Activism Update - May 2020 - Lazard.com
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CONFIDENTIAL MAY 2020
LAZARD'S SHAREHOLDER ADVISORY GROUP
Activism Update – May 2020
Lazard has prepared the information herein based upon publicly available
information and for general informational purposes only. The information is not
intended to be, and should not be construed as, financial, legal or other advice,
and Lazard shall have no duties or obligations to you in respect of the information.ACTIVISM UPDATE – MAY 2020
Activism Monthly Flash Report: May 2020
• May saw an increase in new campaigns compared to March and April; 16 campaigns and $3.3bn of capital deployed
− May's campaign initiations were double that of April, while capital deployed was 159% higher than March
Uptick in Global − However, May activity was still below the monthly averages for the pre-COVID six month period ended in February 2020 with
Activism Driven by respect to both campaigns initiated (~19) and capital deployed (~$4.6bn)
Increased Activity in • Five campaigns in Japan drove much of the activity, continuing the recent trend of heightened APAC activity
Japan − In 2020 YTD, 16 campaigns initiated in Japan, compared with an average of ~6 over the same period in 2017 – 2019
− Three of the Japanese campaigns initiated in May had a capital return thesis, compared with only one capital return-oriented
campaign initiated in the rest of the world in 2020 YTD
• In 2020 YTD, European activism saw broadened sources of agitation as vocalism diversifies across the activism landscape
Uncommon Activists in
Europe • 80% of campaigns were initiated by occasional activists or institutional and other investors, compared with only 50% of
campaigns over the same period in 2019
Activists Holding • Board and/or Management removal at European companies is becoming a more prominent demand by activists
Europe Management
− 50% of Q2 campaigns involved attacks against Boards or Management teams
and Boards
Accountable • COVID crisis has not deterred activists in situations where they believe management is jeopardizing the future of the company
• In addition to the increase in new campaigns in May, existing campaigns continued to develop, including two failed proxy contests
in Europe
Notable Updates to − easyJet founder Stelios Haji-Ioannou failed to remove any of the four Directors he targeted at the EGM
Existing Campaigns − Amber Capital lost its proxy fight against Lagardère, with all eight of its nominees failing to win Board seats
− Elliott published a letter criticizing Alexion for its acquisition of Portola and called for an outright sale of the Company
• Recent campaigns by private equity (e.g., KKR / Dave & Busters) show the continued blurring of formerly-defined investment lines
Aperture of Activism
Widening • Elliott teaming up with MFS, Capital Group and Fidelity to inject capital at CenterPoint highlights the broadening use of activist
tactics as well as a new-found comfort of long-only investors publicly teaming up with activists
• May saw a downturn in settlements for Board seats, with only three campaigns settling for a total of six dissident Board seats
relative to seven settlements for 11 Board seats in April
Board Settlement
− In 2020 YTD, 31 settlements have resulted in 60 Board seats versus 37 and 74 in the prior-year period, respectively
Activity Down;
• Starboard continued to be the most prolific activist in terms of Board seats, settling for three seats at Merit Medical and winning
Starboard Most Prolific eight Board seats in a proxy contest at GCP in May
in Seats Won − In 2020 YTD, Starboard has won 14 Board seats and has 14 seats “in-play” at Commvault and Mednax
• In 2020 YTD, all Board seats won by activists, aside from Starboard’s proxy win at GCP, have come through settlements
Source: FactSet, press reports and public filings.
Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement; select campaigns with market 1
capitalizations less than $500 million at time of announcement included during COVID-19 pandemic induced market downturn.ACTIVISM UPDATE – MAY 2020
Campaign Activity and Capital Deployment
($ in billions)
Quarterly Campaigns Initiated1 Quarterly Capital Deployment in New Campaigns2
# of Campaigns Initiated Aggregate Value of New Activist Positions
249
212 2020 YTD capital deployed in-
209
63 $66.7 line with historical averages
187 May’s 16 campaign $62.4 due to a strong February
49 46 initiations in line with
34 7.8 13.5
43 previous six-month
53 52 average of ~17 8.7 $42.2
52 17.3
73 83 $30.5 6.1
19.0
36 40 54 11.5
24 6.0 20.9 $19.7
12.8 13.0 5.1
65 70 70 57 59 26.0
6.0 16.5 11.7 14.6
5.7
2016 2017 2018 2019 2020 YTD 2016 2017 2018 2019 2020 YTD
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020 YTD Campaign Initiations by Month1 Campaigns Initiated By Region, 2020 YTD
Capital deployed in May outpaced both Between 2017 – 2019,
39
March and April, driven by Elliott’ $0.6bn campaigns at Japanese
26 companies accounted for only
stake in CenterPoint and Pershing’s ~7% of global campaigns
$1.4bn stake in RBI
21 25
17
16 16 9 16
$11.3
10
8 18 16
3
$3.3 6
$2.0 $1.3 $1.9
North America Europe Japan Rest of World
% of Global Post-COVID3
January February March April May
Campaigns
Campaigns Initiated Capital Deployed 47% 30% 19% 4%
Initiated
Source: FactSet, press reports and public filings.
Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement; select campaigns with market 2
capitalizations less than $500 million at time of announcement included during COVID-19 pandemic induced market downturn.
1 Companies spun off as part of campaign process counted separately.
2 Calculated as of campaign announcement date. Does not include derivative positions.
3 Post-COVID period includes all 2020 YTD campaigns initiated after March 1, 2020.ACTIVISM UPDATE – MAY 2020
Update on Activism in Europe
While Europe continues to witness a diversification of agitators and geographies, Management teams and Boards have been put
under increasing shareholder pressure during this crisis
Diversity of Agitators Management and Board have been under pressure: selected recent activity
2019 YTD 2020 YTD Company /
Activist Target Board / Management
Market Cap2
Institutional &
Institutional &
Others Elliott • Veraison requisitioned a special meeting
Elliott Others
17% 12% Full Time
17% 28% with the intention of replacing 4 Directors
Activists 1
8% including the Chairman
$0.4
• TCI urged Wirecard to oust CEO after a
50% critical audit failed to address allegations of
Full Time
Occasional Activists2 accounting wrongdoing
33% 33% Occasional $11.0
80%
52%
• Founder Stelios Haji-Ioannou called for the
Stelios Haji-
Traditional institutions and occasional activists are now responsible for 80% of removal of 4 Directors, including both the
Ioannou Chairman and the CEO
all activism campaigns $2.7
Campaigns including agitation for Board / Management Changes • Teleios Capital sent a public letter expressing
its concerns regarding, among other things,
Half of Q2 campaigns 50%
corporate governance
involved attacks against $0.5
Boards / Management
• In March 2020, Hugo Boss announced that
33%
its CEO will leave the managing Board amid
33%
pressure from Bluebell
$3.4
22%
• In March 2020, Sherborne released a letter
advising Barclays’ Board to withdraw its
reelection support in favor of the CEO
$49.8
2018 YTD 2019 YTD 2020 Q1 2020 April-May • In March 2020, Amber urged shareholders to
vote for a new Supervisory Board and
Continued increase in campaigns for Board/Management change YTD nominated 8 candidates
$4.1
Source: FactSet, press reports and public filings as of 05/31/2020. 3
Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement; select campaigns with market
capitalizations less than $500 million at time of announcement included during COVID-19 pandemic induced market downturn.
1 Includes Cevian, Petrus Advisers, Polygon Partners, Teleios and Third Point.
2 Reported as of initial campaign announcement date.ACTIVISM UPDATE – MAY 2020
Notable May 2020 Public Campaign Launches and Developments
($ in billions)
Launch Company / Launch Company /
Activist Highlights Activist Highlights
Date Market Cap1 Date Market Cap1
• Starboard and Merit Medical entered into a
• Oasis submitted a proposal at the upcoming AGM for settlement agreement for three Board seats
5/20 JPY 10bn in share repurchases, the addition of two 1/20
$1.9 • Merit Medical also agreed to form a new operating
$2.0 Directors and the addition of a nominating committee
committee
• Elliott and Bluescape made $625 million and $100
million investments, respectively, in CenterPoint
through new Series C convertible preferred stock;
MFS, Capital Group and Fidelity also participated in • Fir Tree stated that now would be untimely for a
5/20 the financing through common shares 3/19 share repurchase program and nominated three
$9.0 • Elliott also entered into a settlement agreement $5.2 Directors
which saw two new independent Directors added to
the Board and the formation of a Business Review
and Evaluation Committee
• Pershing Square filed a 13D and made general • ISS recommended for six Starboard nominees, while
statements about engaging over cost structure, Glass Lewis recommended for six out of ten GCP
operations, capitalization, governance and Board nominees; GCP stated that Starboard had rejected
5/20 composition 2/19
$14.6 $2.2 "numerous" settlement offers
• Pershing Square had been a 13G filer at RBI since
the Company’s founding in Q4 2014 • Starboard won all 8 Board seats at the AGM
• Stelios Haji-Ioannou (“SHI”) sought to remove the
Chairman, CEO, CFO and an additional Director and • Elliott sent a letter to Alexion's Board calling for the
force the cancelation of easyJet’s Airbus contract immediate exploration of a sale; Elliott also stated
Stelios
that the recent Portola announcement had a
3/20 Haji- • SHI accused top shareholders Invesco, Ninety One 12/17
"profoundly negative impact on shareholder value"
$2.7 Ioannou and Phoenix of being “Airbus strawmen” $24.4 and eliminated "approximately $1.7bn from the
• Activist proposal was defeated convincingly by ~99% Company's market capitalization in a single day"
of the independent vote
• Amber lost its proxy contest for eight Board seats,
with one incumbent Director failing to be reelected
• Despite losing the proxy fight, Amber stated that it
• John Hockin, head of KKR’s public equity
1/20 5/17 would continue its campaign at Lagardère
investments, was appointed to the Board
$1.5 $4.1 • “White knights” (including Vincent Bolloré and others)
took significant positions and voted in support of the
existing Board
Source: Activist Insight, public filings and press reports.
4
1 Reported as of initial campaign announcement date.ACTIVISM UPDATE – MAY 2020
Board Seat Activity
Of the 68 Board seats won YTD, 59 were in the US, 6 in Europe and 3 in Rest of World
Board Seats Won by Year Top Activists by 2020 Board Seats Won
161
Activist Board Seats Won
Starboard’s eight Board seats won
at GCP are the only seats won in a
proxy contest in 2020 YTD Starboard 14
35
Elliott 12
122
H Partners 4
20
103
Ancora Advisors /
Macellum Capital
3
14
Icahn 3
68
Atlas Holdings 3
126 8
Luminus Management 3
102
89
Voce Capital 3
60
ValueAct 2
JANA Partners 2
2017 2018 2019 2020 YTD 2
Oaktree Capital
Settlements Proxy Contest
Source: FactSet, press reports and public filings. 5
Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement; select campaigns with market
capitalizations less than $500 million at time of announcement included during COVID-19 pandemic induced market downturn.You can also read
