Welcome back to DEF14's Monthly Knowledge+. It's time to explore the developments and activism highlights of the past month. In the US activism universe, August stood out as a pivotal month, hosting a total of 35 active campaigns, including 6 new ones.
As usual, today, DEF14 will serve as your reliable guide to provide you with a comprehensive summary of these events, offering valuable insights that demand the attention of both companies and investors. Without any more delay, let's commence this journey.
DEF14's Activist Alpha® provides real-time updates on the performance and positions of active campaigns filed by renowned activist groups.
August 11th: Farallon Capital v. Chinook
Founded in 2019, Chinook Therapeutics is a biotech company dedicated to developing precision medicines for kidney diseases and rare chronic conditions. In June 2023, it entered into a merger agreement with Novartis AG, valued at $3.2 billion, with completion expected in the second half of 2023.
In anticipation of the Novartis Merger, global investment firm Farallon acquired over 5% of Chinook's shares. However, after the merger was completed on August 11, 2023, with Chinook becoming a wholly-owned subsidiary of Novartis, Farallon no longer held any shares. Their strategy was focused solely on exploiting the merger arbitrage opportunity.
August 11th: Baupost Group v. Veritiv
On August 6, 2023, Veritiv, a B2B provider of packaging, publishing, and hygiene products, entered into a merger agreement with Dubilier & Rice, LLC and Verde Merger Sub, Inc. Simultaneously, Baupost Stockholders signed a Voting Agreement to support the merger and associated matters while refraining from hindering it. The Voting Agreement outlined conditions for termination, including changes to the merger terms or its completion.
Baupost, led by CEO Seth A. Klarman, acquired a 24.53% stake in Veritiv with the intention of actively reviewing their investment. They planned to engage with Veritiv's management and board to potentially influence its operations and governance. Their potential actions ranged from buying or selling shares to participating in control-related or strategic transactions. Essentially, Baupost and Seth supported the merger but maintained the flexibility to adapt their plans based on evolving circumstances.
August 18th: Starboard Value v. Bloomin
Starboard Value, a seasoned activist investor, recently acquired a 9.9% stake in Bloomin’ Brands, the parent company of Outback Steakhouse. Headquartered in Tampa, Florida, Bloomin’ Brands oversees diverse casual dining establishments across 47 states and 13 countries, boasting over 1,450 locations, both company-owned and franchised.
With a notable history in the restaurant sector, including their successful takeover of Darden Restaurants Inc. and involvement with Papa John's, Starboard aims to influence Bloomin' Brands' performance. Starboard acquired the shares of Bloomin because the company believed they were undervalued. As Starboard Value moves forward with plans to influence Bloomin' Brands' performance and stock value, their actions will undoubtedly be closely monitored in the restaurant industry and by investors alike.
August 18th: Gamco v. Intevac & August 25th: Gamco v. SciPlay Corp
Gamco Investors, a prominent financial firm primarily engaged in the securities industry, and related entities, primarily in the securities business, collectively own more than 5% of Intevac, Inc.'s and SciPlay Corp's equity securities. Intevac specializes in advanced equipment and solutions, while SciPlay Corp focuses on interactive digital games.
Gamco Investors actively analyze both companies using the detailed Schedule 13D but have no intentions of controlling them. They follow general voting policies for corporate governance and may transfer voting power if their combined position exceeds a 25% stake in either company. Other entities holding Intevac's or SciPlay Corp's securities for investment purposes have no specific plans beyond their investment philosophy.
August 30th: Engine Capital v. American Outdoor Brands
Engine Capital, a distinguished investment firm recognized for its active engagement in corporate governance and value enhancement, pursued a 5% stake in American Outdoor Brands. This firearms and outdoor equipment industry leader boasts well-known brands like Smith & Wesson and Thompson/Center Arms, making it an enticing investment prospect.
Engine Capital's strategy allows for adjustments in their American Outdoor Brands holdings in response to market dynamics. Their overarching objective involves influencing the company's board and governance.
The journey began with a Cooperation and Support Agreement between the two parties on August 7, 2022, culminating in the appointment of Bradley T. Favreau, a partner at Engine Capital, to American Outdoor's Board. This agreement included standstill restrictions. Subsequently, an amendment on May 24, 2023, ensured Favreau's re-election, underscoring Engine Capital's commitment to influencing governance. The Cooperation Agreement's duration is subject to specific conditions.
Other Activism Highlights
During August, Third Point released its Q2 shareholder letter, where the company emphasized its transition towards tech and other growth stocks, shifting away from value investing. This shift was substantiated by a substantial new investment they made during the quarter, acquiring a $535-million stake in Amazon. Furthermore, Third Point diversified its portfolio by investing in companies like Activision Blizzard, NVIDIA, and Uber.
August Activism: Key Takeaways
Throughout our analysis of these campaigns, one key lesson stands out: timing is crucial, especially in events like mergers, as demonstrated by Farallon Capital vs. Chinook.
On the other hand, Baupost Group's participation in Veritiv reveals the significant influence investors can exert during mergers. Seasoned activists like Starboard Value and Engine Capital have the potential to reshape corporate landscapes, making monitoring their impact essential.
Moreover, Gamco Investors' stakes in Intevac and SciPlay Corp raise questions about their voting policies. Staying informed about these activist campaigns is vital for navigating the dynamic world of corporate activism.
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Thank you for joining us for this journey into the world of corporate activism today. We look forward to seeing you next time for more updates and insights. Stay informed, stay engaged, and stay ahead with DEF14's Monthly Knowledge+.