A Monthly Snapshot – December 2016

Welcome to the December 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

Activist Fund Has Tough Sell to Get Rockwell to Rethink Deal

Jeff Smith’s activist hedge fund Starboard Value has urged US aircraft-parts maker Rockwell Collins to abandon its proposed $6.4bn merger with rival B/E Aerospace and consider selling itself instead. Bloomberg reported that at least three other large investors in Rockwell are also rooting for a sale of the firm instead of the B/E Aerospace deal. The New York Times, 1st December 2016

As Avianca Weighs Bids, Hedge Fund Plays Unusual Role

The board of Avianca is to take a decision on the takeover bids tabled by Delta Air Lines, United Airlines and Copa Airlines of Panama, which value the Latin American airline giant at between $1.9bn and $2bn, implying a near-150% premium to its share price. Hedge fund Elliott Management, which faces a potential default on hundreds of millions of dollars-worth of loans offered to Avianca, is believed to be acting as a mediator for the takeover negotiations. The New York Times, 5th December 2016

Sports Direct chairman seeks shareholder support as profits tumble

The future of Sports Direct’s chairman, Keith Hellawell, will be voted on for the second time in four months in January. A special meeting has been called by the retailer after 57 per cent of independent shareholders failed to support Hellawell at the annual shareholder meeting in September. The Guardian, 9th December 2016 

Disney under siege

Euro-Disney is at war with its investors over allegations it has paid out nearly 1bn in excess charges for royalties and licenses to majority owner Walt Disney. French hedge fund Charity Investment Asset Management is leading a cluster of investors owning about 3% of Paris-listed Euro Disney, claiming Walt Disney has siphoned off the cash and prevented the resort operator from making a profit. The Times, 11th December 2016

Bank of Cyprus Shareholders Are Set to Approve LSE Listing

Shareholders of the Bank of Cyprus are expected to approve the listing of the company’s shares on the London Stock Exchange, marking a milestone in the recovery of the bank as well as the country of Cyprus. The largest lender in Cyprus is still burdened by a mountain of non-performing assets, despite restructuring efforts since its rescue in 2013. The Wall Street Journal, 12th December 2016

Bolloré and Berlusconi play cat and mouse over Mediaset

Vivendi, the French media group, has amassed a fifth of Mediaset, an Italian media group controlled by the family of Silvio Berlusconi, through a series of trades. The move — described by Mr Berlusconi as a “hostile takeover” — sets up a battle of the two media tycoons for the future of Italy’s biggest commercial broadcaster. Financial Times, 14th December 2016

Chipotle Reaches Settlement With Ackman, Names Four New Directors

William Ackman and Chipotle Mexican Grill Inc. reached a settlement that gives the activist investor two seats on Chipotle’s board. In exchange for the board seats, Mr. Ackman’s Pershing Square Capital Management LP, which owns just under 10% of Chipotle’s shares, agreed to not comment publicly on the company for two years. The row comes as Chipotle has recently battled food-safety concerns. The Wall Street Journal, 16th December 2016

American hedge fund drove Murdoch’s advance on Sky

US hedge fund ValueAct Capital, one of 21st Century Fox’s biggest investors with a 6.3% stake, is one of the chief protagonists supporting the latter’s £11.7bn bid for UK satellite operator Sky. It has emerged that Jeffrey Ubben, the San Francisco-based activist fund’s founder and a director at the US media giant, had urged Fox to consider either selling its 39% stake in Sky or launch a full takeover bid for it. The Sunday Telegraph, 17th December 2016

Kate Spade & Co. Explores Sale

Kate Spade & Co. is exploring a sale of the company, according to people familiar with the matter, after coming under pressure from an activist shareholder. In November, activist hedge fund Caerus Investors disclosed a small stake in Kate Spade and called for the company to consider a sale. It could attract a number of potential buyers, such as Coach Inc., or luxury accessory makers, foreign buyers and buyout firms, in part because of its manageable size. The Wall Street Journal, 28th December 2016

The Big Picture

Mediaset / Vivendi: rebooting Italy

Football is a game of haves and have-nots. Those with the commitment and the cash get the goals. Italy’s media mogul Silvio Berlusconi could once muster both for his beloved AC Milan. No more; he has sold it to Chinese investors. He may well lose control of his other prized asset Milan-listed Mediaset, too. Vivendi, the French media company, already embroiled in a lawsuit with Mediaset, has caught the Italian group’s defence napping. FT Lex, 13th December 2016

Vanke: to our sponsors

Rejoice at the demise of a poorly motivated deal. China Vanke, the developer listed in Hong Kong and Shenzhen, said it will not after all buy assets from Shenzhen Metro in exchange for shares. The deal was touted in March 2016 as a means to ensure Vanke’s future growth. It was, rather, designed to bring a large, friendly shareholder on to the register to tip the balance in a battle for control. FT Lex, 19th December 2016

The Month in Numbers

$6.4 bn The amount the merger of Rockwell Collins with B/E Aerospace is worth, The New York Times

3% The percentage of shares investors led by Charity Investment Asset Management own of Euro Disney, The Times 

£11.7 bn The amount of 21st Century Fox’s bid for UK satellite operator Sky, The Sunday Telegraph