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DEF14 Monthly Knowledge+: October's Activism Highlights (New 13D campaigns)

Updated: Dec 7, 2023

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Hello and welcome back to DEF14's Monthly Knowledge+! Are you prepared for a brief update on last month's activism scene in the US? In October, there were a total of 24 active campaigns, with 9 of them being new.

Like your trusty tour guides through this exciting landscape, we're here to give you the inside scoop on all things activism. Now, let’s roll up our sleeves and take a closer look at the latest happenings (13D campaigns) that have been making waves!

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.

A Closer Look at the Newly Launched 13D Campaigns

October 23th: Corvex Management v. Southwest Gas

Corvex Management LP, a hedge fund, has expanded its position in Southwest Gas, a prominent utility services provider, now holding a 5.8% stake in the company, equivalent to 4,153,717 shares. The hedge fund is in talks with the board to maximize Southwest Gas's value, particularly focusing on utility franchises and its Centuri Group investment. Corvex sees Southwest Gas as undervalued compared to peers and emphasizes the need to address this. They also have concerns about the viability of the $2 billion capital plan if it lowers the market valuation. Corvex plans to collaborate with Southwest to enhance shareholder value, potentially through improved capital returns, further restructuring, or exploring a company sale.

October 20th: Bulldog Investors v. Principal Real Estate

Bulldog Investors, a registered investment adviser represented by Phillip Goldstein and Andrew Dakos, has collectively acquired 261,014 shares (3.88% of outstanding shares) of PRINCIPAL REAL ESTATE INCOME FUND (PGZ), with each of Messrs. Goldstein and Dakos individually holding 374,020 shares (5.55% of outstanding shares). PRINCIPAL REAL ESTATE INCOME FUND (PGZ) is a real estate investment trust headquartered in Denver, Colorado.

Their intention is to engage with PGZ's board of trustees to address the Fund's double-digit trading discount to net asset value. Furthermore, on October 25, 2023, Bulldog Investors, LLP announced its plans to nominate Paul Poole for election as a Trustee and present a proposal to merge the Trust into Principal Real Estate Securities Fund at the Trust's 2024 annual meeting of shareholders.

October 19th: Gamco v. Cyteir Therapeutics, Inc.

Gamco Investors, led by Mario J. Gabelli, has recently acquired a significant 5.90% stake in Cyteir Therapeutics, Inc., a prominent biotechnology company. Gamco Investors and Cyteir Therapeutics analyze their investments meticulously and actively explore strategies to enhance shareholder value. It's important to note that they do not intend to assume control or involve themselves in day-to-day management. However, they remain open to various strategic actions, such as divestment of business units, selling the company, or making adjustments to the capitalization and dividend policies. To promote corporate governance and protect shareholder interests, they have established a set of general voting policies.

Interestingly, it was reported in June that Cyteir Therapeutics was considering dissolution and ceasing all operations due to severe financial difficulties, having hit rock bottom.

October 17th: Impactive Capital v. Concentrix Corp.

The prominent investment entity, Impactive Capital, through its Impactive Funds, invested approximately $362 million, equivalent to 5.90% of Concentrix Corporation's shares, believing in the investment's potential. Concentrix is a global customer engagement and business services company. Impactive Capital intends to discuss various matters with Concentrix stakeholders, including operations, strategy, governance, and capital structure. While specific plans aren't outlined, their strategies may evolve based on financial performance and industry trends. Impactive Capital also sees value enhancement potential through ESG initiatives within Concentrix.

October 17th: Starboard Value LP v. Fortrea Holdings Inc.

Activist investor Starboard Value LP reported an 8.7% stake in Fortrea Holdings Inc. (FTRE), a global contract research organization serving the life sciences industry. Starboard believes FTRE is well-positioned for growth, especially with increased biotech research and development investments. Their investment has boosted FTRE's share value. Starboard, including related entities, acquired about 5.6% of FTRE shares for investment purposes and may discuss various matters with the company. While no specific plans are outlined, they may take future actions based on market conditions and performance, potentially involving additional share transactions or engaging with FTRE's management and board.

October 16th: Elliott v. E2open Parent Holdings, Inc.

Elliott Management Corporation (Elliott), a renowned activist fund managing over $71 billion in assets under management, has revealed its substantial ownership of approximately 9% of the tradable stocks of supply chain software platform E2open. In light of this significant holding, Elliott is actively engaging with E2open to explore strategic opportunities aimed at unlocking and enhancing shareholder value. It's worth noting that the mention of dividends is particularly relevant in the context of a company that does not currently issue dividends.

October 16th: Impactive Capital v. Clarivate PlC

Impactive Capital, a prominent investment entity, has reported its ownership of 5.3% of Clarivate Plc shares, viewing it as an attractive investment. Clarivate Plc is a global information services and analytics company. Impactive has engaged in discussions with Clarivate on various matters, including business operations and governance, without specific plans outlined. Impactive Capital remains open to adjusting their investment strategy based on factors like financial performance and market conditions.

October 13th: Gamco v. Blue Apron Holdings, Inc.

Gamco Investors, Inc. holds a 5.10% stake in Blue Apron Holdings, Inc., a meal kit delivery service provider. They acquired these shares in line with their investment objectives, which focus on enhancing shareholder value through continuous analysis of their investments. While not seeking control, Gamco may suggest operational changes or capital structure adjustments for the benefit of shareholders. Their voting policies prioritize shareholder interests and adapt to market conditions.

Of note, Blue Apron recently agreed to a $103 million acquisition by Wonder Group, led by entrepreneur Marc Lore, marking a shift towards an asset-light business model and significant workforce reductions.

October 5th: Gamco v. RGC Resouces

Gamco Investors collectively possess 5.09% of RGC Resources' Common Stock, which amounts to 508,298 shares out of the total 10,001,197 outstanding shares. RGC Resources operates in the energy products and services sector. These holdings are part of Gamco's investment strategy aimed at enhancing shareholder value through suggestions for operational improvements or capital structure adjustments. Their voting policies prioritize shareholder interests, and they adapt their investment strategy based on financial conditions and market trends. It's important to note that individual client decisions regarding RGC Resources, Inc.'s securities may differ due to their distinct objectives and diversification requirements, despite sharing a common investment philosophy.

Other Activism Highlights worldwide

Icahn files lawsuit against Illumina's former CEO and board, citing breach of duty:

Carl C. Icahn is intensifying his efforts to change Illumina by filing a lawsuit against former CEO Francis deSouza and board members over their handling of the Grail acquisition and its defense. This follows deSouza's resignation four months ago due to a proxy challenge from Icahn. The activist investor seeks cost reductions of over $300 million and a halt to acquisitions. However, he supports the current CEO, Jacob Thaysen, appointed in September. Icahn's case revolves around Illumina's Grail acquisition, declining stock price, and increased board compensation for deSouza. He also raised concerns about potential conflicts related to Grail's purchase.

Blackstone engages in discussions with Disney regarding Indian streaming and television operations:

Blackstone, a major private equity firm, is in talks with Disney about possibly acquiring Disney's media operations in India, including streaming and television businesses. High-level leaders from both companies have engaged in discussions, with Blackstone considering either a partial package, including assets like sports properties and Disney+ Hotstar, or the complete portfolio, encompassing Star India TV network and more. Former Disney executives Kevin Mayer and Tom Staggs are facilitating these discussions. The involvement of Vanguard, a significant shareholder in both companies, may also influence a potential deal. It's unclear whether this is part of a broader global transaction for Disney, which has faced various financial challenges and restructuring efforts recently.

Activist Peltz gains support from former Marvel chairman in Disney board seat push:

Activist investor Nelson Peltz, backed by former Marvel Chairman Isaac Perlmutter, is intensifying efforts at Disney. Perlmutter's 30 million shares form the majority of Trian's stake, and Peltz's Trian Fund Management aims for board seats. While Perlmutter, a significant Disney shareholder, believes Disney is underperforming, he won't seek a board seat or return to the company. Disney shares are down 8% this year, raising the specter of a proxy battle in December unless Disney makes significant changes like seeking external investment for ESPN or spinning off ABC and other TV channels.

Starboard Value outlines more details about its investment focus in Bloomin' Brands:

After acquiring a stake in Bloomin' Brands in August, activist investor Starboard Value L.P. has provided further insights into its interest in Bloomin' Brands Inc. Starboard now holds a stake of more than 9.9% in the company and has enlisted David George, a former Darden executive, as an advisor. Their primary focus lies on improving operations and enhancing the customer experience at Outback Steakhouse, urging the brand to recapture its fun-loving image from its advertising history. Additionally, Starboard identifies growth opportunities in Bloomin' Brands' other concepts, such as Outback Brazil, Fleming's Prime Steakhouse, Carrabba's Italian Grill, and Bonefish Grill, with a particular emphasis on Carrabba's potential in the casual-dining Italian segment. Starboard also highlights opportunities for optimizing capital allocation for new restaurants and maximizing return on investment, leveraging Bloomin' Brands' significant discretionary cash flow potential.

Engaged Capital, an activist investor, has announced its investment in VF Corporation:

Engaged Capital has invested in VF Corporation, ,the owner of brands like Vans and The North Face ,urging cost cuts and board changes. Engaged envisions a $46 share price within three years if its proposals are adopted. The exact stake size remains undisclosed, and they criticize former CEO Steve Rendle's strategy. Engaged seeks $300 million in cost reductions and a halt to acquisitions but supports CEO Bracken Darrell.

Activist fund Palliser Capital takes aim at Japanese rail firm with $12bn stake in Tokyo Disneyland parent:

Palliser Capital, a UK-based fund led by former employees of activist fund Elliott Management, is targeting Keisei Electric Railway, a Japanese rail operator holding a nearly $12 billion stake in Oriental Land, the owner of Tokyo Disneyland. Palliser aims to persuade Keisei to reduce its stake in Oriental Land and focus on its core railway business, seeking to unlock trapped value and improve governance in line with increasing pressure on Japanese companies to enhance their price-to-book ratios and governance practices.

October Activism: Key Takeaways

In summary, activist investors have been actively pursuing changes during October in various companies to unlock shareholder value and improve governance. They are targeting undervalued assets, engaging with boards to address trading discounts, and exploring strategic opportunities. Key actions include stake acquisitions, nominations for trustee positions, and legal actions. These efforts reflect a broader trend of intensifying shareholder pressure on companies to enhance their financial performance and corporate practices.

Stay ahead of the game in the corporate activism sphere

That's all for today! We value your presence today and thank you for your engagement. Stay tuned for our upcoming Monthly Knowledge+ edition, promising yet another enlightening recap. Until then, remain informed and stay actively involved. Catch you next month!

P.S. If you're keen on enhancing your understanding of activism, our real-time campaign updates via Activist Alpha® are your ultimate source. Don't miss out – subscribe now to access a wealth of additional insights!

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