Business

Things Activists Are Thankful To Receive When Fighting A Proxy Contest

Validation, respect, and support: three things every activist is thankful to receive when fighting a proxy contest. Yet, I’ve found a handful of activists that received these compliments only after the battle was fought and lost – something I’m sure they were not especially grateful for this Thanksgiving season. These activists lost fights in board-related activism situations, only to find their target’s share price plummet in the months following the vote. Whether or not these investors look at the outcome as a blessing in disguise is yet to be determined. Yet one might claim that a declining share price suggests the activists’ strategies (and in some cases, nominees) may have been the better pick after all.

Fighting A Proxy Contest
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Q3 hedge fund letters, conference, scoops etc

  1. Cation Capital saw shares in Crescent Point Energy plummet nearly 57% since the company’s annual meeting on May 4. Cation nominated a four-person slate to the board in April, only to lose the vote after Glass Lewis failed to support the first-time activist. Since then, Canada-based Crescent Point has terminated five top executives, including its former CEO Scott Saxberg, forced the resignation of Chairman Peter Bannister, cut costs by reducing its workforce, and abandoned its previously announced five-year organic growth plan for a strategy similar to the one presented by the activist (which included cost-saving initiatives and more transparency around cash flow, debt, costs, and dividends). Despite these changes, the company is still lagging peers in performance and shareholders are becoming increasingly concerned. Cation attributed the company’s downfall to a lack of confidence in leadership and told Activist Insight Monthly in November that it may return for a second spat with the firm next proxy season. If the activist can turn around the struggling oil and gas producer, it may have something even greater to be grateful for next year.
  2. Shareholders in Brookdale Senior Living re-elected the incumbent directors at the firm’s annual meeting on October 4, dealing a blow to Land and Buildings, which launched a campaign to unseat the board members. The activist contended that the company suffers from poor corporate governance, adding that recent governance changes were reflective of a company "seeking to do the bare minimum in order to appease shareholders." Jonathan Litt’s hedge fund also called for an aggressive asset monetization plan at the firm. Brookdale shares have lost nearly 16% of their value since the meeting, indicating that Land and Buildings may have been on to something when it contended the legacy board is incapable of maximizing shareholder value. Moreover, Macquarie Investment Management joined the fray in early November, urging Brookdale to consider a sale.
  3. Shares in Japanese entertainment company Faith have dropped more than 14% since the company defeated activist investor RMB Capital Management in a proxy contest on June 28. RMB started a proxy solicitation at Faith after its request for a board seat was rebuffed, but its nominee and portfolio manager, Masakazu Hosomizu, received only 20% of the vote at the annual meeting. At the time, the activist promised Activist Insight Online that it will stay invested and continue engaging with management. Although disheartening, the plummeting share price may encourage shareholders to support the activist in a future bout, noting the importance of shareholder representation and outside perspective on the company’s board.
  4. Stobart lost nearly half its value in the months following a proxy contest where it survived an attempt by former CEO Andrew Tinkler to oust Chairman Iain Ferguson. The ex-executive was fired from his position in June and the U.K.-based infrastructure and support services company started legal proceedings alleging “breach of contract and breach of fiduciary duty.” In turn, Tinkler initiated a defamation lawsuit against the company’s board. Despite defending Ferguson’s position on the board, Stobart shareholders also elected Tinkler as a director at the annual meeting on July 9. However, the board quickly removed Tinkler from the position, citing breach of fiduciary duty, a move Tinkler deemed “unlawful.” Since then, Stobart has appointed a new chief operating officer and non-executive director as well as committed to appoint a new non-executive chairman, senior independent director, and at least one more non-executive director ahead of its annual meeting in 2019. Nevertheless, shareholders are dissatisfied with the company, prompting the share price to plummet 48% since the 2018 annual meeting.

A handful of parties are interested in potentially acquiring Campbell Soup’s cookie brands, Arnott’s Biscuits and Kelsen Group. Bloomberg reported Monday that Mondelez International, Kraft Heinz, and Australian buyout firm Pacific Equity Partners are all considering bids for the brands, which may draw as much as $3 billion. However, no final decisions have been made and there is no certainty that the suitors will submit offers.

The news comes as Campbell disclosed better-than-expected first quarter earnings results, providing shareholders with the hope that its turnaround plan may pay off. Campbell said in August that it plans to sell its international and fresh food businesses following a three-month strategic review. The company also laid out plans to re-evaluate its portfolio brands.

The timing couldn’t be better for Campbell, which faces a proxy contest against Dan Loeb’s Third Point Partners for five seats on the board. The activist received partial backing from proxy adviser Glass Lewis and full support from Institutional Shareholder Services. Nonetheless, its push for change has been opposed by Campbell's founding family members, Bennett Dorrance and Mary Alice Dorrance Malone, who collectively own 41% of the shares.

The annual meeting next Thursday will reveal whether shareholders are prepared to take a leap of faith.


Quote of the week comes from Christen Ager Hanssen, chief executive of Custos Group, who opposes the sale of Scottish publisher Johnston Press to GoldenTree Asset Management in a pre-pack administration deal. The investor, who owned 25% of Johnston’s stock, said he will sue JPIMedia, a new company that owns the publisher’s assets. The activist’s stake is worth nothing after Johnston collapsed into administration last week.

“I am a warrior, a street fighter, and I am going to make them accountable. Custos will now fight to hold this despicable board accountable for their contemptible actions.”