Elliott Management To Launch A Billboard Campaign In Australia

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This week’s events bring us to India, a country which rarely makes headlines for activist campaigns, but where shareholder engagement has been building up for quite some time.

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This morning, the board of 110-year-old Alembic met to decide on a request with very few precedents. Unifi Capital, a Chennai-based value investor, has been seeking the appointment of its vice-president Murali Rajagopalachari to the company's board of directors, using Section 151 of the Companies Act of 2013 – a little known provision which allows the election of directors in representation of small shareholders.

Amit Tandon, the founder of Indian proxy voting adviser Institutional Investor Advisory Service, points out this is the first time that a “sophisticated” investor has used Section 151 to nominate a director.

Under Indian law, small shareholders are defined as investors owning stakes of 20,000 rupees ($314) or less - literally, mom and pop shareholders. Unifi owns 3% of the stock – currently valued at around 330 million rupees ($5.1 million) – and its attempt to champion retail investors' cause to gain a seat on the board may pave the way for a unique form of shareholder activism in the country. Section 151, however, is unexplored territory. Indian lawmakers have allowed some discretion to issuers, whose directors can reject nominations if the candidate lacks the necessary qualification to serve on the board. In addition, experts are still debating exactly how the small shareholder representative should be elected if the nomination is accepted. At the time of writing this newsletter, Alembic's board has yet to announce its decision.

Going after the smallest stockholders is not the only route investors can take to gain some influence with Indian issuers. In an interview with Activist Insight, Tandon said institutional investors have progressively replaced retail shareholders on the share registers of the country's listed companies over the last decade, providing a counterbalance to the power of the “promoters,” which control the majority of the stock. On top of that, regulators are increasing pressure on issuers for improved governance, and on investors to engage with their portfolio companies. In a recent development, the Insurance Regulatory and Development Authority of India has introduced a stewardship code which forces insurers to disclose how they vote at shareholder meetings, and the reasoning behind their decisions.

Examples of Indian shareholders becoming vocal and are increasing in frequency, while U.S. activists Cartica Management and Taiyo Pacific Partners have started operating in the country, exporting their soft-touch approach, and pushing for changes through patient negotiations behind the scenes. Incidentally, an interview with Cartica was featured in the March edition of Activist Insight Monthly, and the August issue, out next week, will include an interview with Taiyo.

In 2012, Chris Hohn's The Children's Investment Fund failed to make much progress with its campaign against the government's influence on state-controlled Coal India, but 2017 may be the year some foreign hedge funds reconsider waging battle with the country's listed companies.

Elliott Management has brought efforts to gain the support of retail shareholders to a whole new level in 2017. After mailing thousands of mini-player devices to Arconic's small investors earlier this year, each with a four-minute video making the case for the activist's proxy contest, the hedge fund has now resolved to launch a billboard campaign in Australia.

Elliott is pushing the Anglo-Australian mining giant to sell its U.S. oil assets, unify its corporate structure and repurchase shares, and forty billboards mocking BHP's slogan “Think big” were erected this week across Sydney, Melbourne, Brisbane and Perth.

THINK SMART. Tell BHP it's time for change," they say.

At Arconic, almost a third of the shares were held by retail investors and Elliott set a budget of $15 million to fight its board battle, hiring Okapi Partners as proxy solicitor.

For its campaign at BHP, the activist has enlisted PR firms Camarco and Honner, based in the U.K. and Australia respectively. In addition, lobbying firms Barton Deakin, which focuses on Australia, and Crosby Textor, which has offices both in London and in Sydney, are working on Elliott's side.

Paul Singer's hedge fund certainly does not lack resources. Recently, he told those at the Bloomberg Invest Summit in New York that he had come to love his reputation of bashing companies around, despite the negative press that sometimes comes from it.

"If that's the reputation we have, backed by having the money and the process and generally sound thinking about the positions, it’s good when a corporate executive opens the mail or the email or picks up the phone and listens with the understanding that we are real, that we have the capacity to carry through and the history of carrying through on the projects that we undertake,” he said.

Article by Activist Insight

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