the U.S. proxy system during a roundtable the Securities and Exchange Commission (SEC) has scheduled for Nov. 15. The various sides on proxy-related issues have begun jockeying for public awareness and support. The SEC's Investor Advisory Commission held a broader discussion on proxy voting during its regular meeting in September, and Ken Bertsch, executive director of the Council of Institutional Investors (CII), called for better use of technology to improve the voting process. Participants also expressed concern about the undue influence of proxy advisory firms such as Institutional Shareholder Services (ISS) and Glass Lewis. David Katz, a partner at law firm Wachtell, Lipton, Rosen & Katz, said the current system is costly for both sides, while Deborah Majoras, chief legal officer of Proctor & Gamble (PG), stressed that there must be an accurate vote count. Also during the meeting, SEC Chairman Jay Clayton announced that the agency has decided to withdraw two 2004 "no-action" letters issued to Egan-Jones Proxy Services and ISS. Meanwhile, ISS and CII have launched a website to oppose H.R. 4015, the Corporate Governance Reform and Transparency Act. The U.S. Chamber of Commerce has released a report that calls for raising the resubmission threshold for shareholder proposals.
Investor Pushes Japanese Insurer Dai-ichi Life to Sell Stock Portfolio to Fund Buyback
" Wall Street Journal (10/11/18) Narioka, Kosaku"
Hong Kong-based Argyle Street Management Ltd. is urging Japan’s largest listed life insurer, Dai-ichi Life Holdings Inc., to sell its large stock portfolio and repurchase up to $13 billion worth of its own shares. In a letter dated Oct. 5, the Hong Kong-based fund said that it considered Dai-ichi’s shares undervalued. It suggested one reason was the insurer’s large portfolio of shares, which could be more volatile than other investments and cause people to perceive Dai-ichi as higher-risk. Argyle proposed that Dai-ichi sell much of its stock portfolio and use the proceeds to repurchase ¥1 trillion to ¥1.5 trillion ($8.9 billion to $13.4 billion) of its own shares. “We believe the board and management should actively pursue this approach,” wrote Argyle’s chief investment officer, Kin Chan. Dai-ichi is in the midst of a much smaller buyback of up to ¥39 billion as part of its goal to return 40% of group profits to shareholders. Argyle also said its calculations indicated Dai-ichi's equity portfolio underperformed a Japanese equity benchmark over the past decade. The investor, which manages about $1.4 billion in assets, owns less than 1% of Dai-ichi's shares outstanding, according to a source. Its financial logic, however, may attract support among Dai-ichi's shareholders.
Hertz CEO Says Carl Icahn Is 'Patient' About Car Rental Turnaround: 'He's a Believer'
" Fortune (10/11/18) Gharib, Susie"
Carl Icahn, the top shareholder of Hertz (HTZ), recruited new CEO Kathryn Marinello nearly two years ago to revitalize the embattled car rental company. In an interview, Marinello says of Icahn, “he's obviously enormously patient to be suffering through this with us. But at the same time he sees the end goal. He sees the great leadership team we've built. He understands the great assets we have and the brand that we have. And he's a believer.” Since Marinello took the helm last year, she has been investing in new information technology, upgrading the company's fleet of vehicles, partnering with companies like Apple (AAPL) and Aptiv (APTV) that are developing self-driving cars, and hiring new leadership. Still, quarterly profits have been swinging positive and negative and its stock has dropped 15% so far this year. With revenues of $8.8 billion, it has also fallen to No. 335 on the Fortune 500. Marinello knows that Hertz's turnaround still needs improvement. She says the only advice she gets from Icahn is “just move faster.” She says, “The need to innovate and quickly launch is something that we probably will never do fast enough, but we're working on it.”
Athenahealth Is Reaching Out to Previously Rejected Suitors
" New York Post (10/11/18) Kosman, Josh"
Athenahealth, which has come under pressure from Elliott Management to explore a sale, reportedly has approached suitors it previously rejected as no stronger offers have materialized. Elliott in June ousted Athena founder and CEO Jonathan Bush. But after indicating in the spring it would pay $160 a share for the company, or about $7 billion, the fund has since backed off that bid. Now, suitors whose offers were considered too low months ago are being invited back, according to sources. Offers are now believed to value the company at no more than $135 a share, and Elliott’s bid is not the highest one, sources said. Without a sale, the shares could fall to between $110 and $120, according to an analyst. The company’s shares closed slightly down Thursday at $120.78. The company will likely not make a decision until next week at the earliest on how to proceed, according to sources. Athenahealth is deciding between a full sale, a merger with Pamplona Capital’s NThrive, or to continue as a listed company. If the company chooses not to sell or merge, it will have to find a new CEO to replace Bush, sources said. Former GE chief Jeff Immelt has been running Athena as its executive chairman since the summer. “They definitely need a CEO that is not Jeff Immelt,” the analyst said. “If I’m the candidate, I would want to know what Elliott’s perspective is going forward.” Elliott owns 9% of Athena.
Britain May Require Companies to Report Pay Disparities Among Ethnic Groups
" New York Times (10/11/18) Tsang, Amie"
Prime Minister Theresa May's government, which already requires large companies to report pay disparities between men and women, is considering a rule that would force companies to report any pay disparities among ethnic groups in their workforce. The rule comes after a study last year, the Race Disparity Audit, which showed pay disparities between ethnic minorities and their white counterparts in Britain. The audit found that the unemployment rate was 8% for black, Asian, and other ethnic-minority people, which was almost double that of white British adults, at 4.6%. Additionally, people who identified themselves as Pakistani, Bangladeshi, or black received the lowest average hourly pay among ethnic groups. The government said it plans to invite employers to offer ideas on how to report on pay by ethnicity. Currently, businesses in Britain share their employees' racial background only on a voluntary basis.