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DEF14 Monthly Knowledge+: March ‘24 Activism Highlights

 Stay up-to-date on March's shareholder activism highlights with DEF14 Monthly Knowledge+. Explore 44 ongoing campaigns and 7 fresh initiatives, including Saba Capital Management's strategic moves and Bulldog Investors' advocacy for shareholder value. From PL Capital Advisors' undervaluation strategy to Icahn Carl's exploration of options for CVR Partners, delve into the latest developments.

Greetings everyone, and thank you for joining us for our latest briefing on shareholder activism endeavors. As we explore the developments of March, we find ourselves amidst 44 ongoing campaigns, with 7 fresh initiatives emerging under the 13D banner. True to tradition, we'll now embark on a comprehensive examination of these latest undertakings.

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 March Campaign 

During the month of March in 2024, Saba Capital Management launched three fresh 13D initiatives, demonstrating their consistent strategy in closed-end fund arbitrage. Saba's goal in acquiring these discounted shares is to implement strategic adjustments aimed at enhancing share prices or enabling favorable sales outcomes.

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

  • Saba Capital Management, L.P., Boaz R. Weinstein, and Saba Capital Management GP, LLC targeted common shares of Lazard Global Total Return & Income Fund Inc, collectively acquiring 791,622 shares, representing approximately 6.08% of the total outstanding shares.

(II): Calamos Long/Short Equity & Dynamic Income Trusts

  • The Schedule 13D filing discloses that Saba Capital Management and its affiliate have jointly acquired 995,978 common shares of Calamos Long/Short Equity & Dynamic Income Trusts, amounting to approximately 5.07% of total outstanding shares. The acquisition, valued at around $14,919,750, is made for investment purposes, driven by their belief in the undervaluation of the shares.

(III): abrdn Healthcare Investors,

  • Saba Capital Management, L.P. and its affiliate have acquired a total of 2,557,469 common shares of abrdn Healthcare Investors, amounting to approximately 5.17% of the outstanding shares. This investment, valued at around $41,875,746, again reflects their belief in the undervaluation of the shares and aligns with their investment strategy

Bulldog’s March Campaign 

In March, Bulldog Investors, LLP also launched two campaigns, acquiring shares in DWS Municipal Income Trust to advocate for a self-tender offer and nominating directors for BNY Mellon Municipal Income Fund to propose measures allowing shareholders to monetize their shares.

(I):  DWS Municipal Income Trust (KTF)

  • Bulldog Investors, LLP, alongside Phillip Goldstein and Andrew Dakos, collectively acquired 1,409,702 shares (3.60% of outstanding shares) of DWS Municipal Income Trust (KTF) on March 18, 2024. This acquisition, funded through clients of Bulldog Investors, LLP and a registered closed-end investment company, was made to continue holding through the next shareholder meeting. The purpose behind this acquisition is to advocate for a self-tender offer for at least 50% of KTF's common shares at or close to their net asset value, reflecting a desire to improve the Fund's performance and narrow the discount of the share price to NAV.given the nature of SPAC companies and incumbent resistance to outsider directors.

(II)  BNY Mellon Municipal Income Fund

  • On March 5, 2024, Bulldog Investors, LLP notified BNY Mellon Municipal Income Fund's secretary of their intention to nominate two candidates, Andrew Dakos and Phillip Goldstein, for director positions and to propose measures allowing shareholders to monetize their shares at or near net asset value for the Fund's 2024 annual meeting. Additionally, Bulldog Investors expressed openness to dialogue with a Fund representative to prevent a proxy contest.

PL Capital Advisors’s March Campaign 

(I):  Finward Bancorp

  • PL Capital Advisors, along with Richard J. Lashley and John W. Palmer, collectively acquired 355,292 shares of Common Stock of Finward Bancorp, amounting to $9,249,638 in total, with PL Capital Advisors holding 354,822 shares on behalf of clients at a cost of $9,245,963. The acquisition was driven by their belief in the undervaluation of the Common Stock at the time of purchase, with the intention to monitor the Company's performance, corporate governance, and potentially seek representation on its Board of Directors.

Icahn Carl’s March Campaign 

(I): CVR Partners, LP

  • Carl Icahn's group acquired roughly 36.8% of CVR Partners, LP's common units, aiming to boost shareholder value. They're exploring options with management and stakeholders. Meanwhile, CVR Energy and Icahn Enterprises are also considering strategic moves for CVR Partners, including potential acquisitions or sales. CVR Energy, controlled by Icahn, holds about 37% of CVR Partners' common units and controls its general partners. The fertilizer company could be acquired through private deals, market purchases, or tender offers. Additionally, CVR Energy appointed Dustin DeMaria and Mark Smith to its board after Hunter Gary's resignation on March 15.

Other Activism Highlights worldwide

SEC Denies Verizon’s Request to Omit Shareholder Proposal on Political Spending

Verizon Communications faces a shareholder vote on a resolution seeking transparency in the company's political spending after the SEC rejected its bid to exclude the proposal. Filed by As You Sow, the resolution calls for an annual report on political expenditures, assessing alignment with Verizon's values and strategic needs. It suggests including aggregate metrics and analysis of potential risks to brand and shareholder value. As You Sow emphasizes the importance of transparency in corporate electoral spending for accountability and decision-making. Verizon sought to omit the proposal citing duplication with another resolution, but the SEC disagreed, prompting inclusion in the proxy statement for the 2023 AGM held on May 11.

Disney Continues to Faces Boardroom Battle with Activist Shareholder

Disney finds itself in a heated boardroom clash with activist shareholder Nelson Peltz of Trian Partners, who aims to secure a board seat backed by over $3.5 billion of Disney stock. Peltz advocates for a comprehensive review of studio operations, but Disney opposes his involvement due to his lack of creative experience. The disagreement highlights the tension between shareholder activism and creative leadership, with Peltz challenging Disney's recent performance and advocating for management changes. However, Disney emphasizes the importance of leaving creative decisions to those with relevant expertise. In a parallel development, Egan-Jones, the second proxy advisory firm, has thrown its support behind Peltz's bid for board seats, criticizing Disney's outdated business model. While Peltz's Trian Fund Management aims for two board seats, another activist firm, Blackwells Capital, seeks three, setting the stage for a closely watched proxy battle at Disney.

Ancora Holdings Strikes Deal with Elanco, Adds Two Directors to Board

Following up on February's developments, Investment firm Ancora Holdings has reportedly reached an agreement with Elanco Animal Health, adding two of its director candidates, Craig Wallace and Kathy Turner, to the company's board. Despite Ancora's previous push for four board seats and a CEO replacement citing poor performance, Elanco CEO Jeff Simmons will retain his position. Ancora, owning 2.13% of Elanco, becomes one of its significant investors. Both companies have yet to comment on the matter.

Equinix Shares Drop Amid Activist Investor's Allegations

Equinix Inc. (EQIX) faced a stock decline after Hindenburg Research, a short seller, accused the data center REIT of questionable accounting practices and misleading claims about its AI capabilities. Hindenburg's report alleged accounting manipulation, business decay, and insider stock sales totaling over $327 million since 2019, including sales by the CEO. Equinix stated it was reviewing the claims seriously. Hindenburg criticized Equinix for overstating its adjusted funds from operations (AFFO) by 22% in 2023 and raised concerns about its ability to handle the electrical demand required for AI products. Equinix shares closed down 2.3% at $824.88 following the report.

Activist Shareholder Politan Nominates Directors to Masimo Board Amid Proxy Battle

Politan Capital Management, owning nearly 9% of Masimo Corp, has nominated William Jellison and Darlene Solomon to the company's board, signaling a potential second proxy battle. Masimo, currently evaluating a spinoff of its consumer business, saw its shares rise by 13% following the announcement. Politan has criticized Masimo's capital allocation, particularly its $1 billion acquisition of Sound United last year. While supporting the separation, Politan seeks additional board seats for oversight. Masimo has been engaged in a legal dispute with Apple over a patent related to blood oxygen sensors in Apple Watch models. Politan accuses Masimo's CEO of withholding information, prompting the latest board nominations.

Activist Shareholder Challenges Gildan Activewear's Sale Process, Advocating for CEO Reinstatement

Browning West LP, an activist shareholder, questions Gildan Activewear Inc.'s sale process, suggesting it may undervalue the company amidst a proxy battle. The Canadian apparel maker, embroiled in a board dispute since CEO Glenn Chamandy's ousting, received a non-binding acquisition offer. Browning West, proposing eight new directors, opposes the sale, advocating for Chamandy's reinstatement and alleging the potential offer of $42 per share lacks premium. Gildan's shares rose to $38.87 amid speculation. Analysts speculate on potential buyers, including Warren Buffett's Berkshire Hathaway Inc. The outcome could impact Gildan's future and shareholder dynamics in Canada's regulatory landscape.

Shareholders Urge Nestle to Curb Unhealthy Food Sales Amid Health Concerns

Shareholder activists are pressuring Nestle to reduce sales of unhealthy food high in salt, sugar, and fats, citing concerns over health impacts and regulatory risks. A coalition led by ShareAction filed a resolution for Nestle's annual general meeting on April 18, highlighting that over 50% of its 2023 sales were products with low Health Star Ratings. The resolution seeks annual reports on sustainable development and social issues, along with adherence to international healthy food standards. Catherine Howarth, CEO of ShareAction, emphasizes Nestle's significant influence on global diets, urging action to improve public health.

Elliott Management Acquires 5% Stake in Scottish Mortgage Investment Trust

US activist investor Elliott Management has disclosed a 5% stake in Scottish Mortgage Investment Trust, acquiring 6.5 million shares. The move follows Elliott's recent withdrawal from pursuing UK electricals retailer Currys. The investment comes at a time when Scottish Mortgage's share price remains 43% below its peak in late 2021, trading at an 8% discount to its underlying asset value. Analysts suggest Elliott may aim to capitalize on narrowing this discount through performance improvements or share buybacks, leveraging the trust's recent commitment to repurchase £1 billion worth of shares. With a track record in influencing investment trusts, Elliott's stake prompts speculation on potential strategic moves to enhance shareholder value.

Starboard Value Nominates Three Directors to Algonquin Power's Board

Starboard Value LP, Algonquin Power & Utilities Corp.'s largest shareholder with a 9.0% ownership stake, has nominated three highly qualified candidates for election to the company's Board of Directors at the upcoming Annual General Meeting on June 4, 2024. The nominees, Brett Carter, Chris Lopez, and Rob Schriesheim, bring extensive expertise in utility operations, financial management, and corporate strategy. Starboard's engagement aims to address concerns over Algonquin's recent performance and decision-making, urging for enhanced shareholder representation and strategic direction.

Match Group Adds Two Directors, Strikes Agreement with Elliott Management

Match Group, the company behind Tinder and Hinge, has appointed Laura Jones and Spencer Rascoff to its board of directors following an agreement with activist investor Elliott Management. The move comes amidst ongoing challenges for Match Group, including leadership turnover and declining user numbers. Elliott Management, known for its active role in corporate shakeups, aims to leverage its influence to drive value creation at Match Group, although specific plans have not been disclosed.

Braemar Hotels in Shareholder Tussle as Activist Investor Seeks Board Representation

Braemar Hotels & Resorts, based in Texas, faces a shareholder challenge as activist investor Blackwells Capital seeks board representation. Braemar contends that Blackwells' Nomination Notice lacks essential disclosures and has taken legal action to prevent what it alleges is an illegal proxy contest.

Fossil Group CEO Steps Down Amidst Declining Sales, Strategic Review Initiated

Shares of fashion conglomerate Fossil Group Inc. surged 8.5% in after-hours trading as Kosta Kartsotis stepped down as chief executive, initiating a strategic review amidst pressure from an activist investor. Jeffrey Boyer, the company's COO, was appointed interim CEO, with plans to find a permanent successor underway. The departure follows activist investor Buxton Helmsley Group's call for change in February. Fossil's fourth-quarter losses narrowed, but revenue declined, prompting an expected sales decrease in the current quarter. The company's shares have plummeted over 40% year-to-date amid ongoing challenges.

Third Point Activist Stake Boosts Advance Auto Parts Shares by 4%

Advance Auto Parts Inc. (AAP) saw a 4% surge in its shares following the disclosure of an activist stake by Dan Loeb’s Third Point LLC, alongside the addition of three new directors to the board. Teaming up with Saddle Point L.P., Third Point aims to influence strategies at the Raleigh-based company. This move coincides with the recent appointment of CEO Shane O’Kelly and ongoing negotiations to sell its Canadian business and equipment distributor, Worldpac. The newly appointed directors, A. Brent Windom, Gregory L. Smith, and Thomas W. Seboldt, bring operational experience to support O’Kelly's agenda. Third Point's recent activity includes exiting Alphabet Inc. (GOOGL) and adjusting stakes in other tech giants. Advance Auto Parts posted a surprise fourth-quarter loss, prompting a cost-cutting initiative.

Engine Capital Targets Dye & Durham for Board Changes

Dye & Durham, a legal software provider, faces pressure from Engine Capital, an activist investment firm seeking board changes. Engine Capital, owning 5.1% of Dye & Durham's stock, requisitioned a meeting of shareholders, expressing interest in three of the seven board seats. Dye & Durham, considering the request, announced chairman Brian Derksen's decision not to stand for re-election, with director Colleen Moorehead set to assume his position. Negotiations between the two parties may ensue, with Engine Capital aiming for shareholder value improvements. Engine Capital has also urged Calgary's Parkland Corp. for similar measures over the past year.

BlackRock Faces Renewed Activist Pressure Over ESG

Activist investor Bluebell Capital Partners is poised for another clash with BlackRock regarding its environmental, social, and governance (ESG) approach. Bluebell aims to critique BlackRock's ESG direction, citing reputational risks. BlackRock's sustainability commitment, announced in 2020, has drawn criticism from Bluebell, Republican politicians, and investors, alleging hypocrisy and ideological influence. Despite the scrutiny, BlackRock reaffirms its focus on managing clients' money aligned with their objectives, prioritizing investor interests over activist agenda.

Bluebell Renews Critique of BP's Net Zero Policies, Claims Support Among Investors

Activist investor Bluebell has reignited its criticism of oil giant BP's net zero policies, alleging insufficient support among top investors for the company's strategic direction. Bluebell's CEO, Giuseppe Bivona, asserts that after engaging with 30 of BP's major investors, only one expressed full support for BP's approach. Bivona plans to share anonymized negative feedback with BP, aiming to underscore widespread investor dissatisfaction. Bluebell contends that BP's focus on renewable energy projects, inherited from former CEO Bernard Looney, is eroding shareholder value compared to rivals like Shell, which prioritize oil and gas investments. Despite BP's $27.6 billion full-year profit in 2023, its share price performance lags behind fossil fuel-focused competitors. BP and Bluebell were not immediately available for comment, though BP previously stated receiving support for its strategy from major shareholders.

Norfolk Southern CEO Criticizes Activist Investor's Demands Amid Proxy Fight

Ancora Holdings, an activist investor group, has outlined a comprehensive plan aimed at revamping Norfolk Southern's operations, services, and profitability by replacing CEO Alan Shaw's resilience strategy with the Precision Scheduled Railroading (PSR) model. Ancora proposes installing its own management team, including former UPS executive Jim Barber Jr. as CEO and former CSX operations chief Jamie Boychuk as COO, to lead the transition. They envision achieving a 57% operating ratio within three years, focusing on cost reduction, network optimization, and improved service metrics. Despite the NS board's support for Shaw and his strategy, Ancora remains steadfast in its pursuit of change, emphasizing the potential benefits of a true PSR approach. However, its proposals face opposition from rail labor leaders and regulatory bodies.

Norfolk Southern CEO Alan Shaw has voiced criticism against Ancora Holdings. Shaw labeled Ancora's responses to settlement offers as unreasonable, stating that the investor's push for wholesale change could lead to long-term shareholder destruction. 

Starwood Capital Increases Stake in Ires Reit as Strategic Review Continues

US investment giant Starwood Capital has raised its stake in Ireland's largest private landlord, Ires Reit, from 1.5% to 2.1%, according to a recent regulatory filing. Starwood's increased investment comes amid ongoing speculation about its intentions following its initial purchase last month. This move follows a period of turbulence for Ires, which faced scrutiny from Canadian activist shareholder Vision Capital over its share performance and governance. Although Vision Capital's proposed board changes were rejected by shareholders, Ires continues its strategic review, with Eddie Byrne set to succeed CEO Margaret Sweeney in May. The review aims to explore various options, including new initiatives, mergers, or asset sales, to maximize shareholder value. Ires Reit's annual general meeting is scheduled for May 2.

Proxy Advisors Recommend Against Overhaul of JB Financial's Board

Global proxy advisors ISS and Glass Lewis have advised against South Korea's JB Financial Group accepting Align Partners Capital Management's demand for a significant board overhaul, according to banking sources. Align Partners, holding a 14.04% stake in JB Financial, proposed appointing five new outside directors to enhance governance, a move opposed by the advisors. ISS highlighted the dissident's failure to provide concrete evidence of governance issues and deemed a change unwarranted given the group's clear strategy and track record. Glass Lewis criticized Align Partners' focus on JB Financial, noting the company's strong performance among Korean banks. JB Financial plans to appoint only one of Align Partners' recommended directors, retaining control over board composition.

ISS Backs Kumho Petrochemical Amid Proxy Battle

Proxy advisory firm ISS supports the proposal of South Korea’s Kumho Petrochemical it faces a proxy battle initiated by an activist fund representing a former executive, Park Chul-whan. ISS endorses Kumho's plan to retire 50% of treasury shares over three years and its choice for an in-house director-cum-audit commissioner. Tcha Partners Asset Management, however, opposes these moves. Shareholders will decide at the March 22 annual general meeting. Despite ISS support, Tcha Partners urges an objective review. The National Pension Service's vote holds significance.

Activist Fund Oasis Management Builds Stake in Greencore, Pushes for Change

Hong Kong-based activist fund Oasis Management has acquired just under 5% of Greencore, signaling potential changes at the UK's largest sandwich maker. Frustrated with Greencore's dividend suspension since 2020 despite lower debt levels than competitors, Oasis seeks revitalization of the share price and increased shareholder returns. Oasis, known for successful activist campaigns, is expected to cross the 5% disclosure threshold soon. While relations with Greencore's management remain civil, Oasis aims for significant changes to drive growth and value. Greencore, benefiting from increased office workers post-pandemic, faces pressure to address underperforming share prices amidst buoyant sales.

March Activism: Key Takeaways 

As we draw to a close on today's briefing, it's evident that shareholder activism remains a potent force driving change in corporate landscapes worldwide. From the targeted strategies of investment firms like Saba Capital Management and Bulldog Investors to the comprehensive plans outlined by Ancora Holdings, each initiative underscores the importance of strategic decision-making and effective engagement between investors and companies. Proxy battles, boardroom clashes, and strategic reviews serve as reminders of the dynamic nature of corporate governance and the evolving expectations of shareholders. As we navigate through these developments, it becomes increasingly clear that the future of shareholder activism will continue to shape the trajectory of corporate governance, accountability in the days ahead.

Until Next Time

As always, if you're eager to dive deeper into your analysis of activism, consider subscribing to our Activist Alpha data product. We look forward to reconvening next month for further insights.

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