Welcome back, everyone! As always, we're thrilled to have you here today as we explore the latest happenings in shareholder activism. As the proxy season looms on the horizon, we've witnessed a significant surge in activity, especially during this bustling November in the US. In fact, the number of active 13D campaigns has soared to 65, nearly tripling the count we saw in October!
Among these 65 campaigns, we've got 10 fresh additions, courtesy of Engine Capital and Saba Capital Management, that we're eager to discuss. So, without further ado, let's explore each of these new campaigns together!
DEF14's Activist Alpha® provides real-time updates on the performance and positions of active campaigns filed by renowned activist groups.
Engine Capital’s November 3rd 13D Campaign: Orthofix Medical Inc.
Engine Capital, a renowned investment firm known for its activist strategies, alongside its affiliates Engine Jet and Engine Lift, has acquired an impressive 2,688,687 shares of Orthofix Medical Inc., a prominent medical device company. This substantial investment, totaling approximately $31.98 million, accounts for roughly 6% of Orthofix's shares by Engine Capital, and less than 1% each by its affiliates. The funding for this investment came from working capital, possibly including margin loans. Engine Capital's move reflects its belief in Orthofix Medical's potential as an attractive investment opportunity and aligns with its proactive approach to influence company management and operations by actively engaging with the company's Board of Directors.
Saba Capital Management’s November 13D Campaigns
In November, Saba Capital Management, under the leadership of Boaz Weinstein, launched an impressive nine campaigns. These investments were funded through various sources, including investor subscriptions, capital appreciation, and margin account borrowings. Saba Capital's decision was rooted in its assessment of undervalued shares and compelling investment opportunities. Demonstrating an active investment strategy, Saba Capital is open to engaging in discussions with the management, Board of Trustees, and other shareholders of the target companies on various aspects such as operations, governance, and strategic direction.
November 1st: BNY Mellon Municipal Income, Inc.
Saba Capital Management, along with its affiliates and Boaz R. Weinstein, made a substantial investment of approximately $13.07 million in BNY Mellon Municipal Income, Inc., which specializes in municipal bond investments.
November 1st: Voya Global Advantage and Premium Opportunity Fund
Saba Capital Management and its affiliates invested around $6.95 million in the common shares of Voya Global Advantage & Premium Opportunity Fund, a company specializing in diverse investment opportunities.
November 6th: Eaton Vance California Municipal Income Trust
Saba Capital Management and its affiliates allocated approximately $7.76 million to the Eaton Vance California Municipal Income Trust, focusing on municipal bonds in California.
November 7th: Pioneer Municipal High Income Advantage Fund
Saba Capital Management and its affiliates have invested approximately $17.91 million in Pioneer Municipal High Income Advantage Fund, Inc., a company specializing in high-income municipal bonds.
November 13th: DWS Municipal Income Trust
Saba Capital Management and its affiliates committed about $17.71 million to DWS Municipal Income Trust, a company specializing in municipal income investment strategies.
November 14th: New America High Income Fund
Saba Capital Management and its affiliates jointly reported their ownership of Common Shares in the New America High Income Fund, which shares the same focus on municipal income investment strategies, amounting to approximately $11.3 million.
November 20th: Neuberger Berman Municipal Fund
Saba Capital Management and its affiliates allocated approximately $14.05 million to Neuberger Berman Municipal Fund Inc., a firm specializing in municipal bond investments.
November 20th: BlackRock Virginia Municipal Bond Trust
Saba Capital Management and its affiliates invested approximately $898,587 in the BlackRock Virginia Municipal Bond Trust, a fund specializing in Virginia municipal bond investments.
November 20th: BlackRock New York Quality Fund
Saba Capital Management and its affiliates put approximately $18.78 million into BlackRock MuniYield New York Quality Fund, Inc., a specialized investment fund primarily focused on municipal bonds within the state of New York.
Our founder at DEF14 has recently highlighted Saba's focused strategy on closed-end fund arbitrage, primarily investing in funds trading below their net asset value (NAV). This approach involves buying undervalued shares and implementing changes to increase their value, especially in closed-end funds which have a fixed share count and often show price-asset value discrepancies. Saba's tactics include converting Closed-End Funds to Exchange-Traded Funds, addressing governance in BlackRock-managed funds, and strategic acquisitions like their bid for Sculptor Capital Management. For more details, click here to read more.
Other Activism Highlights worldwide
Major investors urge board revamp at SilverBow Resources to address governance and performance issues
On November 30th, two major investors of SilverBow Resources Inc, Riposte Capital and Kimmeridge Energy Management, called for a revamp of the company's board due to governance concerns and underperformance. Riposte Capital, holding a 6.7% stake, demanded the appointment of three new directors at the next shareholder meeting, following unheeded previous demands for dropping anti-takeover defenses and considering a sale. Kimmeridge, the largest shareholder with a 12.9% stake, expressed support for improvements in accountability and performance. SilverBow's shares briefly rose 5% following Riposte's letter but later dropped due to external market factors. The company's market capitalization stands at around $800 million.
Elliott Investment Management targets Crown Castle for major board and leadership changes amid underperformance
Elliott Investment Management is set to nominate directors at Crown Castle International, aiming for a leadership overhaul due to the wireless tower owner's years of underperformance. Elliott, owning a $2 billion stake, plans to challenge the 12-member board, potentially leading to a proxy fight in 2024. The hedge fund criticizes Crown Castle's strategy, governance, and share price decline. In contrast, rivals American Tower and SBA Communications fared better. Previously, Elliott's pressure led to a board refresh at Crown Castle. This move aligns with a broader trend of activists increasingly demanding top executive changes in companies.
Elliott Investment Management acquires $1 billion stake in Phillips 66, seeking board seats to unlock shareholder value
Elliott Investment Management has also acquired a $1 billion stake in Phillips 66 (PSX) and is seeking to secure two seats on the company's board. Elliott aims to address Phillips 66's underperformance, improve its execution, regain investor trust, and unlock substantial and sustainable value for shareholders. Elliott believes there is approximately 75% upside potential to the current stock price. While Elliott did not call for the removal of Phillips 66's CEO Mark Lashier, they emphasize the need for significant progress in achieving their recommended targets and the importance of reassuring investors about the company's value-creation potential.
Activist investors Peltz and ValueAct escalate pressure on Disney for board changes and strategic revamp
Nelson Peltz and his firm, Trian Fund Management, have intensified their campaign at Disney, aiming for at least three board seats to challenge the company's direction under CEO Bob Iger. Peltz, dissatisfied with Iger's reforms and concerned about Disney's 16% share value decline, has resumed his activist efforts, questioning the company's strategic decisions and value erosion.
Simultaneously, another significant activist investor, ValueAct Capital, has emerged in Disney, amassing a substantial but undisclosed stake amidst the challenges faced by Disney's traditional TV business and falling share price. Ancora, in an open letter, has also highlighted financial mismanagement and ineffective governance at Disney, which have persisted beyond former CEO Bob Chapek's tenure, contributing significantly to Disney's recent performance difficulties. These moves by ValueAct and Ancora add to the pressure on Disney, already under scrutiny from investors like Peltz.
On the flip side, Blackwells Capital has urged Nelson Peltz to abandon his renewed bid for multiple Disney board seats. They express concerns that Peltz's campaign prioritizes ego over shareholders' interests and could cost them up to $50 million. The firm further criticizes Peltz's track record at Wendy's as a cautionary tale. Blackwells supports Disney's ongoing restructuring efforts under CEO Bob Iger and the recent board appointments. They emphasize the importance of experienced voices in the boardroom and call on Peltz to withdraw his disruptive efforts.
Cosmo Energy faces tough shareholder vote on revised anti-takeover strategy amid activist pressure
Cosmo Energy Holdings, Japan's third-largest oil refiner, faces challenges in gaining shareholder support for a revised "poison pill" defense against a hostile takeover. The company plans a shareholder vote on December 14 to deter an activist group led by Yoshiaki Murakami from increasing its stake from 20% to 24.56%. CEO Shigeru Yamada acknowledged resistance from some investors against takeover defenses. Cosmo has been contending with Murakami's group for over a year, including a June vote that allowed diluting the activists' stake under certain conditions. The upcoming vote will decide if further purchases by the activists can be blocked even when they follow set procedures.
Beyond Inc CEO steps down amid activist investor pressure
Internet retailer Beyond Inc. (formerly Overstock.com) has announced the departure of its CEO, Jonathan Johnson, due to pressure from activist investor JAT Capital, which holds a 9.6% stake in the company. JAT Capital had urged the board to replace Johnson, citing his responsibility for the company's poor financial performance. Dave Nielsen, who has served as Beyond's president since 2019, will temporarily assume the role of CEO while the search for a permanent CEO is underway. Activist investor John Thaler suggested that Marcus Lemonis, a recent addition to Beyond's board, should become the new CEO in a letter dated Nov. 2.
Target seeks dismissal of shareholder lawsuit over LGBTQ-themed merchandise
Target has requested the dismissal of a shareholder lawsuit alleging that the company ignored risks related to offering LGBTQ-themed merchandise for Pride Month. The retailer argued that the lawsuit lacks merit, stating that the plaintiff, Brian Craig, simply disagrees with Target's business decisions and has no evidence of investor deception regarding the company's approach to social and political risks. Target emphasized that securities laws protect against fraud but do not cover expressing disapproval or insuring investors against regular market losses.
Jeff Ubben shuts down Inclusive Capital amid fundraising challenges and market shifts
Jeff Ubben, a prominent activist investor, is closing down his firm Inclusive Capital Partners (InCap) after three years. Known for his earlier success with ValueAct Capital, Ubben started InCap to focus on social investing. The firm invested in companies like Exxon, where Ubben joined the board, addressing environmental and societal needs. However, InCap faced challenges in raising funds, especially amid shifting investor interests towards immediate returns rather than environmental, social, and governance (ESG) issues. Recent market conditions and a series of underperforming investments in companies such as Ingevity and Bio Rad Laboratories also contributed to the decision to shut down InCap.
Activist investors push Twilio for full sale or divestment of business units
Activist investors are pressuring software maker Twilio to sell the entire company or divest one of its two business units, which represent less than 20% of its revenue. Anson Funds and Legion Partners have both advocated for such actions. Twilio implemented a reorganization in February, creating two business units: Communications and Data & Applications. Anson Funds has built a stake in Twilio valued at around $50 million and urged the board to consider a sale or divest the Data & Applications unit. Legion Partners, which maintains its stake, has a similar pitch. Twilio's stock has faced challenges in recent years.
RBC and BMO commit to racial equity audits amid shareholder pressure
Canada's Royal Bank of Canada (RBC) and Bank of Montreal (BMO) are pledging racial equity audits in response to shareholder pressure. RBC plans two third-party audits, one in 2024 focusing on employment practices affecting racialized groups and another in 2025 examining broader business practices. BMO will also conduct an audit addressing racial equity. Both banks aim to identify and dismantle systemic barriers affecting marginalized communities, reflecting a growing trend of corporate responsibility and inclusivity in response to shareholder activism.
Azenta announces board changes following agreement with activist investor Politan Capital Management
Azenta, a life sciences services provider, is making changes to its board following discussions with activist investor Politan Capital Management. The company will add two new directors while two current directors will retire. Additionally, Azenta plans to repurchase $500 million in shares in fiscal 2024 and focus on smaller acquisitions. This agreement has resulted in a nearly 12% jump in the company's shares in after-hours trading. Politan, one of Azenta's major shareholders, has withdrawn its notice to nominate director candidates, avoiding a potential proxy fight.
November Activism: Key Takeaways
Throughout November, activist campaigns employed a range of strategies, including closed-end fund arbitrage, board restructuring, acquisitions, and divestments. Notable companies such as Orthofix Medical, BNY Mellon Municipal Income, and Phillips 66 became targets of these initiatives. We’ve also seen activism on a global scale, addressing issues like underperformance, board reshaping, and advocating for racial equity audits. These examples highlight the influential role played by activist investors in instigating corporate change and steering the direction of companies.
Until Next Month:
We appreciate your participation today and your interaction with our content. Be sure to watch for our forthcoming Monthly Knowledge+ edition, which will offer yet another enlightening summary. In the interim, stay well-informed and engaged in the world of corporate activism. We look forward to reconnecting with you next month!
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