Report: Shareholder Activism Jan-June 2019

Activist Insight on Shareholder Activism and Engagement in the first half of 2019:

The first six months of 2019 have provided plenty of interesting activist activity in what seems like a longer proxy season than last year’s. Late-season fights at HomeStreet and EQT (this month’s campaign in focus) have kept us on our toes, as have a slew of Japanese contests at Lixil, Tosho Printing, and Kyushu Railways.

Indeed, this proxy season was a global one, with activist and short seller campaigns hitting almost every continent (no one has made it to Antarctica yet). Elliott Management led the way in Europe, with investments in France’s Pernod Ricard, Germany’s SAP, and Energias de Portugal. The activist also launched a proxy contest at South Korea’s Hyundai, the first major Asian fight of the season. Elsewhere, Third Point Partners revisited old target Sony and ValueAct Capital Partners gained board seats at Japan’s Olympus (the activist is going abroad more, with another investment at U.K.-based Merlin Entertainments). Concerned shareholders targeted Australian firms like Smiles Inclusive, TikForce, and DataDot Technologies, and short sellers looked as far as Africa-focused Jumia Technologies and Costa Rica’s Establishment Labs.

This year there were plenty of settlements – notably those at Bed Bath & Beyond and MiMedx – and a push against deals as Starboard Value denounced Bristol-Myers Squibb’s acquisition of Celgene, Carl Icahn opposed Occidental Petroleum’s bid for Anadarko Petroleum and may launch a proxy fight, while Third Point Partners and Pershing Square Capital Management dislike Unitech Technologies’ proposed merger with Raytheon. Excluding a day-long board seat campaign at Marriott International, the three companies were the largest by market cap targeted by
dedicated activists this year.

The report notes:

2019 was a seminal proxy season with respect to board diversity enhancement. Institutional Shareholder Services (ISS) and Glass Lewis sent clear messages regarding the heightened importance of diversity and their desire to promote real change when they updated their board diversity guidelines last November.

[O]btaining board seats via settlement agreements has continued to be the “bread and butter” of activism during 2019…Olshan alone has negotiated 30 settlement agreements resulting in over 55 new directors being seated this proxy season.

The report also includes an interview with FTI’s Jay Frankl. He notes that “often capital allocation is the primary issue” for activists and “as so much capital has gravitated to passive funds, active managers need to find ways to earn their fees.”

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