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

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Top activist stories 2

  1. 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 December 17th,2012 PLEASE SCROLL DOWN FOR ARTICLES Buffett buyback – the only bargain If the sage can’t find mispricings in big-cap stocks other than Berkshire, who can ? […] Danone and DE Master Blenders Is it too late to join the buffet ? […] Ingersoll Plans Security Spinoff After Peltz Breakup PushIngersoll-Rand Plc (IR) plans to spin off its commercial and residential security businesses within the next yearafter hedge-fund manager Nelson Peltz pressed for a breakup to boost shareholder value. […] Illinois Tool to Sell Units After Whitworth Divestiture PushIllinois Tool Works Inc. plans to sell commodity-tied businesses that make up a quarter of the company afterRalph Whitworth’s Relational Investors LLC took a stake earlier this year and pushed for moves to boost profit[…] Knight Bemoans Xstrata Influence on Glencore Board AppointmentsKnight Vinke Asset Management LLC, an Xstrata Plc investor that opposed its $33 billion takeover by GlencoreInternational Plc, said it would be better if departing Xstrata directors weren’t allowed to choose theirsuccessors […] Vivendi appoints tycoon Vincent Bolloré to boardVincent Bolloré, a French industrialist and tycoon, will join the board of entertainment-to-telecom groupVivendi in which he is the second-biggest shareholder […] Carl Icahn busiest shareholder activist in 2012Carl Icahn led a busy year for shareholder activism that saw well over 100 different companies around theworld come under fire for weak performance […] Activist Investor Elliott Boosts Stake in Emulex to 11%Elliott Management Corp., the activist investor that pushed Novell Inc. to sell itself in 2010, has amassed morethan an 11% stake in Emulex […] Franck Berlamont Jean-François Bassignot 1GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – –
  2. 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 December 17th,2012 Buffett buyback – the only bargainDecember 10th, 2012 and whole businesses at deep shareholder, estimates the intrinsic discounts instead. The company still value of the shares to be about If the sage can’t find mispricings in won’t buy back stock if its cash falls $180,000; they trade at $134,000.big-cap stocks other than Berkshire, beneath $20bn and Berkshire is not So perhaps Buffett is doing for hiswho can? obliged to purchase Berkshire shares investors what they hope he will – if better opportunities emerge – the finding juicy opportunities. But the Why do you give your money to advantage of buybacks over fact that Berkshire raised its value forWarren Buffett? Simple: he is a better dividends. But the company was repurchases may suggest somethingstock picker than you are. The tricky sitting on $48bn of zero-yielding cash quite depressing about the prospectspart comes when the best stock he as of the end of September. And, for companies large enough forcan find is his own. Berkshire before Wednesday’s announcement, Berkshire to buy. In October, he saidHathaway on Wednesday said it had the shares were trailing the S&P 500 he was “salivating” over a bigbought back $1.2bn of shares from a by about 2 per cent for the year. acquisition but revealed that twolong-term shareholder. And the One way to calculate Berkshire’s $20bn deals fell through this yearcompany raised its valuation limit for value is by applying a market multiple over price. If Buffett can’t findrepurchases to 20 per cent above to the pre-tax earnings of Berkshire’s mispricings in big-cap stocks otherbook value from the 10 per cent limit wholly owned companies, then than Berkshire, what, dear investor,set last year, when the first buybacks adding the market value of its makes you think you can?were executed. investments. Using that formula and Mr Buffett historically has avoided its own estimates as of the end of thebuybacks, preferring to buy securities third quarter, T2 Partners, a Berkshire Source :Financial Times Danone and DE Master BlendersDecember 14th, 2012 Danone announced a €200m cost eliminate, margin declines during the saving plan on Thursday. In its case next two years. Having taken his Here’s a recipe to consider as you the stake-builder is Nelson Peltz, the stake, Mr Peltz is also pushing foreat your breakfast. Take an activist US investor who owns 1 per cash returns to shareholders, whichunderperforming consumer goods cent of the shares. Both companies could stymie future in Europe. Add in some deny that the investors have anything Benckiser’s intentions for DEstake-building by a high-profile to do with the changes. Still, their Master Blenders are far more vague.investor. Leave to mature for a few shares have done nicely. DE Master But bear in mind, first, that it has builtweeks or months and, hey presto, the Blenders is up 6 per cent since the its stake to 15 per cent, while makingcompany makes big changes. spin-off despite its problems, while moves to reduce its holdings The recipe has turned out well at Danone is up 5 per cent since Mr elsewhere. Second, it bought Peet’sboth DE Master Blenders and Danone. Peltz took his stake in November. Coffee & Tea in the US for $1bn inOn Monday the former, a coffee Is it too late to join the buffet? July. A combination of the twomaker, said its chief executive would Perhaps not. DE Master Blenders businesses would not be out of theleave. The company has suffered a looks particularly tasty. Danone’s cost question. On 19 times forecastseries of problems since it was spun savings come in the face of tough earnings, DE shares are no from Sara Lee in June. The stake- trading conditions in Europe, which Decent coffee is rarely cheap.builder in this case is Joh A Benckiser, accounts for more than half of itsa holding company that also owns sales. Morgan Stanley says that thestakes in Coty and Reckitt Benckiser. savings will limit, but not entirely Source : Financial Times 2GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – –
  3. 3. Ingersoll Plans Security Spinoff After Peltz Breakup PushBy David Welch & Brooke Sutherland business, which really has very few Swords, Ireland-based company said.December 10th, 2012 synergies with the rest of the Ingersoll said it would repurchase as business, that’s a great step and likely much as $2 billion of existing shares Ingersoll-Rand Plc (IR) plans to spin to allow that business on its own to starting in 2013 and plans tooff its commercial and residential seek some potential buyers,” Steven complete the buyback in the firstsecurity businesses within the next Winoker, a New York-based analyst at three months of 2014. The companyyear after hedge-fund manager Sanford C. Bernstein & Co., said in a also raised its quarterly dividend to 21Nelson Peltz pressed for a breakup to telephone interview. "Its an industry cents a share, payable March 28 toboost shareholder value. that continues to consolidate.” investors holding stock as of March Ingersoll’s strategy, which also Some heating and air-conditioning 12.includes a stock buyback and a 31% companies have an enterprise value Peltz suggested in a regulatorydividend boost, marks the of about 9 times earnings, and strong filing in August, the same month heculmination of talks with Peltz’s Trian security firms have a multiple of joined the board, that the maker ofFund Management LP, which about 11 on the same basis, Julian air-conditioning systems, climate-disclosed a 7.3% stake in May. Peltz Mitchell, a New York-based analyst control technologies and securityhad threatened a proxy battle, a with Credit Suisse AG, said in a note systems be split into three companies.person familiar with the matter said. to clients. With Ingersoll’s current Separating the security businesses, The new security company have multiple of 8, a split may mean the with brands such as Schlage andabout $2 billion in yearly sales, while separate businesses “yield a closing of Kryptonite, will be tax-free forthe existing Ingersoll will generate this valuation discrepancy over time,” shareholders, the company said.about $12 billion, retaining climate- he said. Ingersoll moved its headquarters tocontrol operations with brands such Bermuda from New Jersey in 2001as Trane and American Standard. The Structure, Management and then to Ireland in 2009, in partmove will let investors value the because of tax laws.different businesses separately, said […] Completion of the spinoff willChief Executive Officer Michael W. require more work on structure andLamach, who will stay at Ingersoll. management, and those plans will be “In separating out the security subject to board approval, the Source : Bloomberg Illinois Tool to Sell Units After Whitworth Divestiture PushBy Thomas Black necessary to sustain meaningful according to the presentation.[…]December 14th, 2012 differentiation.” Relational’s 3.1% stake made it the Today’s divestiture plan builds on seventh-largest shareholder as of Illinois Tool Works Inc. plans to sell Illinois Tool’s decision in August to sell Sept. 30, based on data compiled bycommodity-tied businesses that make a 51% stake in its decorative-surfaces Bloomberg.up a quarter of the company after division for $1.1 billion. Relational Illinois Tool reported $17.8 billion inRalph Whitworth’s Relational disclosed its holding in January and sales in 2011Investors LLC took a stake earlier this said it had begun talks withyear and pushed for moves to boost management to increase earnings byprofit. paring the number of operating units The units will be divested “at the at the maker of welding equipment,appropriate time” over the next few construction supplies and auto parts.years, the Glenview, Illinois-based Illinois Tool’s plan also calls forcompany said today in a slide consolidating business units, reducingpresentation for analysts and the number to 150 from 800 whileinvestors. The businesses lack “strong increasing the average revenue fromcore competitive advantages each to $100 million from $25 million, Source : Bloomberg Franck Berlamont Jean-François Bassignot 3GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – –
  4. 4. Knight Bemoans Xstrata Influence on Glencore Board AppointmentsBy Jesse Riseborough 70 managers. Bond said he planned to Mick Davis is set to leave theDecember 13th, 2012 depart the group once the takeover company within six months. was complete and once the three- “There can be no doubt as to who Knight Vinke Asset Management man nominations committee that he has come out on top,”LLC, an Xstrata Plc investor that was chairman of selected a Knight said. “Whether Xstrata’sopposed its $33 billion takeover by replacement. shareholders like it or not, their BoardGlencore International Plc, said it A Glencore-dominated committee has handed full control of Xstrata towould be better if departing Xstrata may “aggravate concerns of those Glencore and they now only have twodirectors weren’t allowed to choose who question Glencore’s corporate real choices: to seek a majortheir successors. governance,” Knight wrote in the reconstruction of the Board through Xstrata’s non-executive directors letter first published in the Financial direct negotiation; or to sell their“failed adequately to represent their Times. They must “act decisively, shares.”shareholders in the negotiations that quickly and with the interests of all Shareholders in Zug, Switzerland-led to the merger with Glencore and shareholders clearly in their sights. based Xstrata voted Nov.are therefore not the right individuals Their first task will be to hire a new 20 to approve this year’s biggestto hold the management of Glencore Chairman who shares this vision.” takeover, combining the company’sXstrata to account,” Knight Vinke Glencore and Xstrata officials coal, copper, nickel and zinc miningChief Executive Officer Eric Knight declined to comment. assets with Glencore’s commoditieswrote in a letter. trading to create the world’s fourth-“It would be unfortunate if these Reid Going biggest mining company.directors were allowed to select their Knight Vinke owns 16 millionown successors,” Knight said. Two weeks after Bond announced shares in Xstrata and 2 million shares Xstrata Chairman John Bond, his intention to resign, Xstrata’s Chief in Glencore.scheduled to take on the role in the Financial Officer Trevor Reid alsocombined group, quit last month on decided against taking on the samethe day shareholders defied his role in the group and instead wouldboard’s recommendation to approve work as a consultant to the newbonuses for about company for six months. Xstrata CEO Source : Bloomberg Vivendi appoints tycoon Vincent Bolloré to boardBy Laurence Frost and Leila Abboud Morocco, in an effort to reduce debt Vivendis board.December 13th, 2012 and streamline a conglomerate Cagnis name had circulated among structure that has weighed down the people close to the group over the Vincent Bollore, a French shares. summer as a potential candidate toindustrialist and tycoon, will join the Bollore is also expected by replace the prior chief executive, whoboard of entertainment-to-telecom investors to back Vivendis effort, now left in June over disagreements aboutgroup Vivendi in which he is the led by chairman Jean-Rene Fourtou, the groups direction.second-biggest shareholder. to reduce its exposure to the capital-Bollores appointment will need to be intensive telecom business, whileratified at the companys next beefing up in music and pay-TV.shareholder meeting, Vivendi said in a Bollore will replace outgoingstatement on Thursday. director Jean-Yves Charlier, who was The appointment, which had been named director of the groupsexpected and is likely to be approved telecom activities in October, Vivendiby shareholders, may stoke investors said.hopes that Bollore can influence Pascal Cagni, the former generalVivendis ongoing strategy review. manager for Apple in Europe, Middle Vivendi is working on selling assets, East, India and Africa, was alsoincluding telecom units in Brazil and appointed as an attending director of Source : Reuters 4GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – –
  5. 5. Carl Icahn busiest shareholder activist in 2012By David Pett takeover bid. “Activists clearly see boardDecember 11th, 2012 Other notable activists this year representation as an integral part of included Starboard Value LP, Clinton pursuing a successful campaign for Carl Icahn led a busy year for Group Inc., Trian Fund Management change at a company, said Nickshareholder activism that saw well LP, Value Act Capital Partners Inc. and Arnott, co-founder at Activist Insight.over 100 different companies around Pershing Square Capital Management “It’s an important way to ensure theythe world come under fire for weak LP led by Bill Ackman, who won a have a voice in company decisionsperformance, says new research from high-profile proxy contest against and to assist in the implementation ofActivist Insight, a London-based Canadian Pacific Railway Ltd. their strategies.”company that provides global The research showed that activistsinformation on activist investment. succeeded in having a nominee(s)The research showed 73 different elected onto the board in more than 3activists publicly engaged with 135 out of every 4 occasions and of thedifferent companies in in 2012, with 135 activist campaigns identified,41% of activists seeking to gain board there have been 21 proxy contests.representation either through proxy In six of these proxy contests, anaccess granted by the company or by activist submitted regulatory proxylaunching a proxy contest. filings but then later withdrew. As for Mr. Icahn was the most prominent the remaining 15 proxy fights,global activist this year, having gained activists had their nominees join theboard representation at 5 companies, board on seven occasions, while beingincluding Navistar International Corp, rejected on five occasions.Chesapeake Energy and WebMD Three contests, meanwhile, are yetHealth Corp. He was less successful, to be re-solved due to delayedhowever, at Oshkosh Corp. and shareholder meetings and ongoingrecently withdrew after a failed legal proceedings. Source : Financial Post Franck Berlamont Jean-François Bassignot Activist Investor Elliott Boosts Stake in Emulex to 11% By Serena Saitto based company. Software Inc. for several months to December 14th, 2012 Peter Truell, a spokesman for consider a sale, resulting in a $1 Elliott, and Katherine Lane, a billion share buyback announced Oct. Elliott Management Corp., the spokeswoman for Emulex, declined to 31. The activist investor amassed a activist investor that pushed Novell comment. stake in Brocade Communications Inc. to sell itself in 2010, has amassed Emulex has a market capitalization of Systems Inc. as of August 2011, and a more than an 11% stake in Emulex about $597 million.[…] year later Chief Executive Officer Corp. (ELX), a provider of converged Fund managers sometimes use Michael Klayko said he would step networking solutions for data centers. their status as shareholders to urge down after trying to sell the company Elliott, the New York-based hedge- management to shift strategy or look for more than two years. fund investor, said in a regulatory for a buyout. Emulex adopted a so- filing yesterday it bought an called poison pill in 2009 to fend off additional 1.34 % stake in the Broadcom Corp.’s takeover approach. company through derivative Elliott made an unsolicited $2 billion agreements. Elliott reported a 9.96% offer for Novell after building an 8.5% stake in Emulex with a 13D filing Nov. stake in the Linux software maker. 23, becoming the largest shareholder Novell was later bought by and gaining an opening to agitate for Attachmate Corp. for $2.2 billion. change at the Costa Mesa, California- More recently, Elliott pressed BMC Source : Bloomberg 5GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – –
  6. 6. A 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 OSHKOSH OSK US 4,263,043 -654,219 4.7 1.0 13D/A 12-14-2012 Corp. Icahn Associates OSHKOSH OSK US 4,917,262 -1,290,809 5.4 1.2 13D/A 12-13-2012 Corp. Icahn Associates 11,845,167 0 14.9 2.4 13D/A 12-12-2012 Corp. NAVISTAR NAV US Icahn employee Samuel Merksamer appointed to the board, as the mutually agreed-upon designee with MHR Fund Management, pursuant to the October 2012 settlement agreement. Icahn Associates OSHKOSH OSK US 6,208,071 -2,457,189 6.8 1.5 13D/A 12-10-2012 Corp. ValueAct Capital 31,303,362 1,000,000 6.3 15 13D/A 12-07-2012 Management LP ADOBE SYSTEMS ADBE US ValueAct partner Kelly J. Barlow appointed to the board. ValueAct agreed to a standstill agreement lasting through the 2014 annual meeting. Icahn Associates 7,440,933 -1,224,327 8.1 1.8 13D/A 12-05-2012 Corp. OSHKOSH OSK US Icahn withdrew his tender offer after failing to receive enough support. Icahn Associates FEDERAL MOGUL FDML US 76,697,804 443,449 77.6 7.3 13D/A 12-04-2012 Corp.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). 6GENEVA PARTNERS – 33 Quai Wilson – 1201 Geneva – Switzerland – Tel. : +41/22 906 95 95 – –