Carl Icahn Ends Activist Campaign Against Gannett

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Carl Icahn has withdrawn his nominations and proxy proposals for the upcoming Gannett annual shareholders meeting now that the company has agreed to a series of shareholder friendly policies. Gannett will spin off its publishing arm later this year and Carl Icahn, who has a 6.6% stake in the company, was worried they would discourage potential buyers of either Gannett or the spinoff. Even though Icahn didn’t get the exact terms that he was asking for, they were close enough that he said he is “very pleased with the agreement we entered into with Gannett yesterday, which we believe yielded a great result for Gannett shareholders.”

A statement from Gannett non-executive chairman Marge Magner also struck a conciliatory tone, saying that the decision is the result of “productive conversations” with Carl Icahn and other shareholders.

Carl Icahn engaging in preemptive activism

Carl Icahn significantly increased his stake in Gannett (currently trading at $35.90) last fall, and then in January of this year he took the company by surprise when he announced an activist campaign meant to prevent corporate governance policies that he feared might be put into place. By now companies understand that poison pills, staggered boards, and other rules that give management tighter control might invite activism, but in this case Carl Icahntook action simply because those things hadn’t been ruled out. Activism is becoming mainstream, but preemptive activism still seems pretty aggressive.

Carl Icahngot nearly everything he asked for

We still don’t know exactly what the corporate governance profile of the spin-off will look like, but Gannett agreed to a few key principals in today’s announcement. First, the board of directors will be elected annually instead of having a staggered board, and shareholders with a combined 20% stake will have the right to call a special meeting. There won’t be any supermajority voting provision (unless legally required), and uncontested director elections will have a simple majority voting standard. While Gannett reserved the right to use a poison pill (or a shareholder rights plan), it will have a trigger of at least 20% and it will expire after 135 days unless it is ratified by shareholders.

Icahn had wanted to be able to call a meeting if he could gather shareholders with a combined 10% stake (not much of a stretch when he’s already got 6.6%), but that seems like a minor concession compared to everything else he got.

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