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Current Developments in Shareholder Activism Across Europe
The Growth of Activist Investing
305
111
37 36 60 55 44 45
0
50
100
150
200
250
300
350
2010 2011 2012 2013 2014 2015*
US RoW Europe
Com
pani
es p
ublic
ly su
bjec
ted
to
activ
ist d
eman
ds p
er y
ear
Source: Activist Insight Online
* As of 31/10/2015
UK Companies Targeted
29
24
38
27 21
20
0
5
10
15
20
25
30
35
2010 2011 2012 2013 2014 2015
Com
pani
es p
ublic
ly su
bjec
ted
to
activ
ist d
eman
ds p
er y
ear
Source: Activist Insight Online
* As of 31/10/2015
134 4
15
1
19
12
7
4 3
5
* As of 31/10/2015
Companies Publicly Subjected to Activist Demands 2010-2015*
Source: Activist Insight Online
The Targets
$10bn + 12%
$2-10bn 17%
$250mn-$2bn 24%
Under $250mn 47%
Market capitalisation of European companies publicly targeted by activists, 2010-2015
Source: Activist Insight Online
Less Successful?
70
58
68
63
66
69
62
54
63 64 65
56
50
55
60
65
70
75
2010 2011 2012 2013 2014 2015*
US
Europe
Resolved demands at least partially satisfied, %
Source: Activist Insight Online
* As of 31/10/2015
Where Are the Activists From?
63%
32%
0.053691
US-based
European-based
European companies targeted by US-based activists per year
Companies targeted 2010-2015*
5
13
23 20
18
15
2010 2011 2012 2013 2014 2015
R.o.W
Source: Activist Insight Online
* As of 31/10/2015
Activism in the United States
Concerned shareholder Engagement
Occasional
Partial focus
Primary focus
34%
34% 21%
10%
Source: Activist Insight Online
* As of 31/10/2015
Activism in Europe Source: Activist Insight Online
* As of 31/10/2015
Concerned shareholder No longer activist
Occasional
Partial focus
Primary focus
6%
42%
21%
30%
Where Next for the Activists?
0
5
10
15
20
25
2010 2011 2012 2013 2014 2015*
Services
Basic materials
Financials
Com
pani
es p
ublic
ly su
bjec
ted
to
act
ivist
dem
ands
per
yea
r Source: Activist Insight Online
* As of 31/10/2015
Institutional Investors and Activism
Cause and Effect UK companies with new activist investments in 2015
Activist investors need the support of other shareholders and typically invest where there is existing shareholder discontent. 53% had less than 90% support for one or more resolutions at previous AGM. Of these: 37.5% Capital increase (w, w/o pre-emptive rights) 25.0% Remuneration 25.0% EGM 2 weeks notice 12.5% Director elections Based on aggregate voting results from the previous AGM of 17 UK/Irish Companies who received new activist investments in 2015
Dissident Support by European Investors Voting by European investors who have voted at least 10 global proxy contests
INVESTOR/VOTING MANAGER Proxy Contests Voted
% Voted for Dissident
% Voted for All Dissidents
% Dissidents Voted For (when not all)
Deutsche Asset & Wealth Management 47 60% 19% 52% Schroders 18 50% 33% 42% AXA Investment Managers 41 44% 20% 61% Aviva Investors 16 44% 0% 50% bpfBOUW (Bouwnijverheid) 23 44% 4% 44% PGGM Investments 30 43% 13% 55% Norges Bank Investment Management 51 43% 14% 51% BMO Global Asset Management (F&C) 42 43% 14% 54% APG (Stichting PF ABP) 25 40% 0% 49% Legal & General Investment Management 11 36% 18% 55% Allianz Global Investors 14 36% 21% 27% BPF Shilders 16 31% 13% 56% PIRC 25 20% 8% 51% Fidelity Worldwide Investment 16 13% 0% 58%
European Proxy Contests
Company Activist Date Outcome ISS GL
Alliance Trust Elliott Management 29 Apr 15 Settlement All dissidents Some dissidents
Carrefour Moulin Family 11 Jun 15 Dissident No dissidents n/a
Electra Private Equity PLC Sherborne Investors 06 Oct 14 Management No dissidents No dissidents
Solocal Group Wyser-Pratte Management Co 05 Jun 13 Management No dissidents No dissidents
Petroceltic International PLC Worldview Capital Management 25 Feb 15 Management No dissidents No dissidents
Transocean Ltd. Carl Icahn 17 May 13 Dissident (partial) Some dissidents Some dissidents
Dissident Support at EU Proxy Contests MANAGER Transocean (CH) Petroceltic (IR) Solocal (FR) Electa (UK) Carrefour (FR) Alliance Trust (UK)
17-May-13 25-Feb-15 05-Jun-13 16-Oct-14 11-Jun-15 29-Apr-15 Aberdeen Asset Management, Inc. 2/3 0/2 3/3 Aviva Investors 0/2 0/2 2/2 AXA Investment Managers 2/3 0/2 0/2 2/2 0/3 BlackRock 0/3 0/2 2/2 BMO Global Asset Management (F&C) 2/3 0/2 0/2 0/2 3/3 BPF Shilders 0/2 0/2 0/2 3/3 Charles Schwab Investment Management, Inc. 1/3 0/2 1/2 Dimensional Fund Advisors, Inc. 0/3 0/2 0/2 Fidelity Worldwide Investment 0/3 2/2 3/3 Illinois State Board of Investment 2/3 0/2 1/2 Invesco PowerShares Capital Management LLC 0/2 0/2 0/2 Investec Asset Management 0/3 0/2 0/2 Newton 2/2 2/3 Norges Bank Investment Management 0/3 0/2 2/2 Pennsylvania PSERS 1/3 0/2 1/2 PIRC 0/3 0/2 0/2 0/2 3/3 State Street 0/3 0/2 0/2 2/2 Teacher Retirement System of Texas 2/3 0/2 0/2 TIAA-CREF Asset Management LLC 0/3 0/2 1/2 UBS Global Asset Management 0/3 0/2 3/3 Wells Fargo Advisors LLC 2/3 0/2 0/2
Rationale 1 Alliance Trust
Newton (FOR) A long-term investor of the company proposed the election to the board of three directors. This shareholder cited various concerns with management performance and cost control. The company failed to provide compelling arguments to dispel these concerns or explain why shareholders should not support the election of these nominees. Against management recommendation, Newton supported two of the three candidates in the belief that the company and board would benefit from their insight, challenge and expertise.
AXA (FOR) A vote FOR the election of these nominees is considered warranted on account of: The shareholder proponent has made a compelling case that change should be considered, and the company has inadequately explained why the status quo is preferable. The company's relative underperformance against comparable peers on TSR and share price discount to net asset value and the overall higher fixed cost base of managing these assets over a longer period of time demonstrates a case to discuss strategic alternatives. The nominees are considered independent, free from any commercial arrangements with Elliott and have relevant experience which would be beneficial for the company. If elected the nominees will only comprise a minority element on the board and as such there is little concern that Elliott's interests will dominate the board's discussions.
BMO (F&C) (FOR) We believe the three nominees are independent and will bring valuable skills, experience and fresh perspectives to the board. The board will benefit from their participation in formulating a strategy to deliver sustainable investment performance in the future
UBS (FOR) In light of the candidate's experience and of the company's past performance, this proposal merits support.
Rationale 2 Petroceltic International
Aviva (AGAINST) Proposals do not add any value or strong case not made.
AXA (AGAINST) Considering that the board was reshuffled in July last year, adding two directors nominated by Worldview, the following split recommendations are warranted: AGAINST the removal of Brian O'Cathain (Resolution 1); AGAINST the appointment of Maurice Dijols and Angelo Moskov (Resolutions 2 and 3); FOR the appointments of Nicholas Gay and Neeve Billis (Resolutions 4 and 5). Solocal
Aviva (AGAINST) Proposals do not add any value or strong case not made.
Indiana PRS (AGAINST) Insufficient rationale provided to support proposed board.
Rationale 3
Electra Private Equity
Aviva (FOR) Sherborne Investors GP LLC, a 19.9% shareholder in the company, requisitioned a General Meeting to appoint Messrs Bramson (res 1) and Brindle (Res 2) as directors and to remove Mr Cullinan from the board (res 3). Sherborne is Edward Bramson’s listed investment vehicle, which generally invests in one company at a time. Edward Bramson has a successful track record in operational activism and if the resolutions are approved he will lead a strategic review of Electra. Sherborne considers that the company's investment performance has been in decline for a number of years with the company's annualised NAV growth over 10 years to 2013 equating 11.7% compared to that of the FTSE 250 being 30.5%. It states that in the last five years, 67% of private equity funds of similar size dating from 2009 produced better returns than Electra and that the major reason for this underperformance appears to be that as successful investments, made by the company 15 or more years ago, were disposed of, the investments that replaced them were substantially less attractive. Sherborne believes that, with certain changes in approach, the aggregate value of shareholdings in Electra could be increased by more than £1 billion with lower risks and less volatility than under the current strategy. This equates to a price per share in the region of £60, significantly above current levels.
BMO (F&C) (AGAINST) We voted against as we do not believe that the proposed changes to the board are justified at this stage. We would encourage a greater dialogue between the proponent and the board/management prior to implementing significant changes in the governance and strategy of the company.
Speaker Biographies Josh Black Editor, Activist Insight +44 (0)20 7129 1314 | [email protected]
Josh is a financial journalist and the editor of Activism Monthly Premium, the world’s first and only periodical dedicated to shareholder activism. He joined Activist Insight in 2013 and writes the company’s weekly newsletter, “Activism this Week,” and the Editor’s letter which appears in the Lite and Premium versions of Activism Monthly. In addition, he is a frequent contributor to Activism Monthly’s articles and interviews, and the newswire service available through Activist Insight Online. Josh regularly interviews activist managers on their investing styles and strategies, breaking news about their campaigns and shedding light on the sector. He edited The Activist Investing Annual Review 2014 and 2015, produced by Activist Insight in association with Schulte Roth & Zabel, which is among the most widely read publications on the industry. Josh is a regular speaker at conferences, and has led discussions on activist investing at The IR Society Conference, IR Magazine’s Think Tank, Activist Investing in Europe, Activist Investing in Canada and many more. He is also a regular contributor to financial media and has given interviews to CNBC and Sky News, as well as Reuters, the FT, Bloomberg and other media. Before embarking on a career in journalism, Josh worked in financial services and studied at the University of Oxford.
Speaker Biographies Nick Dawson Co-Founder, Proxy Insight Limited +44 (0) 20 7788 7772 | [email protected]
Nick has 20 years’ experience building up and running investor relations and financial information businesses. He founded Proxy Insight with a colleague in 2013, providing comprehensive global proxy voting information to issuers, their advisers and asset owners. Previously Nick ran Capita’s Investor Relations business and before that Corporate Advisory Services (EMEA) for Thomson Reuters after the sale of the Citywatch business by Computershare in 2006.
Speaker Biographies Eleazer Klein Partner, Schulte Roth & Zabel +1 212.756.2376 | [email protected]
Ele is co-head of the global shareholder activism practice at Schulte Roth & Zabel, where he practises in the areas of shareholder activism, securities law, mergers and acquisitions, and regulatory compliance. Representing activists and companies in matters ranging from corporate governance and control to proxy contests and defensive strategies, Ele’s recent representations have included Trian Fund Management in its successful campaign at Sysco Corporation, Mustang Capital in its successful campaign at Furmanite Corporation, Clinton Group’s settlement agreement with Campus Crest Communities and JANA Partners’ campaign at ConAgra Foods Inc. and its participation in a campaign that led to the $8.7-billion PetSmart leveraged buyout. Ele is also well-known for his expertise since the early 1990s in the development and implementation of alternative investment structures for private equity investments and, specifically, the structuring and negotiating of private investments in public equity, or PIPEs, and related products including registered direct offerings, convertible 144A offerings, reverse mergers, equity lines and SPACs. He works on numerous activist campaigns, regulatory and reporting matters and PIPE or PIPE market-related transactions every year for some of the largest private investment groups and investment banks in the United States and abroad. Recognised as a leading lawyer in rankings including The Legal 500 United States, New York Super Lawyers and Super Lawyers Business Edition, Ele has served as a moderator and speaker at numerous conferences and events addressing shareholder activism, regulatory and reporting issues, PIPEs, M&A deals, the capital markets and other topics of interest to the alternative investment industry. He contributed to Shareholder Activism Insight 2014 (published by SRZ in association with Mergermarket) and authored the “Transaction Reporting” chapter in Investment Management: Law and Practice (published by Oxford University Press) covering Schedules 13D and 13G and Section 16 filings. Ele received his JD from Yale Law School and his BS, summa cum laude, from Brooklyn College of the City University of New York.
Speaker Biographies Jim McNally Partner, Schulte Roth & Zabel + 44 (0) 20 7081 8006 | [email protected]
Jim focuses his practice on corporate and transactional matters for private equity and other alternative investment funds. A member of Schulte Roth & Zabel’s European shareholder activism practice, he has represented activist funds in connection with interests in a number of UK and European targets. Jim has extensive experience in acquisitions, disposals and joint ventures with respect to interests in a wide range of asset classes including acquiring, divesting and demerging investment management businesses and interests, as well as fundraisings for new and established fund managers. He is a member of the Alternative Investment Management Association and speaks often on the issues of shareholder activism and private equity fund management. Jim most recently moderated panels on unlocking value through activist investing and on the different legal and regulatory issues regarding shareholder structures in multiple jurisdictions in Europe. He was a contributor to Shareholder Activism Insight 2014 (published by SRZ in association with Mergermarket), and he authored the SRZ UK Shareholder Activism Briefings, which highlight the key tools available to activist investors in the United Kingdom. Jim received his diploma in law from The College of Law of England and Wales, where he also passed the Common Professional Examination, and he earned his BSc, with first class honours, from University of Newcastle upon Tyne.
