Microsoft Corporation (NASDAQ:MSFT) entered a cooperation agreement with ValueAct Capital, one week after announcing the retirement of its chief executive officer, Steve Ballmer within 12 months (see Steve Ballmer Insanity Through the Years in One Clip [VIDEO])). The software giant agreed to offer a board seat to the activist hedge fund.
ValueAct stake in Microsoft
ValueAct Capital owns 57, 750,000 shares of Microsoft Corporation (NASDAQ:MSFT) based on its 13F filing with the Securities and Exchange Commission (SEC) in the second quarter of this year. The stock is the largest position of the activist hedge fund in its portfolio. According to data from Reuters, ValueAct is one of its largest stockholders and its stake accounts for 0.8 percent of Microsoft outstanding common stock.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
Under the agreement, Mason Morfit, president of ValueAct Capital will regularly meet with the management and selected directors of Microsoft Corporation (NASDAQ:MSFT) to discuss a range of significant business issues. The hedge fund has the option to appoint Morfit to the board of Microsoft after the company’s 2013 shareholders meeting.
In a statement, Steve Ballmer said, “Our board and management team are committed to enhancing growth and value for Microsoft shareholders, and we look forward to ValueAct Capital’s input.”
John Thompson, lead independent director and chairperson of governance of Microsoft Corporation (NASDAQ:MSFT) added, “Mason has extensive experience as a public company director, a wealth of financial knowledge and the perspective of a major shareholder. We have enjoyed getting to know Mason over the past few months and are looking forward to working with him.”
On the other hand, Morfit stated, “At this critical inflection point in the company’s evolution, I look forward to actively working together with the board and Microsoft’s management team to continue to create value for all shareholders.”
ValueAct no part in Steve Ballmer’s Departure
ValueAct Capital started negotiating with Microsoft Corporation (NASDAQ:MSFT) to secure a board seat in July. One of the issues raised by the hedge fund was the lack of succession plan for the CEO position. The executives of the software giant emphasized that ValueAct’s pressure had nothing to do with the recent surprise decision of CEO Steve Ballmer to step down from his position. Ballmer became CEO of Microsoft in 2000, and he previously stated his intention to lead the company until his youngest child goes to college, which will be in 2017 0r 2018.
Nomura Securities analyst, Rick Sherlund believes that there will be significant changes within Microsoft Corporation’s (NASDAQ:MSFT) business. He said, “I do think there’s a tidal shift in the corporate governance of Microsoft,” Rick Sherlund, a “It’s not so much about the endorsement of the agenda of Steve (Ballmer) and Bill (Gates).”