The real letter, which I suppose people should be more interested in, sees Fink effectively repeating last year’s entreaties for companies to define their purpose and pursue it, stressing a little more, perhaps, that this should be to the benefit of the bottom line and not to the detriment of profits. “[W]hen a company truly understands and expresses its purpose, it functions with the focus and strategic discipline that drive long-term profitability,” he writes.
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Aligned with this, but less remarked upon, was a letter from State Street Global Advisors earlier in the week. Substitute “purpose” for “corporate culture,” and you have a substantially similar approach; companies can differ, but their boards and senior managers must be increasingly fluent at explaining the intangible strengths of their businesses. Indeed, alongside old standards like governance, both State Street Global Advisors and BlackRock (and from my own observations, many others) will be focusing on the more easily defined “human capital management” in 2019 and beyond.
2019 is off to a bracing start. Many of the advisers I’ve spoken to this month say a lot is going on behind the scenes, which they usually do – but this time they really do sound tired.
At the same time, votes are scheduled for proxy contests in each of the next three weeks, giving us a first look at how campaigns might play out this year. For the record, between eight and 11 contests have either settled or gone to a vote worldwide in January or February over the last five years, according to Activist Insight Online – so the numbers are not especially high. Moreover, there hasn’t been a clear relationship between the first few volleys and how busy the rest of the year has been, suggesting that yearly trends are determined earlier – based on last year’s proxy season and market movements – or change rapidly throughout the year.
What can be said is that the action in 2019 is everywhere. Ashland Global Holdings has struck a deal with Neuberger Berman to lock in the 2.9% shareholders’ support in its proxy fight with Cruiser Capital Advisors at the cost of further board change. ValueAct Capital Partners won three board seats in Olympus and a cooperation agreement at Citigroup that could lead to a director appointment in time. Argyle Street Management has branched out into Taiwan, the fourth Asian country in which it has made a public demand.
Moreover, activism in Canada is popping. The country already saw record volumes last year and that momentum has apparently continued with private equity firm Waterton Global Resource Management using an activist strategy to oust a majority of the board at Hudbay Minerals and dissidents at Guyana Goldfields appealing to the Toronto Stock Exchange, asking the body to keep watch for “signs of entrenchment.”
Amid this frantic activity, the household names have been treading a steady pace. Starboard Value has Dollar Tree, potentially MGM Resorts, and Cars.com on the go, while Elliott Management, on the defensive at Telecom Italia, is broadening its private equity strategy to energy assets. Jana Partners, which is liquidating two funds, is typically a strong starter and may be tempted to remind corporates that it is still in the game with a new campaign ere long. One wonders also when Carl Icahn will enter the fray.
Quote of the week comes from Gannett suitor MNG Enterprises, which highlighted almost all the ways a company can attract an activist or – in this case – a quasi-activist hostile bid. While MNG has questions to answer about its approach (the link is to USA Today, a Gannett paper), which has been compared to “strip-mining,” Gannett itself is at a moment of high vulnerability.
“During this period, Gannett suffered from a series of value-destroying decisions made by an unfocused leadership team – overpaying for a string of non-core aspirational digital deals and pursuing an ill-fated hostile for Tribune Publishing, all while Gannett’s core revenue, EBITDA, margins and Free Cash Flow continue to decline. With Gannett’s CEO departing by May and its key digital executive leaving later this month, there’s now an even greater leadership void.”