Activists Out Another CEO?

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Did activists kill another CEO? Yesterday, General Electric announced its succession plan, which will see boss Jeff Immelt replaced by the current head of the company’s healthcare business, John Flannery, in August. Flannery will also take the chairman role from the beginning of next year. Coming just a month after the market scorned GE’s first quarter earnings, and three months after Immelt signed a deal with Trian Partners – the activist he invited to take a position in the stock – to tie his bonus more closely to operating performance, the move inevitably looks like the consequence of a shareholder coup. Yesterday, lead director Jack Brennan acknowledged that input from shareholders had been plentiful, and that they were “really pleased” by the transition. Trian declined to comment.

So far, Trian’s two-year engagement with GE has been impressively stage-managed to the point that it looks relatively cordial. Yet that was always dependent on management taking the company in the direction Trian expected, and partly out of respect for Immelt. Flannery may have shareholders on his side, but Trian has always acknowledged that GE is an exception to its usual practice of taking a board seat at each of its investments. If its interests diverge with Flannery’s, expect the situation to break into the open.

  • Will FrontFour Capital and Sandpiper win their proxy contest at Canada’s largest industrial real estate investment trust, Granite REIT, on Thursday?
  • Will AMP Capital’s support for an independent review of one of Elliott Management’s BHP proposals help pressure the company to reopen talks with the activist?
  • In the week General Electric announced a succession plan for CEO Jeff Immelt following pressure from Trian Partners, will Elliott weaken the company’s grip on Swedish subsidiary Arcam with a set of shareholder proposals due to be voted on this Friday?

Short update

Citron Research’s Andrew Left was the subject of a lengthy profile in the New York Times Magazine last week, raising the question of whether short sellers can rely on government intervention in the age of Trump. Yesterday, CNBC reported that Senator Elizabeth Warren had taken aim at Citron target TransDigm in May, raising questions about its strategy of raising prices. The initial impact on the aircraft components company was a significant selloff, but shares went on to recover some of their losses. Earlier events – Citron first going public and letters from two Representatives to the Defense Department – caused much bigger ruptures and the stock was back to pre-election levels earlier this month. Citron has announced three new shorts and revisited one other since the TransDigm call in January. Whether or not Left is done fighting, the defense products company has some serious battles ahead

Via ActivistInsight

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