Review of Shareholder Activism - Q1 2019 - Lazard.com
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APRIL 2019
LAZARD'S SHAREHOLDER ADVISORY GROUP
Review of Shareholder Activism - Q1 2019
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.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
Key Observations on the Activist Environment in Q1 2019
Q1 2019’s campaign activity (57 new campaigns against 53 companies) was down year-over-year relative to 2018’s record pace, but
Slower Pace than in line with multi-year average levels
Record 2018, but
1 In Line with
Capital deployed in Q1 2019 ($11.3bn) was in line with recent quarters, and the top 10 activists had a cumulative $75.5bn deployed
in public activist positions (new and existing)1 at the end of the quarter
Historical Levels
Starboard overtook Elliott as the most prolific activist in Q1 2019, launching seven new campaigns
Transaction-focused campaigns were by far the most common in Q1 2019, with an M&A-related objective arising in nearly 50% of all
Activism’s new campaigns
2 Transactional Focus Pushes to sell the company (e.g., Caesars, Zayo) or engage in break-up or divestiture transactions (e.g, Dollar Tree, eBay) were
Continued the most frequent M&A objectives
Attempts to scuttle or sweeten existing deals were relatively less frequent than in prior quarters
Activists won 39 seats in Q1 2019,2 down from a record-breaking 65 in Q1 2018
Numerous Board All Board seats won were secured via settlements, as only three campaigns for Board seats (all international) went to a final vote
3 Seats in Play Heading Settlements included notable examples in the U.K. (Hammerson) and Japan (Olympus)
into Proxy Season Q1 2019 saw a notable surge in long slate nominations, with 10 long slates nominated, accounting for 77 Board seats sought
Heading into the 2019 proxy season, 103 Board seats remain in play
Campaigns outside the U.S. continued to account for ~33% of global activity
In Europe, activists primarily focused on catalyzing change at their existing campaigns (e.g., Barclays, EDP, Hammerson, Pernod
Continued Robust
Ricard)
4 Activity Outside the
ValueAct’s settlement for Board seats at Olympus and the defeat of Elliott’s proposals at Hyundai Motor Company and Hyundai
U.S.
Mobis indicate continued mixed results for U.S. activists in Asia
Heightened capital deployment in Canada (e.g., TransAlta, Methanex), accounting for 10% of the global total
Active Managers Wellington Management switched its 13G filing to a 13D and publicly opposed Bristol-Myers Squibb’s $74bn acquisition of Celgene
Taking Vocal Starboard separately opposed the deal, but withdrew its campaign after the deal garnered proxy advisor support
5 Approach to New Neuberger Berman twice intervened in activist campaigns (Ashland Global, SeaChange International) to broker Board refreshment
Heights deals and avoid proxy fights
Passive Managers State Street and BlackRock released letters refining their ESG principles to include corporate culture and purpose
6 Urge Focus on Culture Comments from passive managers come amid continued inflows into low-cost investment strategies and increasing shareholder
and Purpose concentration
Source:
Note:
FactSet, press reports and public filings as of 3/31/2019.
All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement.
1
1 Based on the market value of activist positions initiated since 2013 in which the activist still holds a stake. Excludes derivatives.
2 Represents Board seats won by activists in the respective year, regardless of the year in which the campaign was initiated.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
1 Campaign Activity and Capital Deployment
($ in billions)
Annual Campaign Activity Quarterly Campaign Activity
1
# of Companies Targeted # of Campaigns Initiated # of Campaigns Initiated1
YTD Companies Targeted 252
216 255 72 74
199 213 71
190 230 65 62
205
Mean: 55 54 57
176 194 190 53 50
200 192
Mean: 155 45
169 41
37 34
105
57
100 55
53
5
41 61 61 64 67
-45 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2014 2015 2016 2017 2018 2019 YTD 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019
Capital Deployment in New Campaigns Capital Deployment by Sector in 2019 YTD
Aggregate Value of New Activist Positions2 Aggregate Value of New Activist Positions2 YTD Companies Targeted
TCI’s Altaba campaign and Sherborne’s Barclays 13 10 5 5 4 6 2 3 4 1
campaign accounted for $9.7bn of capital deployed $25.3 3.5 60%
27%
Retail
Industrials
Media
Telecom
Power, Energy &
Consumer
Healthcare
Institutions
Real Estate
Technology
$20.9
Financial
3 Relatively increased focus on Industrials 50%
$19.0 and Power, Energy & Infrastructure targets
$17.3 2.5 20%
Infra.
$16.5 40%
Mean: $13.1bn $12.8 2 15%
$12.1 $11.3 30%
1.5 12% 12%
$7.8 $8.7
$6.0 $6.0 1 7% 3% 20%
$5.5 2% 1%REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
1 Notable Q1 2019 Public Campaign Launches and Developments—United States
($ in billions)
Launch Company / Launch Company /
Date Market Cap Activist Highlights Date Market Cap Activist Highlights
Starboard and Wellington separately came out
Legion, Ancora and Macellum nominated 16 against the Company’s planned $74bn
Directors, blaming poor governance and acquisition of Celgene, citing risks inherent in
3/19 2/19
management for the Company’s recent the deal
$1.9 $81.4
performance Starboard withdrew its campaign after ISS and
Glass Lewis recommended in favor of the deal
Criticizing Board for seeking bankruptcy rather
than other alternatives, BlueMountain
Land and Buildings nominated its Founder & nominated 13 Directors to replace entire Board
CIO Jonathan Litt to Marriott’s Board, looking Post 3/31 update: PG&E announced new CEO
3/19 1/191
for the Company to divest brands and return and 10 new Board members; while
$41.5 $7.2
capital to shareholders Knighthead, Redwood and Abrams have
supported the announcement, BlueMountain
has not made a public statement
Elliott sent a letter to eBay’s Board outlining a
Barington sent a letter to the Company urging five-step plan for value creation; Starboard was
it to sell its Victoria’s Secret brand and improve separately reported to have been active at the
its governance Company since October 2018
3/19 1/19
L Brands was reportedly engaging a search eBay settled with Elliott for two Board seats,
$7.4 $31.7
firm to help it identify new independent including one Elliott representative, and
Directors Starboard for one Board seat; the Company
announced an operational and strategic review
Starboard nominated seven Directors and
Icahn filed a 13D, saying that Caesars needed criticized the Company’s Family Dollar
to conduct a strategic review ending in a sale acquisition
of the Company Dollar Tree later announced a $2.7bn goodwill
2/19 1/19
Caesars and Icahn settled to appoint three $23.3 impairment on Family Dollar and plans to
$5.8 Icahn representatives to the Board, with the close/rebrand ~600 stores
potential to add a fourth Post 3/31 update: On April 5, Starboard
announced the withdrawal of its nominations
The Company announced a $200 strategic
In the midst of a proxy fight with Cruiser,
investment from Starboard and the
Ashland announced an agreement with
appointment of Starboard CEO Jeff Smith as
Neuberger Berman to appoint two new
Chairman and an additional new Director
2/19 7/182 independent Directors with input from
Founder and Director John Schnatter later $5.1 Neuberger and other investors
$1.3
agreed to step down from the Board and the
Cruiser later withdrew its slate and settled for
Company appointed three new independent
rights to be consulted on the new appointments
Directors
Source: FactSet, press reports and public filings as of 3/31/2019. 3
1 Refers to initial announcement of BlueMountain’s campaign. Campaign by Knighthead, Redwood Capital Management and Abrams Capital launched in March 2019 via 13D filing.
2 Refers to initial announcement of Cruiser’s campaign.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
1 Notable Q1 2019 Public Campaign Launches and Developments—Rest of World
($ in billions)
Launch Company / Launch Company /
Date Market Cap Activist Highlights Date Market Cap Activist Highlights
Mangrove announced plans to nominate five
Directors to TransAlta’s Board the same day as
the Company received a CAD $750m strategic Olympus announced that it invited a ValueAct
investment from Brookfield Renewable Partner to join its Board as part of a new
3/19 5/18 $12.0
$1.9 Partners “transformation plan” meant to “accelerate
Mangrove questioned the terms of the shareholder value creation”
Brookfield investment and threatened to scuttle
the deal
Pernod Ricard announced the appointment of
Hammerson settled with Elliott, appointing two
a Lead Independent Director and new strategic
12/18 4/18 new independent Directors and establishing a
$44.9 plan, the latter of which Elliott thought was
new Investment and Disposal Committee
insufficient $4.8
Elliott released a presentation calling on EDP
to reject China Three Gorges’ takeover offer
and instead divest assets to reinvest in its Elliott proposals for dividends and new
10/18 renewables business 4/18 independent Directors were rejected at
$13.2 $31.0
EDP announced a strategic update with plans Hyundai Motor Company and Hyundai Mobis
for €6bn in various divestitures, and plans to
invest in renewables
CIAM criticized Scor’s Chairman for the Sherborne formally nominated Founder
Company’s decision to sue Covéa over its Edward Bramson to Barclays’ Board
abandoned takeover offer Barclays announced the retirement of three
9/18 $8.7 CIAM urged shareholders to remove Scor’s 3/18 $49.8 Directors and resignation of its investment
Chairman and one other Board member, as bank head
well as vote down the Chairman’s Sherborne separately drew criticism for its use
compensation package of an “equity collar” in building its stake
Vivendi continued its campaign to remove five
Elliott-backed Directors at the Company
King Street said it planned to nominate a
8/18 $19.5 majority slate to Toshiba’s Board to aid the 3/18 $13.6 Vivendi eventually withdrew its nominees and
Company in its turnaround efforts shareholder proposals the day of the annual
meeting and offered its support for the
Company’s CEO
Source: FactSet, press reports and public filings as of 3/31/2019.
4REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
1 Top 10 Activists by Market Value of Current Activist Positions
($ in billions)
Despite the slower start to the year, the top 10 activists still have $75.5bn deployed in existing campaigns
New
Campaigns 2019 Target
Activist Market Value of Current Activist Positions1 2019 YTD2 Countries3 Selected Recent Targets
Elliott $1.7 $15.2 4
ValueAct $10.0 -- --
Cevian $0.6 $9.6 1
Trian $8.7 -- --
TCI $8.0 -- --
Third Point $7.0 -- --
Icahn $0.5 $6.1 1
Starboard $1.0 $4.2 Most prolific activist in Q1 2019 7
Pershing Square $4.0 -- --
Mantle Ridge $2.7 -- --
2019 Activist Positions Market Value of Activist Positions Launched in 2013-2018
Source: FactSet, press reports and public filings as of 3/31/2019. 5
Note: All data is for campaigns conducted globally at companies with market capitalizations greater than $500 million at time of campaign announcement.
1 Based on the market value of activist positions initiated since 2013 in which the activist still holds a stake. Includes publicly disclosed common stock positions only.
2 Number of new campaigns launched, includes positions both open and closed.
3 Based on country of company’s headquarters.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
2 The Activist Role in M&A in Q1 2019
46%1 of campaigns launched in Q1 2019 were M&A-driven, with pushing for a sale being the most common M&A objective
Scuttle or Sweeten
Sell the Company Break-Up / Divestiture
Existing Deals
Agitate for sale of target or encourage Agitation for a divestiture of a non-core Entry into live M&A situation to improve deal terms
industry consolidation business line or company breakup or block an ill-perceived deal from proceeding
39% 38% 23%
Target / Activist M&A Thesis Target / Activist M&A Thesis Target / Activist M&A Thesis
Starboard urged the
Icahn called for a strategic
Company to divest its Family
review and a sale of the Starboard and Wellington
Dollar business; Dollar Tree’s
Company; Caesars later opposed Bristol-Myers’
Board committed to keeping
settled with Icahn for three acquisition of Celgene, citing
the chain, but announced the
Board seats and was potential risks in Celgene’s
rebranding of 200 stores,
reportedly initiating merger drug pipeline and low upside
closing of 390 more and the
talks renovation of another 1,000
Elliott called on eBay to divest Paulson opposed Newmont’s
Elliott offered to acquire QEP its Classifieds and StubHub merger with Goldcorp, citing
for $2.1bn; in response, the businesses, which Starboard an excessive premium;
Company announced that it had pushed for privately; the Paulson dropped its
would conduct a full strategic Company settled and opposition after Newmont
review launched a strategic review announced a special dividend
Elliott called for divestitures at
Sachem Head called on the
the Company, with Petrus opposed Medco’s
Company to sell itself; Zayo
reinvestments in renewables; acquisition of Ophir, saying it
announced a strategic review,
EDP later announced undervalued the Company;
after which Starboard said the
divestitures and stake sales, shareholders approved the
Company needed to focus on
but declined to divest its stake acquisition after the takeover
the review and that a sale
in EDP Brasil, one of Elliott’s price was increased
may be its best option
demands
Kimmeridge called on capital Land & Buildings wanted Denbury abandoned its
return and improved Marriott to divest brands takeover of Penn Virginia
operations and the potential and return capital to after Mangrove and
sale of the Company to shareholders; Marriott later Contrarian said the offer
“achieve scale” in its key announced plans to open undervalued the Company
operating areas an additional 1,700 hotels and introduced additional risk
Source: FactSet, press reports and public filings as of 3/31/2019. 6
Note: All data is for campaigns conducted globally at companies with market capitalizations greater than $500 million at time of campaign announcement.
1 Activists may push for several objectives at initiation of a campaign; as such, total percentages for all objectives exceeds 100%.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
3 Board Seats Won
Board Seats Won1 Non-Activist Employees vs. Activist Employees Appointed as Directors
Board Seats Won1 Non-Activist Fund Employees Appointed
Board Seats Won1 # of Companies Targeted for Board Seats
Activist Fund Employees Appointed
Board Seats Won YTD
161
79 145
68 68 103 Board seats 133
57 53 currently “in play”2
145 103 103
133 160 28 754 seats have
Mean: 129 changed hands 106 125
94
103 103
since 2013
70 75
39
39 39 26
33 28 36
39 13
36 51 47 65 2014 2015 2016 2017 2018 2019 YTD
Activist
2014 2015 2016 2017 2018 2019 YTD Employees 32% 29% 27% 28% 22% 33%
as % of Total
Settlements vs. Proxy Contests Investors Launching Activist Campaigns
Board Seats Won1 Board Seats Won through Settlements # of Activist Investors # of “First Timers”
Board Seats Won through Proxy Fights 158
161 142 136
145 127
133
104
103 103 86 110
86
126 86
112 127 77 56
68
89 39
56 47
50 41 48
35 35 39 27
21 18 14 9
2014 2015 2016 2017 2018 2019 YTD 2014 2015 2016 2017 2018 2019 YTD
Won Through % of
Proxy Contest 34% 16% 12% 14% 22% 0% Campaigns by 26% 39% 37% 32% 30% 16%
as % of Total First Timers
Source: FactSet, press reports and public filings as of 3/31/2019.
7
Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement.
1 Represents Board seats won by activists in respective year, regardless of the year in which the campaign was initiated.
2 Board seats “in play” includes currently announced proxy contests at upcoming shareholder meetings as of 3/31/2019.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
3 Long Slate Nominations
Q1 2019 was one of the busiest quarters ever for long slate nominations, signaling that activists are increasingly emboldened when
demanding Board change
Long Slates Nominated and Board Seats Sought Q1 2019 Long Slates
100 Board Seats Sought Long Slates Nominated 12 Company Activist(s) Seats Sought Seats Won
10 10 Ancora Advisors / Legion
80 16 Ongoing
8 Partners / Macellum Capital
7
60 6
BlueMountain Capital 13 Ongoing1
40 4
77
1 2 Derek and Toby Rice 9 Ongoing
20 45
0
0 6 -2 Waterton 8 Ongoing
Q1 2017 Q1 2018 Q1 2019
Long Slate Campaigns, Percentage of All Board Change Campaigns Starboard Value 7 Ongoing2
Alden Global Capital / MNG 6 Ongoing
Bow Street LLC 6 Ongoing
36%
Starboard Value 6 4
17%
3% Starboard Value 5 2
2017 2018 Q1 2019
Total Long King Street Capital
2 13 10 --3
Slates Management
Ongoing
Source: FactSet, press reports and public filings as of 3/31/2019.
Note:
1
Long slates defined as instances where an activist nominated Directors to replace 50%-plus of the incumbent Board.
BlueMountain has not yet made a public statement regarding PG&E’s announcement of a new CEO and 10 new Directors.
8
2 On April 5, 2019, Starboard announced the withdrawal of its nominations.
3 King Street has only indicated that it intends to nominate a majority slate.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
3 Upcoming Notable Potential Proxy Votes
The 103 seats in play—including 65 as part of long slates—at the end of Q1 2019 portend a busy proxy season ahead
Long Slate
June 14*
Starboard
May 7 Slate Size: 72
May 2 Waterton May 22*
Slate Size: 8 BlueMountain
Sherborne
Slate Size: 131
Slate Size: 1
June 13*
May 10 Bow Street LLC July 10
May 1*
Land & Buildings Slate Size: 6 Toby and
Caligan /
Slate Size: 1 Derek Rice
Falcon Edge
Slate Size: 2 Slate Size: 9
April May June July
June 29*
Ancora Advisors /
April 26
May 5* Legion Partners /
April 25 Mangrove Partners
Voce Capital Management Macellum Capital Management
M&G Slate Size: 5 May 24*
Slate Size: 5 Slate Size: 16
Slate Size: 4 May 16 Canyon Capital
Alden Global Capital / Slate Size: 4
CIAM
Seats Targeted: 2 MNG
Slate Size: 6 June 27*
King Street
Slate Size: N/A3
Source: FactSet, press reports and public filings as of 3/31/2019.
Note: Board seats “in play” includes currently announced proxy contests at upcoming shareholder meetings as of 3/31/2019. Total does not include campaigns where an activist has
signaled an intention to nominate Directors but has not named the size of the slate. Long slates defined as instances where an activist nominated Directors to replace 50%-plus of
the incumbent Board.
Denotes estimated date based on historical precedent.
9
*
1 BlueMountain has not yet made a public statement regarding PG&E’s announcement of a new CEO and 10 new Directors.
2 On April 5, 2019, Starboard announced the withdrawal of its nominations.
3 King Street has only indicated that it intends to nominate a majority slate.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
4 Q1 2019 International Shareholder Activism
($ in billions)
Activism Against European Companies1 Activism Against APAC Companies1
YTD Capital Deployed YTD Capital Deployed
$22.2
# of Campaigns Initiated # of Campaigns Initiated
75 75
$15.7
65 65
58
52 55 55
$10.4 $10.5 43 45 45
43
$8.4 35
35
30
27
25 25
$6.4
$5.2
22 16
14
15 $3.8 15
10
8
$2.3 6
5 $1.4 5
$1.4 $1.1
$0.4
$7.1 $6.3 $1.4 $2.7 $4.0 $0.6 $0.2 $0.9 $0.2
-5 -5
2014 2015 2016 2017 2018 2019 YTD 2014 2015 2016 2017 2018 2019 YTD
% of Total % of Global
Capital 16% 18% 28% 35% 24% 13% Capital 2% 4% 12% 10% 8% 10%
Deployed Deployed
Source:
Note:
FactSet, press reports and public filings as of 3/31/2019.
All data is for campaigns conducted globally at companies with market capitalizations greater than $500 million at time of campaign announcement. APAC includes all of Asia and 10
Australia and New Zealand.
1 Calculated as of campaign announcement date for all publicly disclosed common stock stakes. Does not include derivatives.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
4 Shareholder Activism in Europe—Limited New Campaigns, Not Limited Activity
While there were limited new targets in Q1 2019 in Europe, activists have raised their voices on existing campaigns
STRATEGIC NARRATIVE
Elliott published a White Paper
EDP announced Strategic Update
Appointed a Lead Independent Director
Announced next phase of strategic plan
Cevian disclosed 3% stake in CRH
Announced further cost-cutting measures
CONTESTED VOTES
Vivendi sought to remove five Elliott-backed Directors, but
withdrew its nominees when support was limited
Nominated founder Ed Bramson to Board
Agitating for removal of Chairman and one Board member
SETTLEMENTS AND BOARD CHANGES
Entered into a relationship agreement
Announced the appointment of two dissident Directors
Settled for two independent Directors
Appointed a dissident Director to Board
Appointed C. Gardell as a member of the Nomination Board1
M&A AND DIVESTITURES
Discussions of merger with Commerzbank / shareholders
expressing opinions going both ways
Selected Campaigns with Further divestment of assets (Herta)
Notable Developments
Announced merger with DSV
Source:
Note:
FactSet, press reports and public filings as of 3/31/2019.
All data is for campaigns conducted in Europe at companies with market capitalizations greater than $500 million at time of campaign announcement.
11
1 Not a member of the Board, but a member of the shareholder-comprised Nomination Board. Cevian requested a Nomination Board position after disclosing its
investment.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
5 Active Managers Increasing Engagement: Wellington and Neuberger Berman
Recent actions by Wellington and Neuberger Berman signal that active managers are embracing a role that goes beyond vocalism in activist
situations
On October 25, 2018, Cruiser Capital nominated a four-person slate
at Ashland, saying it believed new Board leadership was needed to On January 3, 2019, Bristol-Myers Squibb agreed to acquire Celgene
help the Company transition from a conglomerate structure to a for approximately $74bn; the Company’s stock price fell given
“streamlined, pure play, specialty chemical company” concerns about recent drug pipeline challenges at Celgene
Situation Overview In December 2018, Ashland announced the retirement of its Lead On February 21, 2019, Bristol-Myers Squibb revealed in a regulatory
Independent Director, to be replaced with a new Director filing that activist Starboard nominated five Directors to its Board, and
In January 2019, Ashland announced the addition of a new was reportedly against the deal
independent Director to its slate
On February 27, 2019, Wellington, which owned 7.7% of Bristol-
On January 13, 2019, Ashland announced that it would work with Myers Squibb, switched its 13G filing to a 13D and announced in a
Neuberger Berman and other investors to appoint two additional press release that it opposed the deal, citing outsized risk and an
Active Manager independent Directors following its annual meeting unattractive transaction price
Response Cruiser responded by saying that all shareholders needed to vote on Shareholders are scheduled to vote on the transaction on April 12,
“truly” independent Directors for the Board, but settled a week later for 2019
the right to be consulted on the two additions to the Board
ISS and Glass Lewis both recommended in favor of the deal
“While Wellington agrees that Bristol-Myers should be active in business
“The goal here was to try and put this to bed, but the development that secures differentiated science and broadens the future revenue
shareholders will decide… We thought this outcome base, Wellington does not believe that the Celgene transaction is an attractive path
was significantly superior than the execution risk, the towards accomplishing this goal. Wellington’s conclusion is based upon three tenets: 1)
distraction risk and the nastiness of the alternatives.” the transaction asks BMY shareholders to accept too much risk and the terms offer BMY
shares to CELG shareholders at a price well below implied asset value; 2) execution
- Charles Kantor, Senior Portfolio Manager, Neuberger success could be more difficult to achieve than depicted by Company management; and 3)
Berman, January 13, 2019 (emphasis added) alternative paths to create value for BMY shareholders could be more attractive.”
- Wellington Management (Press Release), February 27, 2019 (emphasis added)
12
Source: FactSet, press reports and public filings as of 3/31/2019.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
5 Additional Active Managers Increasing Engagement
Q1 2019 saw traditional active managers employing a vocal approach in activist situations across geographies
Company / Company /
Active Manager Commentary Active Manager Commentary
Aviva released a statement in February 2019 supporting Artisan Partners sent a letter to Panalpina’s Board in
Barclays in its proxy fight with Sherborne, writing that it February 2019, urging the Board to consider a recent
“[did] not see merit” in Sherborne’s Edward Bramson takeover offer from peer DSV
joining the Board Panalpina eventually reached an agreement to merge with
DSV
Royal London Asset Management’s head of sustainable
investments said it would support Shaftesbury in the face of
Dodge & Cox reportedly opposed the Company’s acquisition 26% shareholder Samuel Tak Lee’s shareholder proposals
of Celgene to block a share issuance
Shareholders defeated Lee’s proposals at the Company’s
AGM
Ahead of ThyssenKrupp’s annual meeting, DWS portfolio
manager Christoph Ohme said that the Company needed to
M&G, an active manager owned by insurer Prudential, focus on improving its margins, adding that it would be
nominated four Directors to Methanex’s Board, citing closely monitoring the Company’s progress
misgivings over a planned factory and Board tenure issues
ThyssenKrupp went on to announce further details of its
breakup plan, garnering support from activist Cevian
13
Source: FactSet, press reports and public filings as of 03/31/2019.REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
6 Passive Manager Influence Continues to Grow
($ in billions)
Cumulative Flows and Net Share Issuance1 "Big 3" Ownership by Region5
Total O/S %
$1,700 Fund Flows
1,500 Style Since 2007 2018 $1,589 S&P 500 6.5% 7.9% 4.3% 18.6%
1,300 ETF +$1,012 +$46
Index +$577 +$123 FTSE 100 5.8% 2.8% 1.7% 10.3%
1,100
Active ($1,627) ($242)
900 ASX 200 4.0% 4.4% 0.6% 9.1%
700
DAX 30 3.6% 2.7% 0.4% 6.8%
500
300
Benelux6 3.5% 2.2% 0.9% 6.6%
100
(100) Euro Stoxx 3.2% 2.4% 0.5% 6.2%
(300)
CAC 40 2.7% 2.1% 0.5% 5.3%
(500)
(700) Nikkei 225 2.9% 2.2% 0.1% 5.1%
(900)
SMI 2.4% 2.6% 0.2% 5.1%
(1,100)
(1,300)
FTSE MIB 2.6% 2.0% 0.2% 4.8%
($1,627)
(1,500)
(1,700) IBEX 35 2.4% 2.0% 0.3% 4.7%
5
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2
Index Domestic Equity ETFs Hang Seng 1.9%1.4% 0.5% 3.8%
3
Index Domestic Equity Mutual Funds
4
Actively Managed Domestic Equity Mutual Funds BlackRock Vanguard State Street
Source: FactSet, P&I and Simfund.
1 Equity mutual fund flows include net new cash flow and reinvested dividends. Data excludes mutual funds that invest primarily in other mutual funds.
2 ETF distribution channel. 14
3 All mutual index funds (excludes ETFs).
4 All mutual funds that are not index funds.
5 Represents data through 4Q 2018.
6 Includes BEL 20 (Belgium) and AEX (Netherlands).REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
6 Passive Managers Focusing on Culture and Purpose
Passive managers are using their increasing influence to discuss how corporate culture and purpose can affect long-term performance
Larry Fink, Chairman and CEO Cyrus Taraporevala, President and CEO,
State Street Global Advisors
“Profits are in no way inconsistent with purpose—in fact, profits and purpose are “This year we will be focusing on corporate culture as one of the many, growing
inextricably linked. Profits are essential if a company is to effectively serve all of intangible value drivers that affect a company’s ability to execute its long-term
its stakeholders over time—not only shareholders, but also employees, customers strategy. We acknowledge that corporate culture, like many other intangible
and communities… Purpose guides culture, provides a framework for assets, is difficult to measure and manage. However, we also recognize that at a
consistent decision-making, and, ultimately, helps sustain long-term time of unprecedented business disruptions, whether in the form of
financial returns for the shareholders of your company.” technology, climate or other exogenous shocks, a company’s ability to
promote the attitudes and behaviors needed to navigate a much more
challenging business terrain will be increasingly important.”
“One thing, however, is certain: the world needs your leadership. As divisions
continue to deepen, companies must demonstrate their commitment to the
countries, regions and communities where they operate, particularly on “Indeed, we have found that boards sometimes fail to adequately ensure that the
issues central to the world’s future prosperity. Companies cannot solve every current corporate culture aligns with corporate strategy. This is especially
issue of public importance, but there are many—from retirement to infrastructure important in times of crisis or strategic change, such as the transition of a CEO or
to preparing workers for the jobs of the future—that cannot be solved without during mergers and acquisitions or strategic turnarounds. These are critical
corporate leadership.” inflection points during which a lack of focus on culture can delay, or even
derail important strategic objectives and pose existential challenges for
management.”
“Companies that fulfill their purpose and responsibilities to stakeholders
reap rewards over the long term. Companies that ignore them stumble and fail.
“We believe that at a time of historic disruption, increased focus on corporate
This dynamic is becoming increasingly apparent as the public holds companies to
culture and how it supports strategy is essential to sustainable, long-term value
more exacting standards.”
creation.”
- Larry Fink, “Purpose & Profit,” January 2019 (emphasis added) - Cyrus Taraporevala, Letter to Boards, January 2019 (emphasis added)
Source: FactSet, public filings and press reports as of 3/31/2019. 15REVIEW OF SHAREHOLDER ACTIVISM - Q1 2019
Shareholder Advisory Group—Key Contacts
Managing Director and
Jim Rossman (212) 632-6088 jim.rossman@lazard.com
Head of Shareholder Advisory
Mary Ann Deignan Managing Director (212) 632-6938 maryann.deignan@lazard.com
Andrew T. Whittaker Managing Director (212) 632-6869 andrew.whittaker@lazard.com
Managing Director and
Rich Thomas +33 144-13-03-83 richard.thomas@lazard.com
Head of European Shareholder Advisory
Dennis K. Berman Managing Director (212) 632-6624 dennis.berman@lazard.com
Christopher Couvelier Director (212) 632-6177 christopher.couvelier@lazard.com
Kathryn Night Director (212) 632-1385 kathryn.night@lazard.com
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