Monthly Activism Snapshot – January 2017

Welcome to the January issue of our newsletter on shareholder activism. Read all about the key activist campaigns that took place in this month’s issue of our newsletter here.

The Month in Review

Eon urged to spin-off power distribution business

Activist investor Knight Vinke has renewed calls for German utility Eon to spin off its power distribution business. Eric Knight, chief executive of Knight Vinke, said Eon’s regional electricity and natural gas grids would be highly attractive if hived off into a standalone company. Financial Times, 9th January 2017

Activist hedge funds profit amid market volatility

The two largest activist investors in Europe, Cevian Capital and The Children’s Investment Fund, were among the best performing fund managers last year even as stockpicking rivals struggled amid volatility in markets. Cevian, which holds stakes in ABB, RSA and ThyssenKrupp, returned 19.4 per cent, while TCI, Sir Chris Hohn’s hedge fund, made 13.5 per cent, according to people familiar with the funds. Financial Times, 11th January 2017

Paulson calls for Premier Foods to be sold after profit warning

US hedge fund Paulson & Co, until recently Premier Foods’ second-biggest investor, has launched a blistering attack on the company after it blamed commodity prices and a weak pound for a profit warning that sent its shares tumbling. Paulson accused Premier of being “grossly mismanaged” and called on the board to put the company up for sale. Financial Times, 18th January 2017 

Schroders plots £5bn Bovis tie-up with rival

One of Bovis Homes’ top investors is pushing for a £5bn merger with a rival after the housebuilder’s chief executive resigned over a shock profit warning. Schroder Investment Management, Bovis’s second-biggest shareholder with a stake of about 6.4%, is understood to have written to Berkeley Group, a bigger competitor, urging it to consider an all-share merger. The Sunday Times, 22nd January 2017

Bowleven faces investor call for strategy overhaul and new board

Bowleven is facing calls to oust the majority of its board and overhaul its strategy by a Monaco-based investor that has amassed a 13 per cent stake in the Africa-focused oil and gas explorer. Crown Ocean Capital, an investment group, is pressing Bowleven to remove six members of its seven-strong board, including CEO Kevin Hart and chairman Billy Allan. Financial Times, 24th January 2017 

Activist hedge fund set to take over troubled media company

JSpear Point, the activist hedge fund run by Ron Bienvenu, is set to take over Salon Media, with Silicon Valley billionaire John Warnock likely to relinquish his role as chairman of the digital publisher. Prominent investor Bill Hambrecht, who owns 32% of the troubled media website following a debt-for-equity swap in November, is expected to stay on as a director post the deal. The New York Post, 26th January 2017

French Connection in talks to sell flagship store to rival Under Armour

French Connection is in talks to sell its flagship Oxford Street store to American sportswear giant Under Armour. The proposed sale comes as investors in the fashion brand have called for an overhaul of the company’s board and urgent measures to revive the flagging chain. The company reported pre-tax losses of £3.5m, growing on the £1.6m loss the previous year. The Sunday Telegraph, 29th January 2017

Activist fund Oasis pushes to reprice PanaHome valuation

An activist fund with a history of pressuring Japanese management has emerged as the largest minority shareholder of PanaHome, the housebuilder at the heart of a spiralling proxy battle and pivotal test of Japan’s corporate governance code. Oasis Capital holds 4.83 per cent of PanaHome, putting the fund ahead of Japan’s Government Pension Investment Fund on the shareholder register and creating what other minority investors have called a “focal point” for applying pressure to management. Financial Times, 29th January 2017

Investors Press Arconic to Oust CEO Klaus Kleinfeld, Months After Alcoa Separation

Several key shareholders of US aerospace and automotive parts maker Arconic, including activist investor Elliott Management, are pressing the company to find a replacement for chief executive Klaus Kleinfeld, amid concerns over the firm’s financial performance. The Wall Street Journal, 30th January 2017

US investor class action cases against companies hit 20-year high

Class action lawsuits filed by investors in US federal courts hit their highest level in 20 years in 2016, propelled by a fourfold increase in complaints related to mergers and acquisitions. Last year, 270 securities class actions, in which a shareholder claims to represent all the investors in a similar position, were filed in federal courts. That is 82 more than were filed a year earlier and a 44 per cent boost above the 1997-2015 historical average. Financial Times, 31st January 2017

The Big Picture

Kate Spade: seller’s remorse

Activists love to break up companies. Disparate appendages can fetch nice acquisition prices; what is left can trade more cleanly. Not in the case of Kate Spade. The boutique fashion chain’s shares have halved over the past two years despite shedding a series of extraneous brands. A dissident shareholder who wants the company sold appears to be getting its wish as a sale process has emerged. Other investors should dig in and resist the move. FT Lex, 2nd January 2017

Sports Direct chairman should keep his pledge and save some dignity

Four months after Sports Direct chairman Keith Hellawell offered to resign, outside shareholders have once again voted against his re-election. But it appears that Sports Direct founder Mike Ashley would like Hellawell to renege on his promise. Given his lamentable record and two votes of no-confidence by outside shareholders the only honourable course for Hellawell is to stick to his pledge to quit if he gets a third vote of no-confidence. The Guardian, 5th January 2017

Italy is a flytrap for activist investors

The euro zone’s third-biggest economy offers some ideal conditions for shareholder activism – and some great reasons to stay away. A fight between Elliott Management and railway-signal maker Ansaldo STS shows plenty of both. Breakingviews, 19th January 2017

Corporate America employs new tactics to avoid Trump ire

From the White House’s embrace of alternative facts to Donald Trump’s Twitter feed, a new crop of risks has corporate America on edge. Fearful of becoming the next target of the US president’s ire, multinationals are turning to advisers they would usually bring in to fight off activist investors and tailoring their media messages to fit the new president’s agenda. Financial Times, 27th January 2017

It’s a killer argument for pay restraint

Imperial Brands have refused to increase their chief executive Alison Cooper’s pay packet. While Imperial’s share price drop could be one reason for shareholders revolting, another could be that one of its top investors is BlackRock who recently wrote to Britain’s top 300 companies, warning them to cut pay rises. The Times, 27th January 2017

Frontline/DHT: pump it up

Norwegian oil tankers group Frontline launched a bid for rival DHT and bought 16 per cent of the US-quoted company’s shares in the market. DHT responded by instigating a poison pill takeover defence. FT Lex, 30th January 2017

Big investors need more than money to force change

A group of large U.S. and international institutional investors and asset managers with a total of $17 trillion of assets under management launched the Investor Stewardship Group. The goal is to “establish a framework of basic standards of investment stewardship and corporate government for U.S. institutional investor and boardroom conduct.” Breakingviews, 31st January 2017

The Month in Numbers

13% The percentage of shares investment group Crown Ocean Capital owns in Bowleven, Financial Times 

£5bn The value of the all-share merger activist Schroder Investment Management is pushing for between Bovis Homes and Berkeley Group, The Sunday Times 

$17 trillion The amount in assets overseen by the 16 money managers launching the Investor Stewardship Group, Breakingviews

16% The percentage of shares Norwegian group Frontline bought in rival DHT, FT Lex