Regardless of whether a Brexit deal is cut or football finally comes home, Europe looks set for a summer of activism.
Q2 hedge fund letters, conference, scoops etc
So far this year, two contradictory trends have played out across the Atlantic, with the number of companies targeted falling slightly in comparison with the past couple of years, while the amounts invested – particularly by dedicated U.S. activists – are ramped up.
After activist victories in recent years at Stada, Rolls-Royce Holdings and Safran, to name just a few, shaking up companies is seen as easier than ever, especially on the Continent. And while not every situation plays out as planned, the continuation of low interest rates, greater economic stability, and rising commodity prices has meant greater opportunities for financing and M&A.
As a result, management teams are emboldened, and where they remain cautious, boards and institutions appear more responsive to activist pressure. As demonstrated at Stobart and Tungsten, the fact that groups of shareholders can typically requisition meetings with stakes of less than 10% is likely a key determinant in this pressure continuing over the summer, unlike in the U.S.
That means many companies are jettisoning longstanding leaders – take FirstGroup, or ThyssenKrupp as of yesterday – and reconsidering their corporate structure. AkzoNobel made big changes to its structure after fending off takeover efforts, and now Third Point Partners is making clear that it is not going to be satisfied with small changes at Nestle, accusing the consumer products giant of being at risk of “falling irreparably behind” in a rapidly changing industry.
Nestlé’s response avoided addressing Third Point’s public comments directly. Instead, the Swiss company talked up its achievements, perhaps indicating that it doesn’t expect a proxy contest but isn’t going to take chances either.
With U.S. conglomerates proving sluggish even under activist pressure, it is small wonder that activists like Third Point and Trian Partners, according to recent reports, are looking at Europe’s global businesses. Companies need to be on their toes.
A shareholder proposal to watch will go to a vote on July 20 at Minnesota-incorporated Insignia Systems, where Nick Swenson wants to be able to vote the entire stake owned by his fund Groveland Capital and Air T, another corporation he controls. Under Minnesota law, shareholders owning more than 20% of a company cannot vote any shares above the 20% limit he says, violating the one-share, one-vote principle. Sure enough, proxy advisers Institutional Shareholder Services and Glass Lewis support his request that the company opt out of that rule. Defeat, however unlikely at this point, would be a vote of approval for an unusual takeover defense.
Quote of the week comes from Oasis Management, which is pushing Premier Foods to sell its soup brand, Batchelors, amid a proxy fight where a strategic investor and ISS seem likely to help management eke out a victory. Despite that, Oasis thinks a 200 million pound and upward deal would help the company as a whole, not just shareholders:
“Selling Batchelors would put Premier Foods on a solid footing and strengthen the company for the benefit of all of its key stakeholders including staff, pension scheme members and shareholders in one single swoop," a spokesperson for Oasis said in a statement. "Oasis does not seek for any of the proceeds to be directly returned to shareholders but instead be used to de-risk the company and improve its business and long-term prospects. We fail to understand why the current CEO does not understand this."
Article by Activist Insight
