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Elliott Has Taken Position in Germany's Bayer: Sources
" Reuters (12/07/18) Schuetze, Arno; Roumeliotis, Greg"

Sources said on Dec. 7 that Elliott has taken a position in Bayer (BAYRY), marking the hedge fund's latest investment in a German company. The sources note that Elliott has held shares in the company for more than one year, but the size of its stake has not been disclosed. One of the sources said Elliott has tried to talk to Bayer's top management but has been unable to secure a meeting with CEO Werner Baumann or one of his colleagues.

Danske Bank's Board Elects Top Shareholder's Candidate as New Chairman
" Reuters (12/07/18) Jensen, Teis"

On Dec. 7, the board of directors of Danske Bank (DNKEY) elected Karsten Dybvad as its new chairman at an extraordinary general meeting following the ouster of former chairman Ole Andersen over a money laundering scandal. Dybvad was the candidate put forward by the company's top shareholder, A.P. Moller Holdings. In addition to restoring Danske's image, Dybvad will be tasked with finding a new chief executive to head the bank and ensure potential legal cases don't drag attention away from day-to-day business.

Russian Billionaire Wants Switzerland's Meyer Burger to Raise Cash, Renew Board
" Reuters (12/06/18) Miller, John"

On Dec. 6, Sentis Capital PCC called for Meyer Burger (MYBUF) to renew its board of directors and consider raising money to finance its own efforts to manufacture solar cells. The investment vehicle of Russian billionaire Petr Kondrashev is the Swiss solar machinery maker's biggest shareholder, with a 6.14% stake. Sentis said the company should consider raising cash "on the capital market or through a strategic partner," with the funds used to finance in-house production of efficient, so-called heterojunction and tandem solar cells using the company's own technology. Sentis board members Anton Karl and Mark Kerekes said, "Meyer Burger would thus be able to protect its own technology and benefit directly from future improvements in efficiency and throughput of the equipment. As Meyer Burger is currently not in a position to finance a production of at least 5 to 10 GW from its own funds, in our opinion this would have to be done through a capital increase."

Video: Japan's New Corporate Governance Champions
" Bloomberg (12/07/18)"

Katherine Rabin, chief executive officer of Glass Lewis; Takumi Shibata, president and chief executive officer of Nikko Asset Management; and Miki Tsusaka, senior partner, managing director and chief marketing officer of Boston Consulting Group, speak with Bloomberg's Stephen Engle at the Bloomberg The Year Ahead summit in Tokyo.

Del Frisco's Restaurant Group Issues Statement Regarding Letter Received From Engaged Capital
" Globe Newswire (12/06/18)"

Del Frisco's Restaurant Group Inc. on Dec. 6 issued a statement regarding a publicly released letter from Engaged Capital LLC to the company's board. It said: "Del Frisco's is committed to maximizing long-term value for all shareholders. While we do not agree with certain characterizations of events or of our business and operations contained in the letter that we received from Engaged Capital, the Company values constructive input toward the goal of enhancing shareholder value. The Board and management continually evaluate ideas to drive shareholder value and are committed to acting in the best interests of all of our shareholders. Del Frisco's will maintain an open and active dialogue with its shareholders, including Engaged Capital, as the Board and management continue to take actions to position the Company for growth and success."

Investor Takes Stake in Suez Ahead of Key Strategic Decisions
" Financial Times (12/07/18) Keohane, David"

Amber Capital has purchased just over a 1% stake in Suez and is prepared to make key decisions about the company's leadership and strategy. It is now urging the embattled French water and waste group to make moves on its governance, accelerate asset sales, and maximize shareholder returns. "We'd like new management to essentially pay a bit more attention to value creation for shareholders, return on capital employed, and use the opportunity of an ebullient infrastructure market to sell assets and de-lever the company," said Joseph Oughourlian, Amber Capital's founder. The London-based investor says its purchase makes it one of the French utility's top-10 shareholders. Suez has been facing scrutiny since a profit warning in January sent its shares falling 15% in one day. The investment by Amber also comes as Suez prepares to replace CEO Jean-Louis Chaussade and Chairman Gerard Mestrallet, who are scheduled to retire next summer due to statutory age limits. Chaussade is being considered as chairman, despite concern of some shareholders. The decision on the position will be determined largely by top shareholder Engie, which owns one-third of Suez after it was spun out of the energy group 10 years ago.

Keith Meister: Invest in Companies You Believe in and Leave Stock Trading to Computers
" CNBC (12/06/18) Belvedere, Matthew J."

Corvex Management founder Keith Meister recommends that stock investors "do what you do really well" in these turbulent times. "Everyone has different skill sets," said Meister on CNBC on Thursday. "There's people who are going to make a lot of money trading the market [short term]. There's people who are going to make a lot of money having duration." At Corvex, Meister puts himself among the latter, saying he seeks to "buy businesses in the form of public stocks." But he not only selects companies he believes in, he said, but aims to partner with companies to make them better. "I generally believe, if you don't have an edge in the public markets, something that you can do better, you're probably going to be replaced by a computer at some point," he said. "There's more and more of the market and the trading that'll be done by the quantitative players."

Clayton Urges Change in Shareholder Voting, Investment Advisory Firms
" Politico Pro (12/06/18) Temple-West, Patrick"

In a speech in New York, Securities and Exchange Commisison Chairman Jay Clayton on Thursday said the agency should consider making it harder for investors to file shareholder proposals and that he supports stronger oversight of the advisory firms that investors use to make voting decisions at annual meetings. Clayton questioned the current thresholds that a shareholder proposal needs to clear to be put to a vote by corporate investors. An investor currently needs to own $2,000 worth of a company's stock for one year to submit a proposal. Clayton also called for considering new oversight of the investment advisory firms that shareholders use to make decisions on issues ranging from executive compensation to climate change disclosure. He indicated the agency is taking public comments about the issue. He is scheduled to testify before the Senate Banking Committee on Dec. 11.

Regulators Will Move to Rein In Proxy Advisers in 2019, SEC Chairman Says
" Wall Street Journal (12/06/18) Rubin, Gabriel T."

Securities and Exchange Commission (SEC) Chairman Jay Clayton said Thursday that securities regulators will evaluate changes to limit the influence of proxy advisors, including potential new disclosure requirements. The move follows complaints from corporate groups that proxy advisers have too much influence over shareholder votes at public companies, and calls for tighter regulation of the two main proxy advisory firms, Institutional Shareholder Services (ISS) and Glass Lewis & Co. Clayton said the SEC would also take up recommendations on the “plumbing” of the shareholder voting process, which some investors have said is opaque and error-prone. The commission will also consider increasing the ownership thresholds for shareholders to submit proposals for shareholder votes and for the amount of support a proposal must receive for it to be reconsidered in later years, in an effort to limit recurring proposals with little support. “It is clear to me that these issues will not improve on their own with time, and I intend to move forward with the staff recommendations,” Clayton said Thursday. Reining in proxy advisers has been a priority of corporate groups like the U.S. Chamber of Commerce, which took out advertisements earlier this year urging the SEC to limit their influence. At an SEC roundtable last month, leaders of ISS and Glass Lewis made clear they oppose the new regulations and that existing disclosures serve investors sufficiently well.

Dan Loeb Sells Baxter International Shares At Strong Gain
" Forbes (12/06/18)"

Daniel Loeb disclosed Wednesday that he divested a portion of one of his highly profitable bets, healthcare company Baxter International (BAX). Loeb sold 22.2% of his stake that he started more than three years ago. At third quarter-end, the company ranked as his biggest long position at 19.4% of reported holdings, nearly double that of his next largest holding, an 11% weighting in Far Point Acquisition Corp. (FPAC). Loeb had no further plans to sell Baxter but would “re-evaluate at any time based on, among other things, performance of the Issuer and market conditions” over the ensuing 90 days, he said in the related filing. The investor did not attribute the sale to any displeasure with management. Loeb's sale constituted 8 million shares, slashing his holding to 28,008,125 shares. The sale, executed at a price per share of $68.62, represented a sizable gain from average share price when he purchased most of the stock in the third quarter of 2015 around $38. When he invested in the company, Loeb in a shareholder letter called it “one of the most promising positions in our portfolio.” The stock then went on to post two strong years, rising 63.68% after a near 1% decline overall in 2018. Loeb's optimism about the company centered on the CEO he helped install in 2016, Jose “Joe” Almeida. Over the next two years, Almeida rolled out a reduction in costs, the exit of some unprofitable products, and a focus on high-margin businesses. Despite strong operational performance over his tenure, the stock fell 9% on Oct. 31 when it reported third quarter results and fourth-quarter guidance, as investors worried he could not continue the momentum.

Sears Chairman Eddie Lampert Offers to Buy Sears Out of Bankruptcy, Including 500 Stores
" USA Today (12/06/18) Bomey, Nathan"

Eddie Lampert, the chairman and largest investor in Sears Holdings (SHLDQ), is offering to purchase the retailer out of bankruptcy, including 500 of its remaining department stores, in what could be the historic retailer's last chance to survive.  Lampert, a hedge fund investor who was also CEO until the retailer's October bankruptcy filing, wrote in a letter: "Our proposed business plan envisages significant strategic initiatives and investments in a right-sized network of large format and small retail stores, digital assets, and interdependent operating businesses."  The acquisition would keep approximately 50,000 Sears workers employed and would include both Sears and Kmart stores.  Lampert's offer is reportedly worth around $4.6 billion.

Exclusive: Siris, Elliott Near Travelport Acquisition—Sources
" Reuters (12/06/18) Baker, Liana B.; Roumeliotis, Greg"

Sources said on Dec. 6 that a consortium of buyout firm Siris Capital Group LLC and hedge fund Elliott Management is nearing an agreement to acquire Travelport Worldwide Ltd. (TVPT), about eight months after Elliott disclosed a 12% stake in the travel software company and pushed it to explore a sale. A group of banks agreed to offer debt financing for the consortium's bid, and Siris and Elliott hope to conclude negotiations as early as next week. If successful, the deal would mark the second time this year that Elliott participated in a leveraged buyout, having last month partnered with Veritas Capital Fund Management LLC to acquire Athenahealth Inc. (ATHN) for $5.5 billion.

Hanjin KAL and KCGI to Have First Talks Since KCGI's Stake Purchase
" Pulse - Maeil Business News Korea (12/06/2018) Si-young, Cho; Mira, Choi"

Hanjin KAL, the holding entity of South Korea's Hanjin Group, is expected to meet with KCGI for the first time next month. The fund became its largest shareholder last month, pledging to actively participate in management issues. According to KCGI's legal advisor Hannuri Law, the meeting will be in line with the fund's earlier announcement to exercise appropriate checks and restraint over important management affairs of the company as a major shareholder. It stresses that its aim is not to challenge the management rights of the family-owned business but to facilitate improvement in the company's governance structure. KCGI's wholly-owned subsidiary, Grace Holding Ltd., holds a 9% stake in Hanjin KAL.

Clash Could Become Feature in Japan
" Nasdaq (12/05/18) Mak, Robyn"

In Japan, Alpine Electronics' proposed merger with affiliate Alps Electric, which already owns 40% of the company, was approved during an extraordinary shareholders meeting. Oasis Management, Alpine's second-largest shareholder with a 9.9% stake, had opposed the deal, arguing the share-swap proposal undervalued the target. Elliott Management may have been a deciding vote in a deal that squashed the Hong Kong hedge fund's attempt to block the merger. Elliott disclosed a stake in Alpine in late July that eventually grew to 9.8%, and it also held more than 11% of Alps, according to documents submitted to regulators in October. Many similar situations of hedge funds going head to head are set to play out in Japan, writes columnist Robyn Mak. More than 300 Japanese companies are "listed subsidiaries of listed companies," according to analysts at Jefferies. More of these large enterprises may be inclined to consolidate or divest such stakes to improve corporate structures and governance. The Alps episode is a sign that they would be wise to gird for a fight, according to Mak.

U.S. Securities Regulator Should Demand More Voting Disclosure From Fund Managers: Official
" Reuters (12/06/18) Johnson, Katanga"

On Dec. 6, Robert Jackson, a commissioner of the Securities and Exchange Commission (SEC), said at an inter-regulatory audience of the Federal Trade Commission that the SEC should consider imposing stricter disclosure requirements on institutional fund managers regarding how they vote in corporate elections, given that most investors are unaware of how fund managers vote on their behalf. He said, "There are serious investor protection and corporate governance issues that are implicated by the common ownership of stocks by a handful of institutional index fund managers. Each year, institutional investors cast votes in corporate elections on behalf of more than 100 million American families, wielding significant power in the future of our companies and communities." Jackson stressed that investors did not get enough useable information about how fund managers vote on matters regarding their money and therefore cannot hold those managers accountable for how they vote in those elections.

Investor to Push Del Frisco's to Sell Itself
" Wall Street Journal (12/05/18) Lombardo, Cara"

Engaged Capital LLC has purchased almost 10% of Del Frisco's Restaurant Group Inc.'s (DFRG) stock and plans to push it to sell itself, according to sources. The hedge fund believes Texas-based Del Frisco's is poorly managing its eateries and rushed into purchasing faster-growing chains to avoid being acquired. "It wants Del Frisco's to add new directors and form a strategic-review committee to consider selling its various brands," the sources said. Shares of Del Frisco's, which operates Double Eagle steakhouses and the more casual Del Frisco's Grilles, have plunged more than 55% since Jan. 1. This past summer, the company acquired Barteca Restaurant Group, which operates Barcelona Wine Bars and Bartaco restaurants, for $325 million. Engaged believes that purchase, in particular, was ill-conceived.

Bunge Names Syngenta CEO to Board Under Deal With Investors
" Reuters (12/05/18)"

Bunge Ltd. (BG) on Wednesday named the CEO of agrichemicals company Syngenta to its board as part of a deal with investors D.E. Shaw and Continental Grain Co. The company also installed J. Erik Fyrwald as a director. D.E. Shaw and Continental Grain had urged Bunge to add board members in order to revitalize the company's performance. Bunge said in October it would add four directors and create a strategic review committee to explore options for the company, including a sale. Bunge named three of the directors at that time. Fyrwald is a fourth mutually agreed-upon director, according to Bunge. The board expansion comes as the global grains trader navigates low crop prices and the trade war that has slashed U.S. crop exports to China.

Del Frisco's Adopts Poison Pill as Investor Pushes for Sale
" Reuters (12/05/18)"

In response to pressure from Engaged Capital, Del Frisco's Restaurant Group Inc. (DFRG) on Wednesday adopted a shareholder rights plan with a 10% trigger. If the poison pill is triggered, all shareholders other than any triggering entity will be entitled to buy common shares at a 50% discount, or the company may exchange each right held by such holders for one share of common stock, Del Frisco's said. The rights plan will expire on Dec. 4, 2019, it said. Engaged Capital, which owns a 9.99% stake in the company, has urged the restaurant operator to explore strategic alternatives, including a sale. The hedge fund believes that the restaurant chain is poorly managing its restaurants and rushed into buying two chains to avoid an acquisition.

Glass Lewis, Livermore Back Paulson's Detour Gold Proxy Fight
" Reuters (12/06/18)"

Glass Lewis and hedge fund Livermore Partners on Wednesday backed Paulson & Co.’s call for changes to the board of Canadian miner Detour Gold Corp. (DRGDF). The proxy adviser recommended replacing Detour Chairman Alex Morrison and two other board members with Paulson nominees, while Livermore praised its call for an overhaul of the board. Livermore also confirmed its intention to vote in favor of Paulson's nominees. Detour's management has been resisting Paulson's push for a board shakeup and the immediate dismissal of interim CEO Michael Kenyon and Morrison. Paulson owns a roughly 6% stake in Detour. “The best thing that could happen to Detour would be the complete termination of all involvement with Messrs. Kenyon and Morrison,” Livermore said. The fund earlier called for an overhaul of the board at Detour and a strategic review. Detour Gold directors have been unable to recruit a management team that has proven capable of realizing the inherent value of its Detour Lake mine, despite commercial production starting more than five years ago, Livermore said. Paulson on Nov. 15 called for the immediate resignation of Kenyon and Morrison, adding it did not favor a fire sale of the gold miner. Detour's proposals for a shareholder meeting on Dec. 11 include approval of two Paulson nominees to the board.

Japan Slides in Key Asia Corporate Governance Ranking, Ties With India
" Reuters (12/05/18) John, Alun"

Japan dropped three places to seventh in a ranking of corporate governance in Asia, tying with India but languishing behind Thailand and Malaysia. Japan's fall is part of a biennial survey conducted by the Asian Corporate Governance Association (ACGA) and the Asia-focused CLSA brokerage. It comes as governance in Japan has come under a harsh spotlight following the November arrest of Nissan Chairman Carlos Ghosn for alleged financial misconduct. The ACGA/CLSA report criticized Tokyo for failing to take harder, regulatory actions. It further warned that while efforts to improve corporate governance by introducing better board-level oversight via audit committees and independent directors looked good on paper, boardroom reality had changed little in many Japanese companies. Australia ranked No. 1 in the survey.

Rising Sales at Saks Lift Hudson's Bay
" Wall Street Journal (12/05/18) Maidenberg, Micah"

Hudson's Bay Co. (HBAYF) narrowed its loss in the third quarter, pointing to an increase in sales as evidence that its transformation efforts were bearing fruit. The Canadian retailer, which owns Saks Fifth Avenue and Lord & Taylor, reported a 2.9% increase in comparable sales at its stores, led by a 7.3% jump at Saks. "Saks Fifth Avenue continues to drive overall results," said Hudson's Bay CEO Helena Foulkes. The company has faced pressured from Land & Buildings Investment Management LLC, which has pushed Hudson's Bay to sell assets and capitalize on its real-estate holdings.

New Twist as Turnaround Specialist Buys a Stake in Embattled Grand Parade Investments
" Business Day (South Africa) (12/05/18) Hasenfuss, Marc"

Turnaround specialist Value Capital Partners (VCP) has purchased a roughly 8% stake in struggling empowerment group Grand Parade Investments (GPI) just before the extraordinary general meeting on Wednesday. The meeting was reconvened after an adjournment in late October to consider calls from a group of dissident shareholders, which own about 12.5% of GPI shares, to appoint four new directors with fast-moving consumer goods and strategic experience to the company's board. GPI has protested the proposed board changes, even though the company's shares have fallen to levels at which the discount on intrinsic value is more than 50%. At an earlier meeting, shareholders blasted the GPI board's decision to scrap investments in cash-spinning gaming assets to acquire fast food brands—including the master franchise for Burger King in South Africa—that have generated continuous losses. VCP has had success in high-profile turnaround interventions in technology group Altron and services group Adcorp.

John Wylie Goes From Investment Banker to 'Friendly Activist'
" Australian Financial Review (12/05/18)"

In a Dec. 5 letter to GrainCorp (GRCLF) Chairman Graham Bradley, Tanarra Capital's John Wylie offered an outline of his restructuring proposal, going head-to-head with Long Term Asset Partners' (LATP) Tony Shepherd in the company's $3.3 billion takeover. Observers note that Wylie's move could derail the highly leveraged bid by Shepherd's firm, which is backed by Goldman Sachs and Allianz, and also could turn the highly lucrative traditional investment banking model, in which intermediaries get paid fees to maximize share price returns, on its head. According to Wylie, his role in the GrainCorp situation as that of a "friendly activist." He proposes a demerger of the volatile grains marketing, storage, and logistics business and the sale of the edible oils business, leaving a higher-growth company focused on malt and bulk liquid terminals. "As a shareholder of GrainCorp with a shareholding that is material to our balance sheet, Tanarra believes the (LTAP) proposal substantially undervalues the company and is flawed in numerous respects," Wylie's letter said. "We are not investment bankers or management consultants seeking to be paid cash advisory fees. Our interests are completely aligned with those of all shareholders and as we have indicated to you and your colleagues, we are putting our views forward on a friendly constructive basis after a very substantial amount of proprietary and independent research." However, LTAP says it has the full support of GrainCorp's two largest shareholders, Perpetual Investments and Ellerston Capital, which own about 30% of the company.

U.K. Fund Manager Body Warns Corporate Governance 'Repeat Offenders'
" IPE.com (12/05/18) Pfeuti, Elizabeth"

More than 30 U.K. public companies, including three asset managers, have received a warning about ignoring shareholder concerns from the U.K. trade association for asset managers. Shareholders have criticized the companies over the same issue the past two years, indicating that they had failed to address their concerns, the Investment Association (IA) said in a letter to the 32 companies. "While many companies are taking the necessary action and engaging with their shareholders, a frustrating number are failing to address investor concerns," said Andrew Ninian, director of stewardship and corporate governance at the IA. The companies appeared on the IA's Public Register, which tracks companies that have received more than 20% votes against any resolution. The IA launched a list of "repeat offenders" this month to highlight companies that attract protests on the same issues. Shareholder rebellions have risen by nearly 25% in 2018, according to the register. The number of individual resolutions added has risen by 22% from a year ago.

Glass Lewis Recommends Removal of Detour Gold Chairman and Other Core Long-Term Directors
" Globe Newswire (12/05/18)"

Paulson & Co. Inc. announced Wednesday that Glass Lewis & Co. has issued an extensive report admonishing Detour Gold Corporation (DGC)'s board for appearing “to have been deficient in their oversight function.” In recommending that Detour Gold shareholders vote for “fundamental change” to the board, Glass Lewis said, “We ultimately see validity in Paulson's central thesis that, for substantive change to take hold at the Company, certain of the core and long-term directors who have presided over value destruction and overseen technical failures of prior mine plans need to be replaced.” Glass Lewis also addressed Paulson's concerns about entrenchment regarding long-term directors Michael Kenyon, the interim CEO, and Chairman Alex Morrison. "… we question whether Mr. Morrison is the best individual to lead the board going forward, given Detour's subpar performance and governance concerns arising during his tenure as lead director and now chairman," the proxy advisor said. Paulson notes that a number of major shareholders have already voted for wholesale change to the board of directors, and urges remaining investors to vote ahead of Thursday, Dec. 6.

HK Fund Oasis Fails to Block Takeover of Japan's Alpine
" Reuters (12/04/18) Fujita, Junko"

Hong Kong-based fund Oasis Management, the second-largest shareholder in Alpine Electronics Inc. with a nearly 10% stake, has failed to block the company's sale to larger affiliate Alps Electric Co. (APELY). Alps, which already owns 40% in the car navigation systems maker, had made a bid to buy the Alpine shares it does not already own last year. But Oasis protested that the share-swap proposal undervalued the company. “Our team fought very hard today but unfortunately we lost this game,” said Oasis COO Phillip Meyer after the fund's objection to the deal was overruled at an Alpine shareholder meeting on Wednesday. “But this is the first game of a longer series. We will fight hard in the next game too,” Meyer said, adding Oasis was considering all options, including legal. A Tokyo-based lawyer specialising in corporate governance, Stephen Givens, said voting by Elliott Management may have made the difference in the outcome. Elliott owns a stake in both companies and last week supported Alps' pledge to buy back about 40 billion yen ($354 million) of its shares after the Alpine deal. Separate filings the hedge fund made on Oct. 10 showed it owns 9.78% of Alpine and 11.20% of Alps. “Elliott had much more capital tied up in Alps than Alpine. Basically, Elliott as Alps shareholder was happy to acquire Alpine on the cheap,” Givens said. How Elliott voted at the meeting is not immediately known.

Japan’s Crusade for Corporate Overhaul Under Threat, Watchdog Says
" Wall Street Journal (12/05/18) Russolillo, Steven; Bird, Mike"

Japan took a tumble in the latest corporate governance rankings by the Hong Kong-based Asian Corporate Governance Association. The country slid from fourth place in the previous report to seventh, tied with India, among 12 Asia-Pacific markets. It trailed Hong Kong, Singapore, Malaysia, and Thailand. The watchdog's report blames Japanese regulators for not doing enough to improve minority shareholders' rights. Better governance has been central to Prime Minister Shinzo Abe's economic-revival program, which has led to an increase in buybacks and dividends and a greater percentage of independent board members at Japanese-listed companies. “The last couple of years, we think the reform process is plateauing somewhat,” said Jamie Allen, the governance association's secretary general, citing weak disclosures around takeovers, boardroom diversity, private placements, and executive pay. He said such apparent advances as the increase of audit committees on corporate boards often haven't resulted in genuine improvement. Some investors say management's attitude toward shareholders has improved at many Japanese companies. Still, by measures such as returns on equity, Japanese companies have lagged peers in the U.S. and Europe. Wednesday's report also criticized the stock exchanges of Hong Kong and Singapore for opening to companies with dual-class shares.

Takeda Wins Shareholder Approval for Its Shire Megadeal
" Wall Street Journal (12/05/18) Rana, Preetika"

Takeda Pharmaceutical Co. shareholders late Wednesday voted in favor of its nearly $58 billion mega-deal to purchase Europe's Shire PLC, ending an opposition campaign that sought to derail the biggest overseas acquisition by a Japanese company. At least 88% of the votes cast were in favor of the cash-and-stock merger, rejecting a group of longtime shareholders who had lobbied to block the deal. The dissidents contended that Takeda was overpaying for Shire and taking on too much debt in the process. Acquiring Shire will not only enable Takeda to tap into the lucrative market for rare diseases, it will also boost France-born CEO Christophe Weber's mission to expand Takeda's footprint beyond its slowing domestic market.

Danske Investors Bank on Maersk Clan to Chart Course Through Crisis
" Reuters (12/05/18) Jessop, Simon; Ridley, Kirstin; Jensen, Teis"

Danske Bank's (DNKEY) leading investors want Denmark's Maersk family to steer the nation's biggest lender through the turmoil of a 200 billion euro ($227 billion) money laundering scandal. The family's investment firm A.P. Moller Holding, Danske's normally passive top shareholder with a stake of approximately 21%, has ousted the bank's chairman Ole Andersen and called an extraordinary shareholder meeting for Dec. 7 to nominate two successors to the board. Given the scope of the crisis at Danske Bank and concerns about regulatory penalties, some shareholders are thankful for A.P. Moller Holding's new activist approach. A.P. Moller Holding says it seeks "broad support" for its nominations at the Dec. 7 meeting. It wants to develop a team with the authority to select a replacement for former chief executive Thomas Borgen who resigned in September after admitting that Danske's Estonian branch helped funnel hundreds of billions of euros from nations such as Russia over more than eight years. The threat of a hefty fine from the U.S. Department of Justice has sent the company's shares down nearly 50% since March, erasing about $15 billion of market value and raising the specter of legal action. A.P. Moller Holding wants to nominate Karsten Dybvad, CEO of the Danish confederation of industry, and Jan Thorsgaard Nielsen, its own chief investment officer, as chairman and vice chairman, respectively. A number of top investors say they will back the nominations, which have already been supported by the board, although one complained they had been unable to reach Danske's board directly. "They (Danske) need to understand that they have to open up and talk to their shareholders," said the investor, who declined to be named. "Under the usual corporate governance, you speak to the board."

Campbell Denies it Is Struggling to Sell Bolthouse Farms Brand
" Just-food.com (12/03/18) Coyne, Andy"

A recent New York Post article about Campbell Soup's (CPB) effort to sell its fresh food business is inaccurate, according to the food giant. The newspaper reported that Bolthouse Farms is not receiving much interest from potential buyers, speculating that was because the business has proved disappointing, while adding that Campbell has decided to sell its Garden Fresh Gourmet business in a separate process. In a statement, Campbell said it has determined that it could maximize value by selling the businesses separately. Investor Daniel Loeb has been critical of how Campbell has been run and once called for the company to replace its entire board. Campbell recently agreed to hand over two board seats to Loeb's hedge fund, Third Point, which holds a 7% stake in the company. In October, the Wall Street Journal reported that Campbell was discussing the sale of Bolthouse Farms with a group of investors led by former executive Jeff Dunn.

Moelis Hires From BlackRock, Hedge Fund for Activist Defense Team
" Reuters (12/03/18) Herbst-Bayliss, Svea; Baker, Liana B."

Moelis is the latest investment bank to add to its team advising companies facing activist shareholders. Ted Moon, prevously a principal at Will Mesdag’s hedge fund Red Mountain Capital Partners, recently joined Moelis as an executive director in its Los Angeles office, the bank confirmed on Monday. Moelis reported it also hired Peter da Silva Vint, a former vice president in BlackRock’s investment stewardship unit, as an executive director at the firm’s New York office. He starts on Monday. Craig Wadler, a managing director who heads Moelis’ shareholder defense practice, said Moon and da Silva Vint have "real experience" in what activist hedge funds want to see done and how big index funds think when it comes to voting as shareholders. Investment banks have been working to ensure their defense teams offer corporate America more expertise on how to evaluate governance, executive compensation, and other issues where they may be vulnerable.

Hedge Fund Oasis Seen Blocked by Elliott on Alps-Alpine Deal
" Bloomberg (12/03/18) Lee, Min Jeong; Taniguchi, Takako"

Oasis Management Co. could lose its fight to halt a Japanese takeover after Elliott Management Corp. indicated it may support the deal. Alps Electric Co.’s planned purchase of Alpine Electronics Inc. will come down to a shareholder vote on Dec. 5. Oasis owns 9.9% of Alpine and opposes the takeover; Elliott, which also owns roughly 10%, has declined to comment on its intentions. But Elliott’s actions last week were a clue, says Justin Tang, the Singapore-based head of Asian research at special-situations house United First Partners. Elliott published a statement saying it welcomed Alps’s announcement of a post-merger plan to buy back 40 billion yen ($353 million) in shares. To Tang, that suggests the fund will vote for the deal. Elliott is “driving the bus on this one," Tang said in an interview. "Given Elliott's stake and its public commendation of Alps's 40 billion yen share buyback post the merger, the vote will likely go through." Two-thirds of Alpine's shareholders need to approve the deal. Alps's 40% ownership of Alpine, combined with Elliott's stake, would mean 50% of votes are already decided in its favor. “While we won't comment on any specific shareholder, we believe that any investor who understands these issues and votes in favor of the transaction is voting directly against good corporate governance, which is bad for Japan,” Oasis said in an emailed statement.

Hedge Funds Are Engaging European Telecoms
" Bloomberg (12/04/18) Seal, Thomas"

Amid growing tensions in the telecommunications industry, two U.S.-based hedge funds have been buying into the phone companies and calling a radical solution: stop running phone networks. This paradoxical plan is being tested in Italy, where Elliott Management Corp. overhauled Telecom Italia SpA's board and removed the CEO, bolstering the fund's monthslong campaign for splitting out the company's national network. At the time, Telecom Italia had “no clear strategic path forward” and needed dramatic action such as a spinoff of its network, Elliott said last spring. Elliott has also built a stake in Europe's biggest mobile operator, Vodafone Group Plc. The fund hasn't disclosed the size of its position or its agenda, but just weeks after the investment was reported in July, Vodafone CEO Nick Read floated the idea of inviting outsiders to invest in the company's network of 58,000 cellular towers. Meanwhile, in October, David Einhorn's Greenlight Capital revealed a “medium-sized” stake in BT, just as the carrier underwent a change in management. In a letter to investors, Greenlight said BT could “unlock value” by spinning off Openreach, a network operations subsidiary formed in 2006 to ensure equal access to rival service providers. When incoming CEO Philip Jansen takes the reins in February, frustrated shareholders may demand serious action. The hedge funds say telecom companies should take a page from the energy industry, where pipelines and power grids have largely been separated from retail operations. While the carriers' income-focused shareholders might have once dismissed such a proposal, the sector's stalling growth makes them more inclined to listen to the Americans.

Apollo Global Emerges as Leading Bidder for Arconic
" Bloomberg (12/03/18) Porter, Kiel; Deveau, Scott; Clough, Rick"

Sources say that after a months-long sale process, Apollo Global Management LLC is the leading bidder to take aerospace manufacturer Arconic Inc. (ARNC) private. They note that Apollo made a final offer for Arconic last week that was selected over a bid from a rival group of private equity investors. However, no final agreement has been reached yet. Including debt, Arconic has an enterprise valuation of $15.2 billion, according to data compiled by Bloomberg. Under the deal, Elliott Management Corp., which owns a 10.7% stake in Arconic, will roll its holding into the new entity.

Fortum, Elliott Have Held Talks Over Uniper: Sources
" Reuters (12/03/18) Schuetze, Arno; Steitz, Christoph"

Sources say Fortum (FOJCY), Uniper's (UNPRF) largest shareholder with a 16.51% stake, has held talks with Elliott about how to gain control of the German energy firm. They note that Fortum has been frustrated over the slow pace of progress in discussions with Uniper over a cooperation agreement after it took a 47% stake this year, and Fortum is considering how to increase influence over the company after Russian antitrust authorities limited its shareholding to 50%. The talks also touched on possible conditions in which Fortum could buy Elliott's stake. According to one source, "Fortum is not under pressure to do anything and could just keep the status quo unchanged." However, the company could replace directors on Uniper's supervisory board over time in order to gain control over strategy.

ISS Backs Detour Gold Board Proposals in Paulson Proxy Fight
" Reuters (11/03/18)"

Institutional Shareholder Services Inc. (ISS) has recommended that Detour Gold Corp.'s (DRGDF) shareholders vote for the company's board of directors at a special shareholders' meeting on Dec. 11, dealing a blow to Paulson & Co. The investor is seeking to overhaul the board and has also called for the immediate removal of interim CEO Michael Kenyon and board member Alex Morrison. The Canadian miner's proposals for the shareholders' meeting include approval of two Paulson nominees for the board but stop short of the six to eight changes the hedge fund has requested. Detour has also said Kenyon, who has agreed to resign, would continue to lead the company until a permanent replacement is found. ISS said appointing a temporary replacement for Kenyon at this stage could potentially delay the search for a permanent CEO. Paulson, which owns a roughly 6% stake in the miner, responding to the ISS report, said it did not believe ISS had gone far enough in its recommendation. Detour is under pressure from two other investors, Coast Capital Management L.P. and Livermore Partners, to renew its board and weigh a sale.

Telecom Italia Set for Investor Showdown
" The Times (London) (12/02/18) Woods, Ben"

Telecom Italia (TI) is considering holding its annual meeting in January due to a power struggle between Vivendi and Elliott Advisers, its two leading shareholders. The French media group holds a 24% stake in the company, while the hedge fund owns 9%. Telecom Italia's board of statutory auditors on Thursday may recommend moving the annual meeting from April over concerns that the company might not have an auditor in place by the end of the year. The previous meeting was cancelled due to the battle between Vivendi and Elliott. Last month, Telecom Italia sacked CEO Amos Genish, who had the backing of Vivendi. Telecom Italia ousted Genish just six months after a majority of its shareholders voted for Elliott to take control of the company. Vivendi may try to install five new members to the 15-member board at the next annual meeting. However, the board of directors, which is backed by Elliott, could wait until April to appoint a new auditor.

GPI Appoints New Director Ahead of Showdown With Shareholders
" Business Day (New Zealand) (12/02/18) Hasenfuss, Marc"

Grand Parade Investments (GPI) has made a key change to its board days ahead of a showdown with shareholders, appointing Mohsin Tajbhai as group COO. At a reconvened extraordinary general meeting on Dec. 5, investors will be asked to vote on calls from a group of shareholders to appoint four nonexecutive directors with fast-moving consumer goods and strategic experience to the board. The shareholders believe doing so will provide oversight on corporate governance and capital allocation at GPI, which trades at a discount of more than 50% to its official sum-of-the-parts valuation. Some observers think the appointment of Tajbhai strengthens the GPI executive side of the boardroom against possible changes to the nonexecutives, while others speculate that it could make way for Executive Chairman Hassen Adams to take on a nonexecutive role.

Three Executives Depart in Major Leadership Shuffle at Symantec
" Bloomberg (11/30/18) Carville, Olivia"

Symantec (SYMC) recently announced that President and Chief Operating Officer Michael Fey has resigned, but it did not reveal that other executives have left the company. Chief Marketing Officer Michael Williams and Bradon Rogers, senior vice president of the company's Go-to-Market teams, have stepped down. In September, Starboard Value reached an agreement with the struggling cybersecurity software maker that gives the investor three board seats. That same month, Symantec concluded an internal investigation that was based on concerns raised by a former employee about accounting practices, announced in May. The internal investigation sent Symantec shares down 35% in a single day—the most in 17 years. The company announced it would revise its fiscal 2018 fourth-quarter results and fiscal 2019 first-quarter results after determining that $12 million of $13 million in recognized revenue should have been deferred. Dwindling consumer interest in personal computer antivirus programs has forced the world's biggest maker of cybersecurity software to focus more on selling to businesses.

Litt Pitched a Split Plan to Brookdale
" Bloomberg (11/30/18) Deveau, Scott"

Jonathan Litt has proposed splitting Brookdale Senior Living Inc. (BKD) into a real estate investment trust (REIT) and senior-housing operator, according to sources. Litt’s Land & Buildings Investment Management, which owns a 3.2% stake in Brookdale, has been pressing the company to explore ways to unlock the value of its real estate since 2016. During a teleconference Wednesday with senior executives, Litt argued that moving the company’s best properties to a separate REIT would yield a significant premium to Brookdale’s current share price, the sources said. No agreement was reached on whether to pursue the split, they added. During the conference, Litt called for the company to create a separate senior-home operator that would own some of the properties not included in the REIT, the sources said. Institutionalizing and branding those operations would allow Brookdale to profit from the growth expected in the sector, they said. The two sides also discussed the possibility of Brookdale selling its real estate in $500 million increments until the discount between its trading price and net asset value narrows, they said. Macquarie Investment Management, which owns a roughly 3.9% stake in Brookdale, also urged the company to sell its real estate or the entire company last month, saying management had not identified a clear opportunity to monetize its assets against the backdrop of favorable credit markets.

Paulson Rebuffed From Stocking Detour Board by ISS
" Bloomberg (12/01/18) Deveau, Scott"

Institutional Shareholder Services Inc. (ISS) has advised Detour Gold Corp.’s (DRGDF) investors to appoint just two of Paulson & Co.’s eight nominees to the board. The proxy adviser said although Paulson had made a case that change was warranted at the Toronto miner, Detour had been responsive to its concerns by appointing three new directors in August and offering to appoint two of the dissident’s nominees to its board. “Despite seeking to replace all but one of the incumbent nominees, the dissident has not articulated a sufficiently detailed go-forward plan,” ISS said in its report issued late Friday. The advisory firm added that due to the company’s prolonged underperformance, investors may want to instill “the board with an even greater sense of urgency and perhaps speed up the CEO search.” It recommended investors consider supporting an additional dissident nominee, such as Dawn Whittaker, in addition to Steven Feldman and Christopher Robison, who are backed by both the company and Paulson. The hedge fund, which owns a 5.7% stake in Detour, argues that extensive changes are needed at the company because the existing board is entrenched and failing shareholders. “Real change for the better will only happen with the replacement of the core, long-term directors who have overseen prolonged value destruction,” Paulson said in an emailed statement. “We appreciate ISS recognized many of the concerns that shareholders have, but they haven't gone far enough. Momentum is building behind the campaign for real change.”

Billionaire Paulson Accuses Detour Gold of ‘Bullying Tactics’
" Bloomberg (11/30/18) Bochove, Danielle"

Paulson & Co.'s founder has accused Detour Gold Corp.'s (DRGDF) of “bullying tactics” and reiterated its claims that Detour executives have mismanaged the company. In a 20-minute speech webcast ahead of a Dec. 11 special shareholders’ meeting, John Paulson pressed Detour investors to vote to overhaul the Toronto-based miner’s board. “Despite our best efforts, the Detour board has used bullying tactics against us,” Paulson said. Accompanied by Paulson & Co. partner Marcelo Kim, they detailed many of the complaints that have arisen in an increasingly contentious proxy fight. “I think this board makes shareholders the laughingstock of the investment community.” Since Paulson first took its complaints with Detour public in June, initially urging the miner to consider a sale, each side has accused the other of providing misleading information. Detour also has served Paulson with a lawsuit, which Paulson dubbed “frivolous.” In its latest letter to shareholders, Detour said Paulson has resisted all its attempts to compromise and said the hedge fund's proposed overhaul would send the miner “backwards.” While the miner sees value in appointing two of Paulson's nominees, it said replacing the entire board “is a recipe for disaster.” Detour says it will resume its search for a replacement for interim CEO Michael Kenyon the day after the proxy fight ends. As chairman and now interim CEO, Kenyon has overseen a huge loss of shareholder value, Paulson said. “We need to send a message to management, to boards and to the industry that entrenched boards that use their position of responsibility solely to enrich themselves will not be tolerated by shareholders.” Paulson says it owns 5.7% of Detour.

Luby’s to Fight Investor Seeking Control of Struggling Restaurant Chain
" Houston Chronicle (11/30/18) Takahashi, Paul"

Luby’s (LUB) announced Friday its board of directors will vote their shares in support of the company's current leadership and strategy, setting up a proxy fight with Bandera Partners. The investor, which has been invested in Luby's for over a decade and owns 8.9% of its outstanding shares, recently nominated five candidates to “improve the board with fresh, independent faces,” according to its letter. It is concerned about the embattled restaurant chain's direction amid growing competition from fast-casual restaurants. Members of Luby's nine-member board of directors are elected to a one-year term at the company's annual shareholders meeting, which is expected to take place early next year. Luby's said Friday it was surprised by Bandera's nominations, which came a few days after the hedge fund approached the restaurant chain's board demanding that it replace a third of its members. The restaurant chain said Bandera didn't give its board enough time to review and discuss the hedge fund's proposed candidates. “Bandera gave the board only 48 hours to agree to their demands,” Luby's said. Meanwhile, Bandera's cofounder Jeff Gramm argued in his letter last week that the company has “evaded substantive discussion” with the investor for weeks. Bandera's impending proxy fight with Luby's would be the first the hedge fund has waged.

Nestlé Defends Governance Amid Pressure From Investor
" Financial Times (12/02/18) Abboud, Leila"

Nestlé (NSRGY) is defending its corporate governance protocols against criticism by Daniel Loeb's Third Point, arguing that the relationship between the CEO and chairman is not hindering the food company's plans for growth. Third Point has a 1.25% stake in Nestlé. Nestlé has an arrangement common among European companies but frowned upon in the United States and United Kingdom whereby chief executives become board chairmen and oversee their successors. Third Point has stated that Chairman Paul Bulcke "seems too comfortable with the status quo" and that it risked "holding up the pace and magnitude of change." CEO Mark Schneider says the company has been well served for decades by its long-term outlook and approach to governance. "Frankly, I am grateful I can turn to someone to give me perspective," Schneider says. "Part of the challenge of being CEO is you deal with a lot of competing interests and there aren't that many people you can talk to when you have a question." The company's board acts as a robust check on the pair, Bulcke says. However, some investors have demanded change. In October, two-thirds of respondents surveyed said they would vote against Bulcke's reappointment, and 75% said they would back Third Point if it nominated a board candidate. Meanwhile, Third Point has been urging Nestlé to sell its stake in cosmetics company L'Oreal and use the proceeds to repurchase shares. Bulcke says it is "something active on the board's agenda" and that it will "take the right action at the right time."

Directors Engaging More, Survey Finds
" Royal Gazette (Bermuda) (11/30/18)"

PwC's 2018 annual corporate directors survey finds that board members are engaging more in a wide array of topics including board diversity, strategy oversight, and cybersecurity. The research's findings were presented to Bermuda-based directors and senior executives at the firm's recent DirectorConnect Forum. Arthur Wightman, PwC Bermuda leader, observed, "The percentage of directors saying that company strategy should 'very much' take social issues like health care availability and cost, resource scarcity, human rights, and income inequality into account jumped notably, between seven and 10 percentage points from 2017." David Forester, PwC Bermuda director, cautioned that nearly 33% of directors polled say shareholders are "too focused on corporate responsibility." He added that 84% of respondents say diversity enhances a board's performance, but around half warned that board diversity efforts are driven by political correctness and "shareholders are too preoccupied with the topic."

Campbell Struggling to Find Bolthouse Farms Buyer
" New York Post (11/29/18) English, Carleton; Kosman, Josh"

Sources say Campbell Soup (CPB) is having a hard time unloading its Bolthouse Farms brand in an auction it began this summer, shortly after its board was engaged by Third Point's Dan Loeb. The company said in August that it planned to sell its fresh-foods business after resisting pressure from Loeb to sell the entire company. Sources say Bolthouse's business has been disappointing since Campbell acquired it in 2012 for $1.5 billion. The company is now looking to sell Garden Fresh, which it acquired in 2015 for $231 million, in a separate process. "I think there will be interest in Garden Fresh as a separate business," said one source. A Campbell spokesperson says there has been "strong interest" in both businesses from strategic and financial buyers.

Showdown Over Shire Looms as Rebels Fight Takeda Takeover
" Boston Globe (11/30/18) Chesto, Jon"

On Dec. 5, shareholders of Takeda Pharmaceutical (TKPYY) will vote on whether to approve its nearly $62 billion purchase of Shire (SHPG), which would be the largest Western acquisition ever made by a Japanese buyer and make Takeda one of the world's top 10 drug makers. However, more than 100 shareholders oppose the deal and hope to win other investors to their side. These critics, including former Takeda employees and founding family members, believe the deal is too costly and brings with it too much debt, citing Takeda's poor stock performance since the deal was announced in May. The group believes at least 15% of shareholders will vote against the deal and claim that more are coming on board. They need 34% of voting shares on their side to win.

Jack in the Box Courting Potential Buyers
" San Diego Union-Tribune (11/29/18) Freeman, Mike"

Jack in the Box's (JACK) shared jumped almost 6% on Thursday following reports that the fast food chain was exploring strategic options, including a potential sale. The company reportedly began talking to potential buyers this month. Jack in the Box has been under pressure in recent months as Jana Partners and Blue Harbour have acquired stakes. “They feel like they are being besieged by outside agitators, and there is some truth to that,” said John Gordon of industry research firm Pacific Management Consulting Group. In addition, a group representing 2,000 franchisees has called for the removal of CEO Leonard Comma after the departure of the company's long-time chief marketing officer in August. The report of a possible sale comes amid a busy year for mergers in the hotly competitive fast food sector. Last month, Jack in the Box reached a settlement with Jana Partners, agreeing to expand its board and give Jana input on selecting two board members. Blue Harbour, which has acquired a 6.8% stake in Jack in the Box since September, said in a regulatory filing that it has talked with management and the board, and it may do so again regarding a variety of topics including strategic alternatives.

Detour Gold Denies Paulson's Demand to Immediately Replace CEO
" Reuters (11/29/18)"

Detour Gold Corp. (DRGDF) said Thursday CEO Michael Kenyon will lead the company until it finds a permanent replacement, resisting Paulson & Co.’s call for his immediate replacement. The hedge fund, which owns a roughly 6% stake in the miner, has pushed for Kenyon's resignation, saying the company had “unsuccessfully tried to boost short-term performance” including “questionably running up its accounts payable to exaggerate cash flows.” In a letter to shareholders on Thursday signed by Chairman Alex Morrison and other directors, Detour said it had “tried hard to settle with Paulson,” but was unable to reach an agreement. The miner also recommended appointing two of Paulson's nominees, Steven Feldman and Christopher Robison, to its board, saying they have the support of two of its top shareholders. The company did not disclose the names of the shareholders. Detour is also under pressure from Livermore Partners and Coast Capital Management L.P. to shake up its board and consider a sale. Shareholders have until Dec. 7 to vote on nominees.

SEC to Take Up Trump's Request on Quarterly Earnings Reports
" Wall Street Journal (11/30/18) Rubin, Gabriel T."

The Securities and Exchange Commission (SEC) intends to explore changes for public companies' quarterly earnings reports, following a request to do so by President Donald Trump. The SEC on Nov. 29 said it would vote next week on asking companies and investors for feedback on the "nature and content of quarterly reports and earnings releases." Some business leaders argue quarterly reporting promotes a short-term approach to investing, which includes pressure from hedge funds. SEC Chairman Jay Clayton has said that he doesn't expect quarterly reporting to change for most companies, particularly big ones, because the market expects detailed financial information on a regular basis. However, he has expressed openness to possible changes for firms with revenue of less than $1 billion. Among possible changes, the SEC could cut the number of disclosures required in quarterly reports, which some companies perceive as excessive in an era when company information is readily available to the public.

RELEVANT ARTICLES

Should 41's Legacy of Civility Extend to the Boardroom?
" Forbes (12/07/18) Peregrine, Michael"

Michael Peregrine, a partner in the Chicago office of international law firm McDermott Will & Emery, says the public discussion about President George H.W. Bush's dignity, honor, kindness, and rectitude in the aftermath of his death could apply to corporate governance, presenting a unique opportunity to consider the role of comity and cooperation in boardroom functions. "Governance experts such as Martin Lipton have long articulated a distinctly civil expectation for boardroom discourse. At its core, this envisions a tone at the top that establishes a corporate culture that gives priority to ethical standards, professionalism, and integrity. It describes the board/CEO dynamic in terms of a 'working partnership,' rather than an adversarial relationship. And it calls for a 'truly collegial' culture within the board, and in its relationship with management. More recently, the new Commonsense Principles 2.0 declares that collaboration and collegiality are critical for a healthy, functioning board, and urges directors not to be divisive or self-serving," he says. "These principles and guidelines signal a desire for productive, respectful boardroom engagement; that appropriate scrutiny of ideas and proposals can co-exist with decorum and fiduciary duty...The current, and possibly fleeting public conversation on civility offers a unique teaching moment for corporate boards. Pro-active board chairs and CEOs may use the opportunity to engage with their colleagues on proper boardroom discourse."

Old-School Activism Still Produces Results for Dan Loeb
" Financial Times (12/05/18) Fortado, Lindsay"

Although traditionally bruising proxy battles have fallen out of favor recently, Dan Loeb proved in two victories last week that such fights can still pay off. In one victory Campbell Soup (CPB) gave Loeb's Third Point hedge fund two board seats, plus additional concessions. In another, United Technologies (UTX) decided to split into three companies. Loeb is a throwback among a growing number of activists who are redefining their investing strategy as "constructivism," essentially "playing nice" and working with management behind the scenes. Funds like Cevian Capital, ValueAct, and Trian Partners have paved the way for a less aggressive style over the years. Still, Loeb and others such as Carl Icahn and Elliott Management seem to relish a fight. Even funds like Trian Partners, which prefers to be referred to as an "active shareholder" instead of an activist, has become more aggressive lately.

Activist Investors Are Spending More and Shifting Their Strategies
" Wall Street Journal (12/06/18) Whittall, Christopher"

Activist investors, spending more cash than ever, are shifting their attention to new companies and honing their strategies, according to a new report from Deloitte. Activist hedge funds currently have invested almost $300 billion, according to the report. About $74 billion was spent in the year that ended in September, more than twice the amount invested in all of 2016. Activists are increasingly engaging large companies, the research found, and board-related activism has the highest success-rate when the funds deployed have assets of more than $500 million, bringing about some kind of change in 70% of cases. Larger firms, such as Elliott Management and Cevian Capital, are also the most adept at driving the changes they want, according to Deloitte. New York-based Elliott manages $35 billion, while Swedish investment firm Cevian has about $15 billion in assets. The research found that Elliott Management invested the most in the last year, followed by Cevian Capital, ValueAct, Icahn Enterprises, and Third Point. Activists are also looking outside the increasingly saturated American market. Half the stakes activists have taken in the 12 months ending in September are outside the U.S., compared with just 30% in 2014, according to Deloitte. Activists are “here to stay in Europe and Asia,” said Jason Caulfield, head of value creation services at Deloitte.

Clearing the Bar: Shareholder Proposals and Resubmission Thresholds
" Harvard Law School Forum on Corporate Governance and Financial Regulation (12/04/18) Whitehill, Brandon"

The vast majority of shareholder proposals satisfy the current resubmission thresholds of 3%, 6%, and 10%, according to an analysis of a dataset of voted shareholder proposals between 2011 and 2018 at Russell 3000 companies by the Council of Institutional Investors. About 20% of proposals win majority shareholder support on the first attempt, but less than 5% of proposals that fail to win majority support the first time go on to pass in a subsequent attempt. Still, proponents can often successfully engage companies if their proposals win substantial—but less than majority—support, writes Brandon Whitehill, a research analyst at the council. The most common proposal subject matter is governance issues, which also win the highest levels of support. Raising the resubmission thresholds to 5%, 10%, and 15% would roughly double the number of ineligible proposals; a more substantial increase to 6%, 15%, and 30%, as called for in the Financial CHOICE Act, would triple the number; while doubling the current thresholds to 6%, 12%, and 20% would have an impact that falls between these two scenarios. Of the proposals that were eligible under existing rules but would fail to satisfy the increased thresholds, only about one-third were actually resubmitted between 2011 and 2018, and those that were gained two to four percentage points in support on average. Still, raising the resubmission thresholds could exclude anywhere from seven to 38 proposals that went on to win substantially higher support when resubmitted, depending on the scenario.

Quotas Are a Terrible Way to Promote Board Diversity. Companies Should Do This Instead
" CNN (12/04/18) Fiorina, Carly; Peterson, Joel"

According to Carly Fiorina, former chairman and CEO of HP (HPQ), and Joel Peterson, chairman of Jet Blue Airlines (JBLU), boards should become more diverse "because a variety of backgrounds, experiences, and skill sets leads to stronger, more rigorous, and significantly more effective corporate governance. And more effective governance means better performance for all stakeholders." However, they do not think California's one-size-fits-all quota system is the answer and "will inevitably lead to a box-checking approach that will further damage board credibility and performance." Instead, to increase board diversity, they recommend seeking out more angular expertise for the board, rather than having a CEO monopoly on board seats; grilling companies on how they recruit board directors; using blind resumes in the recruitment process; considering different evaluations for the next open director search; and evaluating and implementing team health and performance metrics for the board.

Opinion: Investors in Asia Need All the Help They Can Get
" Wall Street Journal (12/05/18) Peaple, Andrew"

The Asian Corporate Governance Association published a report Wednesday that declared a “more localist and divisive” approach is now undermining two decades of progress on shareholder rights across Asia. The not-for-profit watchdog's top concern is that increased competition among stock exchanges to attract high-profile listings is compromising the fair treatment of shareholders. One issue is the increased tolerance in major Asian markets for companies to list with dual-class shares, which enables small numbers of shareholders to retain majority control of company voting rights even after they go public. Having lost out on Alibaba's initial public offering to New York in 2014, Hong Kong this year changed its rules to allow dual-class shares, concerned it would miss other big tech stock listings. Dual-class shares are not ideal. However, for years large numbers of companies listed in Hong Kong and across Asia have had dominant shareholders—sometimes the state or controlling families—who do not always act in the interests of ordinary investors, writes the Wall Street Journal's Andrew Peaple. Changing this structural feature of Asian markets will not happen soon. Given that, it is on governments and regulators to show more determination to enhane corporate governance and the broader environment for investors, he writes.

For Companies, It Can Be Hard to Think Long Term
" Wall Street Journal (12/03/18) Stoll, John D."

Short-term versus long-term thinking on Wall Street is a key concern for chief executives attempting to support significant capital investments that can take years to pay off. Long-range strategies can be difficult to execute in an era when Wall Street is focused on three-month reporting periods. "Companies need to make a choice," says Tim Koller, a McKinsey & Co. partner. "Do I please investors who are in it for the long haul, or do I please investors who are playing the quarterly game?" The data behind the issue does little to answer the question. McKinsey says 75% of shareholders are considered long-term investors, meaning they should be more patient than sell-side analysts, and Koller says there isn't a lot of evidence that proves shareholders want executives to focus so heavily on the short term. Still, the number of publicly traded companies is trending down, partly because of the growing pressure on executives to put immediate performance before investing in the future. Many business leaders are weary of feeling forced to make short-term decisions that could negatively affect their companies' long-term health. Barnes & Noble Inc. (BKS) Chairman Leonard Riggio, for example, said in October the bookseller is weighing going private because public shareholders may not be sufficiently patient to support a costly and extensive turnaround plan. Many critics of short-term thinking on Wall Street say quarterly earnings is the area most in need of immediate change. Even if quarterly guidance holds executives accountable and fosters transparency, it may not be worth the detrimental behavior that sometimes results.

Should Dual-Class Shares Be Banned?
" Harvard Business Review (12/03/18) Govindarajan, Vijay; Rajgopal, Shivaram; Srivastava, Anup"

The use of dual-class shares has grown recently, and there have been calls to eliminate them, or at least have a mandatory sunset clause. In this article, Vijay Govindarajan of Dartmouth's Tuck School of Business, Shivaram Rajgopal of Columbia Business School, and Anup Srivastava and Luminita Enache of the University of Calgary argue that an "outright ban on dual-class shares would not be costless. For example, one principal reason for decline in the number of initial public offerings is the increasing reluctance of technology companies to list their stock, which is largely caused by rising shareholder activism. At the margin, a ban on dual-class stock would encourage more technology companies to remain private, or motivate listed technology companies to go private, eliminating common investors' chance to buy even the inferior voting stock. This growing possibility is likely why Hong Kong and Singapore stock exchanges have reversed their earlier stance and allowed dual-class shares." Meanwhile, they believe "a sunset clause would be ideal if there exists a fixed, predetermined time after which all companies become mature enough to need no further changes in their business models. However, we cannot completely endorse this idea for two reasons. First, the firm age at which [a] sunset clause should kick [in] is far from clear...Second, and more important, we are unsure whether any of today's companies can bask in their established business models forever, given the increasing pace of creative destruction and the emerging competition from digital companies." Instead, they recommend a more flexible shareholding structure. "Companies with dual-class structures could be required, after a period of predetermined years, to gain approval from a majority of all shareholders to continue the dual-class structure. Furthermore, single-class firms should be given an option to convert to dual-class shares through a shareholder vote, in order to carry out significant transformations, instead of having to completely delist in order to achieve that goal," they write.

Female CEOs Are More Likely to Be Fired Than Males, Study Finds
" Forbes (12/01/18) Walton, Alice G."

Female chief executives are fired at a significantly higher rate than male chief executives, according to a new study published in the Journal of Management. Researchers at the University of Alabama, the University of Memphis, Clemson University, and the University of Missouri looked at data from publicly traded companies between 2000 and 2014. In addition to gender, they distinguished between CEOs who left voluntarily, those who were fired, and what was going on at the company at the time. Female CEOs were approximately 45% more likely to be fired than their male counterparts. Improvements in company performance, which had a protective effect for males, had no such effect for females. "Dismissing the CEO is usually viewed as evidence of good corporate governance. ...However, our research reveals there are invisible but serious gender biases in how the board evaluates CEOs and its decision to retain or fire particular CEOs," commented study author Sandra Mortal.

What Happens When CEOs Have Too Much Power
" CNN (11/29/18) McGrath, Rita"

Corporate governance issues at Facebook (FB), Nissan (NSANY), and General Electric (GE) in recent weeks highlight how concentrated power and a lack of diverse perspectives on boards can cause systemic blind spots in organizations and lead them into avoidable crises. For one thing, absolute power at a company shrinks cognitive bandwidth. Practices such as having a combined chairman/CEO role, failing to give decision making power to truly independent directors, and selecting directors from the same pool of contenders are all likely to increase the chances that corporate leadership will miss something important externally. Furthermore, having absolute power at the top discourages individuals from sharing uncomfortable news. The people most likely to encounter evidence that the world is changing tend not to be comfortably seated in corporate headquarters but are at the "edges" of the organization. At Facebook, Nissan, and General Electric, it was lower-level employees who noticed something was amiss, not executive leadership. Finally, absolute power enables self-interested decisions. When power is overconcentrated in a few players, executives can take actions that are comfortable for themselves, but not necessarily consistent with the good of the organization or its stockholders. Good governance, challenging group discussions, and quests to find real information are difficult. But it's an effort worth making—unless an organization wants to star in the next set of shocking corporate headlines.

Elliott's Latest Arconic Move Is to Save Face
" Reuters Breakingviews (11/29/18) Buerkle, Tom"

Elliott Management plans to revive bidding interest in Arconic (ARNC) by creating a separate entity to contain potential liabilities from a deadly fire at a London residential high-rise last year. The separate entity would hold liabilities for the company's construction division, which supplied combustible aluminum cladding used at Grenfell Tower. Elliott, which is Arconic's largest investor with a stake of nearly 11%, hopes to bring Apollo Capital Management and a rival buyout group including Blackstone and Carlyle back to the table, at a higher price. The board has spurned Apollo's offer of $23 a share for the whole group. Elliott's move helped push the stock up more than 2% on Thursday, but investors remain skeptical one day before bids are due, as shares closed at $21.24 apiece, below Apollo's previous offer. A buyout bid of about $25 would be a disappointment for Elliott because that would probably mean a low double-digit return for three years of work. The S&P 500 is up nearly 40% over the same period. The move suggests that Elliott's effort is more about saving face.

Bogle Sounds a Warning on Index Funds
" Wall Street Journal (11/29/18) Bogle, John C."

The creation of the first index mutual fund was the most successful innovation in modern financial history, writes Vanguard founder John C. Bogle. "The question we need to ask ourselves now is: What happens if it becomes too successful for its own good?" Three index fund managers—Vanguard, BlackRock, and State Street—now dominate the field with a collective 81 percent share of index fund assets. It's only a matter of time until index mutual funds own half of all U.S. stocks, says Bogle. "If that were to happen, the 'Big Three' might own 30 percent or more of the U.S. stock market—effective control. I do not believe that such concentration would serve the national interest." Bogle outlines several solutions that have been advanced to avoid such concentration, or if unavoidable, to blunt its potential negative impacts. Bogle's concerns are shared by some observers. In a draft paper released in September, Professor John C. Coates of Harvard Law School wrote that indexing is reshaping corporate governance, and warned that we are tipping toward a point where the voting power will be "controlled by a small number of individuals" who can exercise "practical power over the majority of U.S. public companies."

The Realities of Robo-Voting
" Harvard Law School Forum on Corporate Governance and Financial Regulation (11/29/18) Doyle, Timothy M."

According to new research by the American Council for Capital Formation (ACCF), 175 asset managers, representing more than $5 trillion in assets under management, automatically vote in line with Institutional Shareholder Services' (ISS) recommendations on both shareholder and management proposals more than 95% of the time, in a practice known as "robo-voting." There are concerns that this trend enables proxy advisory firms to operate as quasi-regulators of U.S. public companies despite lacking any statutory authority. The report, "The Realities of Robo-Voting," indicates that proxy advisors dictate as much as 25% of proxy voting outcomes. The report reveals that of the 175 asset managers in the 95th percentile, nearly half are in the 99th percentile, meaning they are voting with ISS on both management and shareholder proposals more than 99% of the time. According to ACCF's Timothy M. Doyle, "Robo-voting enhances the influence of proxy advisory firms, undermines the fiduciary duty owed to investors, and poses significant threats to both the day-to-day management and long-term strategic planning of public companies."

Campbell Soup and Nestlé: One Investor, Two Strategies
" Wall Street Journal (11/30/18) Ryan, Carol"

Daniel Loeb's Third Point has invested about $4.5 billion into Nestlé (NSRGY) and Campbell Soup (CPB), which now account for a full 17% of the fund's net exposure. Although the fund has a much larger investment in Nestlé, its approach with Campbell has been notably more aggressive. One reason is that Campbell is in deeper trouble and therefore a riskier bet. Stripping out currency and portfolio changes, sales have fallen 1% a year on average since 2013, compared with gains of 3% at Nestlé. Campbell's weak annual shareholder returns of 3% over the past five years also allow for stronger tactics. Meanwhile, Third Point is betting that a push for faster asset sales at Nestlé is sufficient to boost returns. Nestlé has already unloaded unhealthy U.S. candy brands BabyRuth and Butterfinger and recently announced a strategic review of its skin health division. Nestlé has also been more responsive than Campbell. It set a new margin target and voluntarily refreshed its board not long after he showed up. The relative size of the two companies is relevant as well: Third Point's $3.5 billion investment in Nestlé bought just 1.5% of the Swiss giant's share capital, while a 7% holding in Campbell, currently worth $830 million, makes it easier to mount a credible proxy threat. Nestlé can expect continued pressure from Third Point to add more consumer expertise to its board and sell its $30 billion stake in cosmetics group L'Oréal.

2019 Americas Proxy Voting Guidelines Update
" Harvard Law School Forum on Corporate Governance and Financial Regulation (11/28/18) Mishra, Subodh"

Institutional Shareholder Services' (ISS) update to proxy voting guidelines in the Americas for 2019 offers changes in key areas such as board of directors, shareholder rights and defenses, and social and environmental issues (E&S). On the matter of voting on director nominees in uncontested elections, ISS has changed its policies on board composition (diversity and attendance), board accountability (management proposals to ratify existing charter or bylaw provisions and director performance evaluation), and board responsiveness (ratification proposals). ISS' rationale for changing its policy on diversity is that investors favor gender diverse boards, board gender diversity has been positively correlated to better company performance in some studies, and gender diverse boards are the market norm. Meanwhile, moving the five-year underperformance test to the initial screen, as opposed to as part of a secondary step in the director performance evaluation, will reduce the number of companies that undergo scrutiny under that policy. The responsiveness policy is updated to reflect that the failure of a management proposal to ratify existing charter and bylaw provisions to receive majority support will trigger a board responsiveness analysis at the following annual meeting. Also, the policy on reverse stock splits is being updated to codify the approach currently taken for companies that are not listed on major stock markets or exchanges and are not proportionately reducing their authorized shares. And the update to ISS' global approach to E&S issues is being made to codify the factors that are already taken into consideration in its case-by-case analyses of E&S shareholder proposals.


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