Home Business A Look Inside Shareholder Activism: Elliott vs. Riverbed

A Look Inside Shareholder Activism: Elliott vs. Riverbed

Last week Elliott Management issued two amendments to its original 13D filing of November 8, 2013 that disclosed it had acquired a beneficial interest of 10.4% in networking equipment company Riverbed Technology, Inc. (NASDAQ:RVBD).

Elliott Management’s first amendment

The first amendment merely added the following: “Elliott has directly conveyed to the Issuer’s Board of Directors its views on the appropriate next steps the Issuer should take to increase shareholder value, and it looks forward to following up promptly.”

The media, however, construed that this filing also indicated Elliott had cut its stake in Riverbed Technology, Inc. (NASDAQ:RVBD) to 5.8% from 10.4% disclosed on November 8.

Then followed the second amendment from Elliott, which added the following: “Collectively, Elliott, Elliott International and EICA continue to have combined economic exposure and voting power in the Issuer of approximately 10.4% of the shares of Common Stock outstanding, as previously disclosed in the Reporting Persons’ Schedule 13D filed with the Securities and Exchange Commission on November 8, 2013.”

Dance between activist investors, companies a delicate one

It is clear, therefore, that Elliott’s holdings in Riverbed Technology, Inc. (NASDAQ:RVBD) are above the 10% threshold specified in Riverbed’s Stockholder Rights Plan (a.k.a “poison pill”) which it instituted on November 11, shortly after Elliott disclosed its stake.

Elliott Management believes that Riverbed is “significantly undervalued” considering its strengths and that it “can build on these strengths and immediately increase stockholder value by implementing certain value maximizing operational, capital structure and strategic review initiatives. Elliott believes that these initiatives will prudently, but significantly, provide a meaningful increase to the company’s valuation,” according to its initial 13D filing.

Riverbed Technology, Inc. (NASDAQ:RVBD) responded with a statement saying that, in addition to the operational improvements reported in its earnings release for the third quarter, it had “a strong track record of returning capital to shareholders, including our recent announcement of a $75 million accelerated share repurchase as a part of our current $500 million share repurchase program. Over the last eight quarters, Riverbed has returned approximately 70% of free cash flow to investors in the form of share repurchases.”

Riverbed implemented poison pill

Riverbed Technology, Inc. (NASDAQ:RVBD) also instituted a poison pill by way of a rights issue that would make it highly expensive to acquire the company through a hostile takeover move.

Jesse Cohn, portfolio manager at Elliott Management, responded by saying, “This stockholder-unfriendly reaction does not seem consistent with a receptive approach to fresh perspectives. However, Riverbed has provided us with some times next week for a meeting, and we are hoping that this will give us an opportunity to get this dialogue back on the right track.”

No further details are as yet available on these discussions.

However, according to a Bloomberg article on November 14, Riverbed was working with Goldman Sachs Group Inc (NYSE:GS) to help it study strategic options, and that private equity players were interested in a leveraged buyout of the company.