Activist hedge fund Elliott Management has unveiled a 7.5% stake in Swedish video surveillance firm Axis AB in a move that could force Canon to raise its bid for the firm. The stake disclosure was made in a filing with Sweden’s Financial Supervisory Authority.
Canon’s plan to acquire Axis
In February, Japan’s Canon announced plans to acquire Axis AB for ¥333.7 billion ($2.8 billion) in an effort to expand into surveillance products, which are outside its traditional camera and office equipment offerings. In recent years, Canon’s sales from its traditional business have plummeted.
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Axis’ board recommended that shareholders accept Canon’s offer, which could translate to 340 Swedish kroner ($40.02) a share.
Canon’s proposal requires acceptance from at least 90% of Axis shareholders. After Elliott disclosed its 7.5% stake, Canon might need to persuade the hedge fund to support the offer in order to reach the required 90% threshold. Alternatively, Elliott Management would need to enhance its holdings in Axis to over 10% or partner with other shareholders to thwart Canon’s offer.
Elliott Management stake could force Canon to raise bid
According to people familiar with the matter, the activist hedge fund, which is run by founder Paul Singer, could lobby for a higher price for Canon’s acquisition of Axis. Elliott has a history of routinely buying stakes in companies involved in takeovers to drive the price of an outside firm’s offer up.
In 2011, Elliott Management forced U.S. chemicals company DuPont to raise its bid for Danish food company Danisco. DuPont sweetened its bid to 700 Danish kroner ($139) a share from 665 kroner a share in a $6.64 billion deal. However, as reported by ValueWalk, the acquisition turned out to be an expensive affair for DuPont, as since the acquisition, Danisco’s organic revenue has plummeted by one-third and margins dropped to approximately half of what they were in 2010.
Last year, Elliott Management forced drug marketer McKesson to sweeten its offer for German drug distribution rival Celescio. However, Elliott was accused of receiving a higher price in the takeover battle than other investors. It was reported that when McKesson purchased Celescio, it paid more to Elliott Management than other bondholders. The report indicated that Elliott Management was paid €31 for convertible bonds, while other bondholders were paid just €23.50 in the takeover of the public company.