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Top Activist Stories - A Review of Financial Activism by Geneva Partners

Top Activist Stories - A Review of Financial Activism by Geneva Partners

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  • 1. T O P A C T I V I S T S TO R I E S A REVIEW OF FINANCIAL ACTIVISM BY GENEVA PARTNERS January 18th,2013 PLEASE SCROLL DOWN FOR ARTICLESBoom year for activist investorsInvestment funds that seek to profit by pushing for strategy shifts at companies or improvements in corporategovernance have had a banner year, posting returns well ahead of the US equity market and their stock tradingpeers. […]Icahn’s Stake Pushes Transocean Closer to PartnershipCarl Icahn’s new stake in Transocean Ltd. (RIG) may raise pressure on the world’s largest offshore driller to putsome of its rigs into a tax-advantaged partnership as the billionaire seeks to boost his investment’s value. […]Banks Need Activists More Than New Rules, Mayo SaysWall Street banks such as Morgan Stanley will benefit more from shareholders demanding reforms thanregulators imposing new rules, CLSA Ltd.’s Mike Mayo said.[…]Activist investors toast a banner yearIs any company safe from the agitators? Even Institutional Shareholder Services, an influential adviser oncorporate governance matters, which is often an ally of activist investors, now has one of them in its ownshareholder register.[…]Fund titans Loeb, Ackman square off on HerbalifeTwo prominent hedge fund managers are squaring off over Herbalife Ltd, with Daniel Loeb betting thenutritional supplements company will flourish while William Ackman is betting it will falter.[…] Activist Funds Loaded With Capital Augurs Dealmaking Surge“We have seen a dramatic increase in the level of shareholder activism,” said Patrick Ramsey, co-head ofAmericas M&A at Bank of America Corp., who predicts that activism will contribute to an increase in M&A thisyear.[…]Franck berlamont Jean-François Bassignot 1GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – info@geneva-partners.com – www.geneva-partners.com
  • 2. T O P A C T I V I S T S TO R I E S A REVIEW OF FINANCIAL ACTIVISM BY GENEVA PARTNERS January 18th,2013 Boom year for activist investorsBy Dan McCrum and Sam Jones at the Corrections Corporation of The firm’s small- and mid-capDecember 23th, 2012 America, where they are attempting strategy, with almost $2bn under to persuade the prison operator to management, had returned over 26 Investment funds convert into a real estate investment per cent this year, according tothat seek to profit by pushing for trust. Pressure from Corvex also investors. However the large-capstrategy shifts at companies or helped push Ralcorp to sell itself to to strategy, with twice the capital, is upimprovements in corporate Conagra last month. only 6.9 per cent, hit by declines ingovernance have had a banner year, Both hedge funds are run by disciples the value of computer maker Hewlettposting returns well ahead of the US of more established activists. The Packard, where Mr Whitworth is onequity market and their stock trading $900m Marcato was started by Mick the board.peers. McGuire after he left Pershing Square, Bill Ackman’s Pershing Square, was upThe growing status and firepower for the $11bn fund run by Bill Ackman. only 6 per cent at the end ofactivist investors points to more The $6bn Corvex is run by Keith November, investors said. However,boardroom battles ahead for 2013, as Meister, a former lieutenant they said it was likely to have had abig pension funds throw money and to corporate raider Carl Icahn. strong December as Mr Ackmansupport behind the agitators. Other strong performers include Jana, unveiled a high-profile positionLeading the pack in terms of the $2bn flagship fund run by Barry betting on a fall in the share price inperformance this year are The Rosenstein is up 21 per cent this year, Herbalife, the nutritional supplementChildren’s Investment Fund, Corvex which has persuaded several direct. Shares in the company felland Marcato Capital Management, companies to split apart this year, and nearly 38 per cent last week followingwith returns of around 25 per cent as Cevian, the $7bn European activist Mr Ackman’s attack.of the end of November, according to fund up almost 21 per cent at the end The hedge fund of Trian Partners, runinvestors. of November according to investors. by Nelson Peltz, Edward Garden andFor TCI, winning bets included Japan The small, focused portfolios of Peter May, was up 4 per cent for theTobacco, Disney and News Corp, the activists can be susceptible to periods year at the end of November,media company which decided to spin of underperformance, and three of according to investors.out its print media businesses this the more established firms have All the firms declined to comment.year in the wake of the UK phone trailed this year.hacking scandal. It has been a mixed year for RelationalMarcato and Corvex both had success Investors, run by Ralph Whitworth. Source : Financial Times 2GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – info@geneva-partners.com – www.geneva-partners.com
  • 3. Icahn’s Stake Pushes Transocean Closer to PartnershipBy David Wethe “It’s certainly interesting,” Greg increase revenue in 2012 to $9.7January 16th, 2013 Cauthen, the company’s former billion. interim chief financial officer, told Transocean also is improving its fleet, Carl Icahn’s new analysts and investors Nov. 6. “It’s having sold most of its standardizedstake in Transocean Ltd. (RIG) may something we have and will continue shallow-water drilling rigs for $1.05raise pressure on the world’s largest to look at, but we’ve not come to any billion, and started building nine newoffshore driller to put some of its rigs conclusions at this time.” Cauthen rigs, most of which should be able tointo a tax-advantaged partnership as was succeeded a week later by Esa command some of the highest daythe billionaire seeks to boost his Ikaeheimonen, previously the chief rates in the industry and work ininvestment’s value. financial officer at Seadrill, a move waters as deep as 12,000 feet.Transocean’s announcement this that was announced in September.week that Icahn bought 1.56 percent Transocean isn’t saying much about Macondo Settlementof its shares and sought regulators’ the Icahn investment, other than an The settlement withpermission to own more than 3 e-mailed statement Jan. 14 that it the U.S. Justice Department overpercent stirred a debate in the “looks forward” to talking with him. Transocean’s role in the explosion ofinvestment community as the activist Icahn notified the company that he’s the Macondo well and subsequent oilinvestor known for shaking up seeking regulatory approval to spill calls for the company to pay $1.4companies remained silent about his potentially acquire shares worth more billion over five years, a paymentintentions. He’s jumping in less than than $682.1 million, Transocean said schedule that Argus Research analysttwo weeks after Transocean agreed to in a statement on its website the day Phil Weiss said in a Jan. 9 note topay the U.S. $1.4 billion to settle its before. […] investors was “certainly manageable.”liability in the 2010 Gulf of Mexico oil After turning in the best performancespill. Creditors’ Concern among peers on the Philadelphia OilWith the company already in The move by an Service Sector Index (OSX) over theturnaround mode -- the shares activist investor known for pushing past year, the company still has roomhave led peers with a 34 percent gain companies for change added enough to grow.over the past year -- some investors uncertainty to concern creditors, with The stock is trading at about 85and analysts said they expect the 76- Transocean bonds reversing gains percent of the company’s net-assetyear-old to push for Transocean to posted after its oil spill settlement value, compared with the 10- yearcreate a master limited partnership, was announced Jan. 3. The company’s average of more than 100 percent foror MLP, to raise cash for the parent $1 billion of 6.8 percent notes due the industry group, West said.company and spur growth with its March 2038 fell 2 cents to 121 cents “It’s extremely undervalued, which istax-free structure. It would be the on the dollar, yielding 5.27 percent at a classic Icahn trade,” said Laurencesecond drilling-rig partnership after 4:31 p.m. in New York, according to Balter, who helps manage $100Stavanger, Norway-based Seadrill Ltd. Trace, the bond-price reporting million, including Transocean shares,(SDRL) spun off assets to system of the Financial Industry at Oracle Investment Research in Foxcreate Seadrill Partners LLC (SDLP) in Regulatory Authority. Island, Washington.October.“I would guess he’s going The rig contractor has made progressafter an MLP because there aren’t a in shoring up its balance sheet after CVR Partnershipwhole lot of other levers to pull,” Joe losing more than half its market value CVR Energy Inc.Hill, an analyst at Tudor Pickering Holt following the April 2010 oil spill, Collin (CVI), an oil refiner Icahn took control& Co. in Houston said in a telephone Gerry, an analyst at Raymond of last year after winning a proxy fightinterview. Icahn didn’t return James said in a telephone interview. with management, is scheduled torepeated calls and e-mails to his office Earnings before interest, tax, hold a $520 million initial publicrequesting comment on his depreciation and amortization are offering today to create an MLP withinvestment in Vernier, Switzerland- expected to almost double in 2012 to the company’s two oil refineries.based Transocean. $3.39 billion from $1.85 billion a year Icahn is poised to double his $2 billion earlier, according to 39 analysts’ investment in CVR thanks to the MLP Considered estimates compiled by Bloomberg. restructuring and cheaper U.S. oil that Transocean said it The Ebitda is expected to climb has widened profit margins forwas studying the possibility of forming another 39 percent over the next two refiners.[…] MLPs pay no U.S.an MLP when asked about it after years, and for the first time since corporate income tax and distributeSeadrill’s spinoff. 2008, the company is expected to cash to holders of partnership units,.… 3GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – info@geneva-partners.com – www.geneva-partners.com
  • 4. which are traded like shares in a Seadrill Partners trades at a premium as an experiment, but I’m a littlepublic corporation. is because of its payout to unit- skeptical they’re going to get a bigMLPs are usually controlled by a holders. That same effect could be value uplift from doing one,” Hill said.general partner that retains a share of accomplished at Transocean by Balter sees an MLP structure as athe units and receives a portion of the bringing back the dividend, he said. quick boost to shares of the parentincome. Retail investors have favored Seadrill gave its partnership a partial company in the beginning, thoughthe MLP model in the pipeline interest in four drilling rigs with long- ultimately a “cop out” because theindustry because they tend to pay term contracts operating in North structure may take away some of thesteady dividends tied to long-term America and West Africa. Since it best assets from the larger company,contracts that are often akin to rent. began trading Oct. 18, the parent he said. “I would not be surprised toMLP Expansion In the past year, more company has fallen 10 percent while see them go the MLP route,” Balteroil and natural gas producers and Seadrill Partners has climbed 26 said. “But I would be disappointedrefiners have been attracted to the percent. that the industry is trending this way,model. Now, with most major rig Transocean is viewed as under-valued just for the sake of raising the shareowners mulling the idea, Scott compared to Seadrill at the time of its price.” Alternatively, Icahn may justGruber, an analyst at Sanford spinoff, James West, an analyst focus on pushing the company to cutBernstein dubbed the topic “MLP at Barclays Capital said in a telephone costs, reduce debt, sell older vesselsMania?” in a note just after Seadrill interview. So shares may gain with and reinstitute the dividend, Gruberannounced the IPO of Seadrill the cash from an MLP’s unit said. “A year ago, you could see somePartners. distributions and improved incremental pockets of value inMLPs don’t create value for foreign- forecasting for cash-flow from long- squeezing some stuff out, but nowdomiciled drilling companies such as term rig contracts, he said. some of those have been resolvedTransocean and Seadrill because Still, the arguments for a Transocean and you’re left wondering, ’What’sthere’s no tax-efficiency gain, Gruber MLP are less convincing, according to left for him to really change?” Gerrysaid in a telephone interview. That’s Tudor Pickering’s Hill. said. “Maybe it’s the MLP structure.”why Seadrill ultimately went with alimited- partnership structure instead Value Questionsof an MLP, he said. The reason why “It’s fine to do one Source : Bloomberg Banks Need Activists More Than New Rules, Mayo SaysWall Street banks such as Morgan ahead of acquisitions. crisis,” Mayo said in a telephoneStanley will benefit more from “We need more Dan Loebs than we interview. “This is a seminal event,”shareholders demanding reforms need regulators,” Mayo said. “We he said. “To have this sort of high-than regulators imposing new rules, need more shareholders to step up to profile activism at a brokerage firmCLSA Ltd.’s Mike Mayo said. the plate.” has been unheard-of in recent years.”Activist investors including Nelson Morgan Stanley (MS) should Morgan Stanley plans to reduce somePeltz’s Trian Fund Management LP “upgrade” its directors, with one risk-weighted assets, and Chiefand Dan Loeb’s Third Point LLC will member of the bank’s board “familiar Executive Officer James Gorman ishave more success in changing the to us from previous corporate cutting 1,600 jobs from investmentbiggest U.S. banks by holding governance battles we have fought banking, trading and support staff, amanagements’ “feet to the fire,” against moribund boards,” Loeb person with direct knowledge of theMayo said today in a Bloomberg wrote in a letter to investors. He plans said yesterday.Television interview with Betty Liu. previously pushed for an overhaul at Billionaire Peltz disclosed a 5.1Loeb’s hedge fund said yesterday it Yahoo! Inc. and won the ouster of percent stake in Lazard Ltd. (LAZ), thebought a stake in Morgan Stanley, Chairman Roy Bostock, who is a biggest independent advisory firm, inand predicted the New York-based Morgan Stanley director. June last year. Peltz criticized thebank’s shares may double as Morgan Stanley also needs to Hamilton, Bermuda-based company’sbrokerage margins improve and improve its fixed-income, currency pay and cost structure in meetingsmanagement devises a “bold fix” for and commodities business this year, with senior executives before thethe fixed-income trading Third Point said. disclosure, people familiar with thebusiness. State Street Corp. (STT), the matter said at the time. […]third-largest custody bank, came Loeb Fanunder pressure from Peltz in October “If we had more investors like Dan2011 to increase profitability, cut Loeb, we likely would have had fewerexpenses and put shareholder returns of the problems of the financial Source : Bloomberg 4GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – info@geneva-partners.com – www.geneva-partners.com
  • 5. Activist investors toast a banner yearBy Dan McCrum and David Gelles vulnerability to activism and suggestions.”December 23th, 2012 shareholder pressure, particularly in Some are very publicly onside, such as the US but also outside the US.” the Ontario Teachers’ Pension Plan, a Is any company safe It comes as activists are setting their Canadian pension fund that workedfrom the agitators? Even Institutional sights high, and looking overseas. Bill with Jana to push for a spin out of theShareholder Services, an influential Ackman, founder of activist hedge education business from McGraw-Hill,adviser on corporate governance fund Pershing Square, swept a concluded last month.matters, which is often an ally of boardroom election at railroad “Success begets success,” says Danielactivist investors, now has one of company Canadian Pacific and then Kerstein, head of the strategic financethem in its own shareholder register. moved on to the world’s largest group at Barclays. “The more we seeValueAct Capital, an activist hedge consumer goods maker, P&G. activists appearing to create changesfund, last month disclosed a 5 per Trian, an activist company founded by at companies and, through that,cent stake in MSCI, which owns ISS. Nelson Peltz, Edward Garden and profiting for their investors, the moreThe move was only one element in a Peter May, has began a low-key campaigns we’ll see. It’s self-late flurry of activism that caps a year campaign to encourage the perpetuating.”in which activists have ousted boards, leadership of Danone, the French The next wave of activist fights isforced corporate break-ups and yoghurt maker, into increasing profit already shaping up ahead of thechallenged sleepy management margins and not wasting capital on spring “proxy season”, when manyteams. costly takeovers. public companies hold annualThough the number of 13D filings, Not everything is going the activists’ meetings where activists can wagewhich announce when activists have way, however. While Ralph public battles for board seats.acquired more than 5 per cent of a Whitworth of Relational Investors had For instance, after forcing splits atstock, is down from previous years, a good year at Illinois Tool Works, he Marathon Petroleum and El Paso, aboards of directors and bankers still suffered in Hewlett-Packard. The natural gas company, Jana has takensee 2012 as a banner year for investor was invited on to the board its playbook to Agrium, a Canadianactivism. Many activists succeeded in in November 2011: too late to fertiliser group. Agrium is resisting apressing companies to return cash or influence the $10.3bn takeover of UK split, so investors will vote on a newdo a deal, and some of the biggest software maker Autonomy that has slate of candidates for the boardbrand names in the US, since proved disastrous. A person proposed by Jana, one of whichincluding Netflix and Procter & familiar with Relation said that he had includes Lyle Vanclief, a formerGamble, came under siege. experienced very long turnrounds Canadian minister of agriculture.And with several activist funds before, including four years at Home More activist situations are beingproducing investor returns of more Depot. resolved without going to proxythan 20 per cent for the year, cash Meanwhile JC Penney, the fights. But many of those that do turnhas flooded into the sector. “More department store chain, is undergoing into battles are still being wagedmoney means a need to find more a strategic overhaul at the urging of by Carl Icahn, the billionaire raidertargets, and larger ones,” says Henry Mr Ackman. Sales have plunged this turned activist who this month lost hisGosebruch, managing director in year, taking the share price with it, second attempt to gain controlJPMorgan’s mergers and acquisitions but the investor likens it to a private of Oshkosh, the defenceteam. equity style turnround that will manufacturer.There was $57bn dedicated to activist ultimately bear fruit. Mr Icahn says he expects to stay busy:strategies at the end of the third Nonetheless, the fact that such “One problem with the economy isquarter, according to HFR, the activists are even in a position where that way too may companies are justresearch house, up from $51bn at the they are welcomed on to boards badly managed and too many boardsstart of the year and $32bn at the end reflects their change in stature and do not hold managementof 2008. The pressure on boardrooms influence. A decade ago, lawsuits accountable”. Company directors,seems likely to increase. were the first response. “Today we consider yourselves warned.Chris Young, head of contested get an entirely different reaction, wesituations for Credit Suisse, says: don’t get sued any more”, says Barry“There is a tremendous amount of Rosenstein of Jana Partners. “Long-interest from executive suites about only investors will actually call us with Source : Financial TimesFranck berlamont Jean-François Bassignot 5GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – info@geneva-partners.com – www.geneva-partners.com
  • 6. Fund titans Loeb, Ackman square off on HerbalifeBy Svea Herbst-Bayliss In a three-hour long presentation 21 percent gain in his Third PointJanuary 9th, 2013 Ackman, one of his top lawyers and a Offshore fund and a 33.6 percent rise top analyst said they believe Herbalife in his Third Point Ultra fund, is bettingTwo prominent hedge fund is a "pyramid scheme" because that Herbalife stock will rise.managers are squaring off over distributors earn more than 10 times "The stock declined by nearly half lastHerbalife Ltd, with Daniel Loeb as much from recruitment as they do month following controversialbetting the nutritional supplements by selling company products. assertions made by a short sellercompany will flourish while William Herbalife has vehemently disputed about Herbalifes business model andAckman is betting it will falter. Ackmans accusations. practices," Loeb wrote, adding "Third Loeb and Ackman are sometime- Point has a different view and holdsLoeb, fresh off a stellar 2012, gave the friends, each with reputations for about 8 percent of Herbalifesupplements company a shot in the conducting strong research and outstanding common stock, which wearm, when his Third Point LLC hedge delivering sharp-tongued bluster. As acquired mostly during the panickedfund said it had taken a stake of more they now face off, investors and selling that followed the short sellersthan 8 percent in Herbalife. The industry observers are bracing for a dramatic claims." The short seller iscompanys shares rose more than 4 high-profile and public brawl. Ackman whom he does not identify.percent. "This will be a battle of firepower," As a fast-growing company, HerbalifeLoeb told investors that he expects said David Tawil, who runs hedge fund is already a mainstay in manythe companys share price to do even Maglan Capital. investment firms index funds. Also,better, forecasting it can trade Herbalife shares bounced around on East Side Capital, a highly respectedbetween $55 and $68 a share, maybe Wednesday, jumping as much as 8.9 New York-based hedge fund whichhigher. Given the potential upside percent on news of Loebs move has long managed money for Georgemakes "the company a compelling before tumbling 5.4 percent on a Soros, is another very large investor inlong investment for Third Point," Loeb report that the Securities and Herbalife, regulatory filings show.wrote in a letter obtained by Reuters. Exchange Commission is investigating Robert Chapman, who foundedAlso on Wednesday, the Wall the company before recovering again Chapman Capital, said last week in aStreet Journal reported that the U.S. to trade up 4 percent at $39.85. blog post that he took a "monster"Securities and Ackmans announcement of his short bet that Herbalife shares will climb,Exchange Commission opened an position last month, which was arguing that Ackmans quest to seeinquiry into Herbalife, led by roughly a year in the making, pushed Herbalifes stock price go to zeroenforcement officials at the SECs the share price down 21 percent in depends heavily on the Federal TradeNew York office. An SEC two days. It also helped rescue his Commissions becoming involved inspokeswoman declined to comment funds otherwise tepid returns, the matter.and Herbalife did not return calls leaving investors with a gain of 12 The agency has defined a pyramidseeking comment.[…] percent for 2012, twice as much as scheme as one where a companyThe move was announced one day the average hedge fund. "promises consumers or investorsbefore Herbalife, a 32-year old On Wednesday, Ackman, who already large profits based primarily oncompany which sells nutrition and vowed to donate any profits he made recruiting others to join theirweight management products off the investment to charity, tried to program, not based on profits fromthrough a network of independent take a more modest tone by saying any real investment or real sale ofdistributors who are also paid for his research was simply designed to goods to the public."recruiting other sellers, scheduled its help others understand Herbalife Ackman is not alone in his quest. Ainvestor conference. Ackman, who is better. person familiar with hedge fundtraveling abroad, plans to listen in by "The outcome of this investment is Kynikos Associates said short sellertelephone. not about Pershing Square or anyone Jim Chanos is believed to have beenAnd it comes less than a month after else who is long or short the stock," shorting Herbalife shares for a while.Ackmans Pershing Square Capital Ackman said in a statement. "To theManagement called extent another investor, long or short,Herbalifes business model a "pyramid brings additional sunlight to thescheme" and disclosed a short situation, we welcome them."position valued at around $1 billion, Meanwhile Loeb, who delivered evenbetting that the share price will fall. stronger returns than Ackman with a Source : Reuters 6GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – info@geneva-partners.com – www.geneva-partners.com
  • 7. Activist Funds Loaded With Capital Augurs Dealmaking Surge By David Welch and Serena Saitto poured about $3.8 billion into activist successful,” billionaire activist Carl January 17th, 2013 funds after returns in 2012, compared Icahn said in a phone interview. with $1.8 billion in 2010, according to The wake of the financial crisis has left Food producer Hedge Fund Research, a Chicago- “a substantial price gap between Ralcorp Holdings Inc. refused to based firm. sellers and buyers,” said Gideon King, accept a takeover bid from rival “We wanted to consider all options CEO of Loeb Capital Management, a ConAgra Foods Inc. in 2011. A year due to the low return environment,” New York-based hedge fund. “That’s later, 39-year-old activist investor said Aeisha Mastagni, an investment one of the reasons why you see a Keith Meister stepped in. officer for the California State return of activists who can push the On Aug. 23 Meister, a onetime Carl Teachers’ Retirement System. It has a parties to the bargaining table to try Icahn protege, disclosed that he had $3 billion portfolio of activist to narrow this chasm.” accumulated a 5.1 percent stake in St. investments among its total of $154.3 Louis-based Ralcorp, hoping to restart billion under management. The Technology Deals talks with ConAgra. Just three months California Public Employees’ Mature technology later Ralcorp, now headed by a new Retirement System is putting $1.25 companies laden with cash are an chairman and with Meister on the billion over the next five years into a especially ripe target, said Gene board, agreed to ConAgra’s $5 billion fund of its own, said senior portfolio Sykes, Goldman Sachs Group Inc.’s bid. Ralcorp Chief Executive Officer manager Anne Simpson. global head of mergers and Kevin Hunt said the deal provided Investors have been rewarded. While acquisitions. “compelling cash value to the Standard & Poor’s 500 Index rose Agitation by hedge-fund manager shareholders.” 13 percent in 2012, activist funds Elliott Management Corp. has put Meister’s activist fund Corvex jumped 25 percent, according to BMC Software Inc. on the block, and it Management LP turned a quick $90 Mazin Jadallah, CEO of San Francisco- might be taken private this year, million on its $189 million investment, based money management firm according to three people familiar or 48 percent, according to AlphaClone, which tracks activist with the situation. Last year it Bloomberg calculations based on funds. attracted interest from private equity company filings. M&A could use a boost from the firms including KKR & Co., TPG Capital The win underscored how activists are activists. Dealmaking declined 10 and Bain Capital LLC, people familiar shaking loose deals and making big percent globally in 2012 to $2.19 with the situation said Oct. 22. Elliott, returns, auguring a rise in mergers trillion, buoyed only by a strong which owns 8.1 percent of Houston- and acquisitions this year. Meister fourth quarter, according to data based BMC, will push again this year declined to comment. compiled by Bloomberg. for a sale of the software maker, said “We have seen a dramatic increase in one of the people, who asked not to the level of shareholder activism,” be identified because the situation is said Patrick Ramsey, co-head of Hedge Fund Involvement private. Americas M&A at Bank of America Activist investors, Mark Stouse, a spokesman for BMC, Corp., who predicts that activism will mostly hedge fund managers, were and Peter Truell, a spokesman for contribute to an increase in M&A this dubbed corporate raiders amid the Elliott, declined to comment. year. hostile takeovers of the 1980s. They With financing cheap and share prices tend to buy at least 5 percent of a ValueAct’s Moves sluggish, shareholder activists last company’s stock and flag their status Activist Jeffrey year started 219 campaigns against by disclosing their holding in a 13D Ubben, co-founder of ValueAct, companies they deemed filing with the Securities and Exchange moved against industrial equipment undervalued, a 22 percent increase Commission. maker Gardner Denver Inc. after it from 2011 and the most since 2008, While many hedge funds try their fired its CEO last July. The fund according to data from Norwalk, hand at activist investing, only a few bought a 5 percent stake for $64.5 Connecticut-based Factset Research focus on it as their core strategy, million and demanded the board sell Systems. including Icahn, Starboard Value LP, the company, citing the lack of strong Dan Loeb’s Third Point LLC and management. The Wayne, More Activism ValueAct Capital Partners LP. Pennsylvania-based company is More investor “Substantial amounts of money can talking with several private-equity dollars has meant more activism. be made through activism, but you firms, following the collapse of a deal Facing few high-yield alternatives, have to have a large amount of long- with SPX Corp. in December. …. investors including institutional funds term committed capital to be 7GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – info@geneva-partners.com – www.geneva-partners.com
  • 8. Loeb’s Third Point and Bill Ackman’s argument. sold, said Andrew Bednar, a partnerPershing Square Capital Management at New York advisory firm PerellaLP are now jousting over Herbalife Herbalife LBO? Weinberg Partners, which defendsLtd., a high-profile battle that may put companies against shareholderthe vitamin distributor in play for a “There is far more campaigns.takeover even though it’s not a likelihood of another LBO of Herbalife “There is often not a cause and effecttraditional activist fight. Calling the than any other headline risk,” he between activist action andcompany a pyramid scheme, Ackman wrote. management decisions,” Bednar said.has shorted the stock while Loeb has Loeb moved in a traditional activist Ralph Whitworth, co-founder ofbought an 8.2 percent stake, betting way on Jan. 9 when he bought a stake activist fund Relational Investors LLC,that Ackman is wrong -- as the Grand in Morgan Stanley and urged the bank responded: “It’s true thatCayman-based company has said. to address its fixed-income unit and management has often heard similarThe agitation could push Herbalife make board changes. He previously suggestions from bankers, investorsinto the hands of a private-equity pushed for an overhaul at Yahoo! Inc. or analysts, but an amazing numberfirm, said Robert Chapman, founder and won the ouster of Chairman Roy suffer from the ready, aim, aim, aimof hedge fund Chapman Capital Bostock. syndrome.”Partners. His fund placed “a monster Some of the activists are claiming toolong bet” on the company, he wrote much credit when they buy in toin a letter rejecting Ackman’s pyramid companies that are already ripe to be Source : BloombergA C T ICVTI ISVTI SA CATCIT IIVTIYT Y T V % Company Activist Position % Ticker Position Outstanding Source Date Name investor Change Portfolio Shares Icahn Associates 01-14- TRANSOCEAN RIGN VX 5,838,386 5,838,386 1.62 1.95 News Corp. 2013 Relational 01-14- 17,847,255 0 8.88 2 13D/A Investors LLC 2013 PMCS SIERRA PMCS US PMC gave Relational an option to appoint a director to the board after 8-1-2013, and Relational agreed not to certain standstill provisions lasting through the duration of the 1.5 year agreement. Relational said that it had "confidence in managements ability to execute on its stated strategy." ValueAct Capital 01-09- MOODYS MCO US 10,365,573 -6,970,000 4.65 6.97 13D/A Management LP 2013 COMMERCIAL Icahn Associates 01-08- CMC US 5,805,986 -2,127,489 4.99 0.66 13D/A METALS Corp. 2013 Third Point 01-03- HERBALIFE HLF US Management 8,900,000 8,900,000 8.24 4.99 13G 2013 Co. LLC COMMERCIAL Icahn Associates 01-02- CMC US 7,185,486 -747,989 6.17 0.78 13D METALS Corp. 2013Franck berlamont Jean-François Bassignot 8GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – info@geneva-partners.com – www.geneva-partners.com
  • 9. This newsletter has been prepared by, and is subject to the copyright of, Geneva Partners S.A. (Geneva Partners).This newsletter is confidential and has been furnished to the intended recipient solely for such recipient’s information and private useand may not be referred to, disclosed, reproduced or redistributed, in whole or in part, to any other person.This newsletter has been prepared on the basis of information provided to Geneva Partners and publicly available information. Thisinformation has not been independently verified by Geneva Partners. This newsletter does not constitute a due diligence review andshould not be construed as such. No representation or warranty as to this newsletters accuracy, completeness or correctness is madeand no reliance should be placed on the accuracy, completeness or correctness thereof. The information contained, and any opinionsexpressed, in this newsletter are subject to change at any time and Geneva Partners is under no obligation to inform the intendedrecipient or any other person of any such change.Geneva Partners accepts no responsibility or liability whatsoever in relation to this newsletter (including for any error or in relation tothe accuracy, completeness or correctness of this newsletter). The exclusion of liability provided herein shall protect Geneva Partners,its officers and employees in all circumstances.This newsletter is not intended to form the basis of any investment decision and does not constitute or form part of any offer to sell oran invitation to subscribe for, hold or purchase any securities or any other investment, and neither this newsletter nor anythingcontained herein shall form the basis of or be relied on in connection with any contract or commitment whatsoever. This newsletter isnot, and should not be treated or relied upon as investment research or a research recommendation under applicable regulatory rules.Geneva Partners is a member of the Swiss Association of Asset Managers (SAAM).Franck berlamont Jean-François Bassignot 9GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – info@geneva-partners.com – www.geneva-partners.com

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