While annual meetings are mostly still some way off, proxy season is approaching the “put up or shut up” stage of the year.
With most nomination deadlines approaching, some guests at the Tulane M&A law conference in New Orleans, or the Council of Institutional Investors’ Spring Conference in Washington D.C., will undoubtedly be stuck in their hotel rooms.
Seth Klarman: Investing Is Art First, Craft Second And Science Third
While the law of small numbers magnifies changes and the period covered is far from scientific, if activism in the U.S. is going to keep us busy, activists had better hurry. So far, Activist Insight Online has tracked public gain board representation demands at 22 U.S. companies between January 1 and February 19, representing a 23% decline on the 27 tracked in the same period last year, another slow start.
The dry spell extends to other areas too. Activists have pushed for the sale of nine U.S. companies, compared to 13 in the first few months of 2019 (compared to five elsewhere in the world in both 2019 and 2020 up to Feb 19). Companies where a CEO or specific board member was targeted were down 41% globally and by half in the U.S.
Share Repurchases May Get A Boost As Japanese Proxy Season Approaches
Curiously, demands for dividends or share repurchases have plateaued in the U.S. and are down only modestly worldwide (a figure that may be boosted as Japanese proxy season approaches). A January review of shareholder activism by Barclays’ investment bank suggested that activists had targeted stocks with higher dividend yields since 2014, reflecting concern about the durability of the economic cycle. Elliott Management, with positions in AT&T and several utilities, was singled out.
Next week does present some crucial deadlines in the form of a shareholder vote on Instructure’s revised take-private deal, and Enzo Biochem’s adjourned shareholder meeting. Instructure asked private equity firm Thoma Bravo to up its offer for the education software company, while CEO Dan Goldsmith offered his resignation (he had already foregone a portion of his stock options), having become a focal point for criticism from activists who thought the deal undervalued the company. Enzo, which is seeking shareholder approval to expand the size of its board, is already fighting a lawsuit from Harbert Management, which looks odds on to win two board seats.
Quote of the week comes from a very pleased Barington Capital CEO, Jim Mitarotonda. On Thursday, L Brands announced that it was selling a majority stake in its Victoria’s Secret and Pink chains, while Chairman and CEO Les Wexner plans to step down. Announcing an extension to an advisory agreement between the activist and the company, Mitarotonda said:
"We are pleased to have worked with the L Brands board and management team and I congratulate them on the steps they have taken to address the operational, financial and governance objectives we first outlined last year. We look forward to continuing our relationship with the company and are confident that today’s announcements will position the company for future success."