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DEF14 Monthly Knowledge+: February 24 Activism Highlights (13D campaigns)

Dive into the forefront of shareholder activism with DEF14's Activist Alpha®. February 2024 spotlighted a total of 39 active campaigns, with Saba Capital Management spearheading two new notable 13D campaigns, highlighting their strategic moves within Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund and BlackRock Science & Technology Term Trust.

Welcome back to our monthly update on shareholder activism activities. As we reflect on February, we observed a slight decline in the number of active campaigns compared to the previous month. Despite this, the influence of Saba Capital remained notable, consistently contributing to the majority of ongoing endeavors. Among these 39 active campaigns, 3 are the new 13D initiatives. As customary, we will embark on a detailed exploration of each of these recent developments.

DEF14's Activist Alpha® provides real-time updates on the performance and positions of active campaigns filed by renowned activist groups.

DEF14's Activist Alpha® provides real-time updates on the performance and positions of active campaigns filed by renowned activist groups.

Saba Capital Management’s February 13D Campaign 

In February 2024, Saba Capital Management initiated two new 13D campaigns, a move aligned with its typical strategy of closed-end fund arbitrage. This approach focuses on identifying and investing in funds whose shares are trading at prices lower than their net asset value (NAV). By purchasing these undervalued shares, Saba seeks to effectuate changes that could increase the share prices or facilitate advantageous sales.

(I): Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund

  • Saba Capital Management, L.P. and Boaz R. Weinstein filed a proxy statement on January 12, 2024, opposing a proposed reorganization by Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund. The purpose of the proxy statement is to solicit proxies from shareholders to vote against the reorganization proposal. Saba believes the proposed reorganization undervalues the Fund's shares and aims to persuade shareholders to oppose it.

  • On February 23, 2024, Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund submitted conclusive supplementary documents, actively seeking proxies and encouraging shareholders to oppose Saba Capital Management L.P.'s efforts to hinder the proposed reorganization of the Fund with abrdn Global Infrastructure Income Fund. This directive is intended to be addressed at the Company's rescheduled special meeting of shareholders, slated for March 7, 2024.

  • Meanwhile, Saba Capital Management, alongside its affiliates, acquired approximately $3,186,342 worth of Common Shares from Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund.  As of the filing date, the Reporting Persons collectively beneficially owned 436,901 shares, representing approximately 5.11% of the class. 

(II): BlackRock Science & Technology Term Trust

  • On February 16, 2024, Saba Capital Management, L.P. announced its intent to nominate a slate of seven independent director candidates to BlackRock Science & Technology Term Trust's board. These nominees include David Locala, Athanassios Diplas, and Alex Vindman as Class II Nominees, and Ilya Gurevich, Shavar Jeffries, David Littlewood, and Jennifer Raab as successors. Additionally, Saba proposed terminating the investment management agreement between the Company and BlackRock Advisors, LLC, at the 2024 Annual Meeting. The acquisition of approximately $81.5 million worth of common shares was funded through subscription proceeds from investors and capital appreciation, alongside margin account borrowings. This action was disclosed in a Schedule 13D/A filing with the U.S. Securities and Exchange Commission on February 20, 2024

  • On March 6, Saba Capital Management, L.P. has launched a campaign to improve the governance of 10 underperforming closed-end funds managed by BlackRock. They filed a lawsuit against BlackRock ESG Capital Allocation Term Trust for adopting an illegal "Entrenchment Bylaw," which deprives shareholders of their right to elect new directors. Saba intends to hold BlackRock and its board members accountable for the loss of billions in shareholder value. They have nominated seven independent candidates for the boards of the BlackRock Funds to address governance issues and narrow the discounts to Net Asset Value (NAV). 

Starboard Value February 13D Campaign

(I):  Alight Inc.

  • On February 16, Starboard nominated four director candidates for Alight's (a cloud-based provider of integrated digital human capital and business solutions) board at the 2024 annual meeting: Keith D. Dorsey, Matthew C. Levin, Gavin T. Molinelli, and Coretha Rushing. Alight, a recently de-SPACed company, faces challenges including high leverage, depressed margins, and leadership concerns. Starboard believes these issues can be addressed with solutions like reducing debt, improving margins through technological investments, and enhancing corporate governance. Starboard's nominations aim to introduce experienced directors who can implement these changes and restore shareholder confidence. While Starboard made these nominations before private discussions with Alight, they aim to keep their options open and ensure flexibility in negotiations. Despite potential challenges in a proxy fight, Starboard believes shareholders would benefit from their nominees joining the board. However, the outcome remains uncertain given the nature of SPAC companies and incumbent resistance to outsider directors.

Other Activism Highlights worldwide

ISS and Glass Lewis Back Activist Proposals for Samsung C&T, Urging Shareholders to Support Share Buyback and Dividend Increase

Proxy advisors ISS and Glass Lewis have recommended Samsung C&T shareholders support activist fund proposals for a share buyback and increased dividends at the March 15 general meeting. The funds, holding a 1.46% stake, suggested a 500 billion won buyback and higher dividends, leveraging Samsung C&T's strong financials. Palliser Capital, a London-based hedge fund, said it will vote in favor of these proposals for Samsung C&T. 

While Samsung C&T opposed, noting management burdens, it plans to retire 1 trillion won in treasury stocks to sway shareholders. Despite past opposition from ISS and Glass Lewis, Samsung C&T has previously overcome such challenges. The outcome hinges on minority and foreign investor support, with legal backing from Kim Chang Lee and Lin for the activists.

Exxon Faces Backlash for Suing Climate Activist Shareholders

ExxonMobil is under fire for employing what has been described as "bullying" tactics by pursuing legal action against climate activist investor groups, Follow This and Arjuna Capital, even after they withdrew a resolution calling for greater action on reducing greenhouse gas emissions. The lawsuit, aimed at preventing the resolution from being voted on at the general meeting, continues despite the investors' decision to not pursue their proposal, sparking concerns over shareholders' rights. Follow This founder, Mark van Baal, criticized Exxon for preferring litigation over shareholder democracy, framing the legal move as an intimidation tactic to stifle demands for addressing the climate crisis. This controversy comes amid wider discussions on shareholder rights and corporate responsibility, with Exxon insisting on clarifying proxy rules to prevent abuse, while facing criticism for not doing enough to address its environmental impact.

Carl Icahn Gains Two Board Seats at JetBlue, Avoids Proxy Battle

After acquiring a 10% stake in JetBlue Airways and declaring the shares undervalued, activist investor Carl Icahn has successfully negotiated two board seats for his representatives, avoiding a potential proxy confrontation. Jesse Lynn and Steven Miller from Icahn Enterprises will initially join as non-voting members, transitioning to full voting rights post the airline’s upcoming shareholder meeting. This expansion brings JetBlue’s board to 13 members, following Icahn's recent move to become the airline’s third-largest shareholder.

AEP Ousts CEO Julie Sloat Following Carl Icahn's Board Influence, Initiates Search for New Leadership

Just weeks after Carl Icahn secured two board positions at American Electric Power Co. (AEP), the utility has dismissed CEO Julie Sloat, who served for less than 14 months, signaling a push for new leadership under the billionaire's influence. Benjamin G.S. Fowke III steps in as interim CEO, marking a swift transition aimed at steering AEP into its "next chapter" with plans for an external CEO search. This move reflects the board's desire for rapid changes, amidst analysts' speculation about leadership shifts following Icahn's involvement. AEP's shares rose nearly 3% after-hours as the company reported earnings and announced the leadership change, highlighting Icahn's history of significant corporate interventions.

Blackwells Capital Urges Disney to Develop AI Strategy for Stock Boost

Blackwells Capital, a shareholder in Walt Disney (DIS.N), is advocating for the media giant to create and disclose an artificial intelligence (AI) strategy, suggesting such a move could potentially elevate Disney's stock price by up to 129%. Despite generally supporting CEO Bob Iger, Blackwells is pushing for board representation and proposing significant changes, including a breakup of the company and spinning off its park and hotel assets. The investor points to the substantial market value gains seen by tech companies following AI initiatives as a model for Disney. However, Disney defends its technology investment track record and its formation of an AI Task Force last year, emphasizing the synergy across its diverse business segments as a key strength against the proposed breakup and real estate investment trust spin-off.

Trian Fund's Nelson Peltz Faces Opposition from Disney Family in Board Battle

Nelson Peltz's Trian Fund Management is challenging Walt Disney Co. with a proxy battle for board seats, criticized by the company and the Disney family heirs. Trian, criticizing Disney's recent strategic moves as ineffective, has proposed adding Peltz and former CFO James A. “Jay” Rasulo to Disney's board. This move has sparked a public dispute, with Disney family members, including Abigail E. Disney and Roy P. Disney, voicing strong support for CEO Bob Iger and the current board, denouncing the activists' proposals. Disney has rebuffed both Trian's and another activist investor, Blackwells Capital's, nominee slates, focusing instead on its turnaround strategies. Amidst this, Disney's shares have seen significant fluctuation, reflecting the ongoing tension between the company's management, its shareholders, and activist investors.

Caligan Partners Ups Stake in Anika Therapeutics to 9.7%, Proposes New Directors

Activist investor Caligan Partners has increased its ownership in Anika Therapeutics to 9.7%, up from about 7% previously, and has put forward two candidates, David Johnson and William Jellison, for election to the drugmaker's board. This move underscores Caligan's assessment of Anika's stock as significantly undervalued, advocating for a reevaluation of strategic options to enhance shareholder value. This follows a previous settlement in which Anika agreed to add former Johnson & Johnson executive Gary Fischetti to its board amidst Caligan's calls for the company to explore a full sale due to underperformance and losses in its joint preservation segment.

Starbucks Under Pressure from Activist Investor Linked to Labor Unions for Board Changes

Starbucks is facing calls for board restructuring from the Strategic Organizing Center (SOC), a coalition of labor unions, which criticizes the company's handling of labor issues, resource allocation, and the resulting reputational risk. In an investor presentation, the SOC, not among Starbucks' top ten shareholders, argued that Starbucks has diverged from its iconic status due to these issues. To address this, the SOC has nominated three candidates with diverse backgrounds in business, government, and non-profit sectors, including former senior White House officials Maria Echaveste and Joshua Gotbaum, and former NLRB chair Wilma Liebman, for election to the Starbucks Board. In response, Starbucks highlighted its board's expertise and its investment in employee benefits and wages.

VF Corp. Broadens Board with New Directors Amid Engaged Capital's Activism

VF Corp. is responding to the demands of activist investor Engaged Capital by appointing two new directors to its board, showcasing its commitment to shareholder dialogue and company improvement. Caroline Brown, a veteran in the luxury fashion industry with leadership roles at Donna Karan International and Carolina Herrera, joined the board effective February 14, following "constructive engagement" with shareholders including Engaged Capital. Engaged Capital, which criticized VF Corp.'s management and strategy under former leadership, has advocated for the divestiture of "non-core" assets to focus on enhancing the value of key brands like Vans and The North Face. A second board position, influenced by Engaged's recommendations, is expected to be filled shortly, indicating VF's openness to external input for its strategic direction. This development aligns with VF's ongoing efforts to revitalize its brand portfolio amid recent fiscal challenges, including declines in major brand sales and an overarching strategic review aimed at sustainable growth.

Simpson Oil Considers Actions After Parkland Corp Advances AGM, Limiting Director Nominations

Parkland Corp's largest shareholder, Simpson Oil, holding a 19.7% stake, is reevaluating its options to safeguard its shareholder rights following Parkland's decision to move up its annual meeting to March 28, a move seen as limiting Simpson Oil's ability to nominate directors. Traditionally held in May, this year's advance contravenes the December agreement that suspended Simpson Oil's nomination rights until March 31. This development escalates tensions between Parkland and Simpson Oil, which had already seen abrupt board departures and restrictions on public criticisms. Amidst these corporate skirmishes, Parkland faces additional scrutiny from Engine Capital, advocating for independent board directors and cautioning against unnecessary litigations with shareholders.

Arkhouse Management Increases Offer to Acquire Macy's to $24 Per Share Amidst Proxy Battle

Arkhouse Management has raised its offer to acquire Macy's to $24 per share, following Macy's initial rejection of a $21 per share bid. This escalation comes amidst Arkhouse's ongoing proxy fight, demonstrated by its nomination of nine new directors for Macy's board. The revised offer, which represents a 51% premium over Macy's share price at the end of November 2023 and a 33% premium as of March 1, 2024, has propelled Macy's shares up 16% in early trading on March 4. Macy's is reviewing the new proposal, which arrives just after CEO Tony Spring introduced a strategic plan for the company's revitalization. Previously, Arkhouse, along with Brigade Capital, had attempted a takeover valued at $5.8 billion but faced rejection from Macy's, leading to the proxy battle and director nominations to restructure Macy's board and potentially unlock shareholder value. Macy's board remains critical of Arkhouse's approach, emphasizing the need for detailed financing plans and constructive dialogue.

Norfolk Southern Urges Shareholders to Support Current Management Against Ancora Holdings' Takeover Attempt

Norfolk Southern is rallying its shareholders to stand by its current management and strategic direction, countering Ancora Holdings' effort to replace the railroad's board with eight of its own nominees. In response, Norfolk Southern has proposed adding a former Amtrak CEO and a former U.S. Senator to its board, aiming to inject new perspectives without compromising its ongoing initiatives. The railroad, under CEO Alan Shaw, has tweaked its operational model for enhanced safety and efficiency, diverging from the industry's cost-cutting trend. Ancora criticizes Norfolk Southern for subpar efficiency and profitability metrics, proposing a management overhaul with former UPS and CSX executives. Amidst debates over management strategies and the aftermath of the East Palestine derailment, three major rail unions have expressed support for Norfolk Southern's current leadership, highlighting the company's progress under Shaw's guidance. The controversy unfolds as Norfolk Southern discloses Shaw's significant compensation increase, sparking further debate on corporate governance and strategic direction.

Ancora Holdings Seeks Major Changes at Elanco Animal Health, Targets CEO and Board Seats

Ancora Holdings is pushing for a significant overhaul at Elanco Animal Health, advocating for the replacement of CEO Jeffrey Simmons due to perceived underperformance and nominating four candidates for the company's 12-member board. As one of Elanco's largest shareholders, holding 2.13% of the firm, Ancora criticizes the company's operational margins, drug commercialization efforts, and governance, attributing a 55% share price decline since the 2020 acquisition of Bayer Animal Health to Simmons' leadership. Despite Elanco's claim of stock price recovery and innovation-driven growth, Ancora's nominees include Ancora Alternatives president James Chadwick and veterans from the animal health and financial sectors, aiming to address shareholder concerns at Elanco's upcoming annual meeting. This move follows Ancora's historical activism, including engagements with companies like Norfolk Southern, highlighting its commitment to driving value and operational improvements at Elanco.

Currys Declines Elliott Investment Management's £700m Takeover Offer

Currys has turned down a £700 million takeover proposal from activist investor Elliott Investment Management, describing the offer as a preliminary and conditional cash bid for the company at 62p per share. This rejection comes despite the offer representing a substantial premium over Currys' closing share price of 47.1p, which values the company at £534 million, down from 75p per share a year ago. The board, after consultation with financial advisors, unanimously decided that Elliott's bid significantly underestimates the value and future potential of Currys. Known for aggressive investment strategies, Elliott now faces a decision to either formalize its offer under UK takeover regulations or withdraw. Currys, which rebranded in 2021 after merging with several firms and operates 300 UK stores employing over 15,000 people, also maintains a presence in the Nordic region as Elkjøp and recently sold its Greek business for £175 million.

Elliott Management to Launch Hyperion for $1 Billion Mining Asset Acquisition

Elliott Investment Management, a prominent U.S. activist investor, is creating a new entity, Hyperion, to pursue mining assets valued over $1 billion. The venture aims to diversify into various commodities, including metals essential for electric vehicles, under the leadership of Sandeep Biswas, former CEO of Newcrest Mining, according to insider sources.

Petrus Advisers Seeks Removal of Temenos Interim CEO Amid Mixed Reaction to Hindenburg Report

Petrus Advisers, owning just over 2% of Temenos, has intensified its demand for the removal of interim CEO Andreas Andreades following allegations from Hindenburg Research of earnings manipulation and accounting issues within the Swiss fintech company. While rejecting some of Hindenburg's criticisms and acknowledging Temenos' recent progress, Petrus agrees with the call for Andreades' departure, criticizing his leadership for prioritizing short-term gains and neglecting investment in technology and client satisfaction. Despite the significant impact of Hindenburg's report on Temenos' share price, Petrus views the identified challenges as not fundamental threats to Temenos' success, noting improvements in product and SaaS technology feedback. Temenos refuted Hindenburg's findings, denouncing inaccuracies and misleading claims. Petrus now demands immediate action against Andreades and a response to specific allegations by Monday.

Mithaq Capital Abandons $308M Takeover Bid for Aimia Amid Board Resistance

Mithaq Capital SPC, Aimia Inc.'s largest shareholder, has withdrawn its $308-million takeover offer for the investment holding company, citing Aimia's board's lack of cooperation and constructive engagement. The Saudi-based private investment firm, representing a prominent non-royal family, expressed disappointment over the board's entrenchment, marking the end of a hostile acquisition attempt that began nearly a year ago with opposition to the re-election of Aimia's directors. Despite achieving partial success in last year's board elections, Mithaq criticized the company's leadership for allegedly influencing shareholder votes. Aimia, transitioning into a holding company after selling Aeroplan to Air Canada, has faced internal turmoil, including the firing and subsequent legal battles involving former executives Phil and Chris Mittleman. With Mithaq's stake diluted following a private placement by Aimia, the investment firm now shifts focus to other opportunities, having recently acquired a majority stake in The Children’s Place Inc. Aimia, on its part, pledges commitment to transparency and governance amidst ongoing regulatory scrutiny over Mithaq's actions during the takeover bid.

Kelso Secures Board Positions at The Works, Aiming to Enhance Shareholder Value

Kelso's push for increased shareholder value at The Works has led to the appointment of its chief, John Goold, and CFO, Mark Kirkland, as non-executive directors, sparking a 6.7% surge in the retailer's stock this morning. Their focus will be on boosting the company's performance, backed by the support of major shareholders. The arts and crafts retailer, which Kelso has targeted since acquiring a 5.1% stake in September 2023, saw a significant share price jump following the announcement, despite recent dips due to lackluster semi-annual results. Carolyn Bradley, The Works' chair, praised Goold and Kirkland's extensive experience, anticipating their positive impact on the company's stock prices. The new board members, also involved in other companies Kelso targets, committed to leveraging their expertise in small-cap firms to enhance The Works' valuation, expressing confidence in its strong market proposition and strategic direction.

February Activism: Key Takeaways 

In February, shareholder activism continued to make waves across sectors including utilities, entertainment, healthcare, and retail, pushing companies towards strategic overhauls, leadership changes, and enhanced governance practices. The period was marked by significant engagements from entities like Saba Capital, Starboard Value, and Carl Icahn, underlining the activists' relentless pursuit of increased shareholder value and corporate accountability. Amidst this activism, challenges such as proxy battles, executive turnovers, and merger and acquisition debates were prominent, emphasizing the crucial role of shareholder votes and corporate responses. The focus of activism also expanded to encompass environmental sustainability, digital transformation, and financial optimization, indicating a broadening of the activist agenda to address contemporary corporate issues.

Until Next Month:

This wraps up our discussion on the dynamic world of shareholder activism for now. We're grateful for your keen interest and contributions to this vital conversation. Keeping abreast of these developments is crucial, and we invite you to continue exploring and engaging with us on these important topics. We look forward to our next encounter and encourage you to explore the resources provided by Activist Alpha for the latest and most perceptive updates. Stay curious and connected until we meet again!

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