Editor’s Letter – Issue 123

Originally published in the June 2017 issue

Shareholder activism is gathering momentum and going global. It is most prevalent in the United States, where Schulte, Roth & Zabel recently scored an unprecedented litigation victory on behalf of venBio Select Advisers LLC, in the Immunomedics proxy contest. For the first time, a major corporate deal that sought to entrench incumbent management was unwound in the context of a proxy contest. In this issue we interview some members of the SRZ teams who advised venBio. Canada may even be more activist-friendly than the US in several respects, say local lawyers, Goodmans.

The tally of public activist campaigns in the US has almost quadrupled from 123 in 2010 to 476 in 2016, according to Activist Insight. In the UK the number has fluctuated between 21 and 43 without any clear uptrend over the past seven years, but both US and UK managers have secured notable successes. Paul Singer’s Elliott Advisers managed to install independent directors, and new management, at Alliance Trust. Jeffrey Ubben’s ValueAct has obtained a board seat at Rolls Royce and Martin Hughes’ Toscafund has got one of its nominees onto the board of Speedy Hire.

In Europe outside the UK, the number of public actions has multiplied six-fold from 10 in 2010 to 60 in 2016. But there has been mixed success. Elliott has, thus far, found corporate governance in the Netherlands less conducive to activism. Elliott, and other shareholders, including the UK’s largest pension fund, the Universities Superannuation Scheme (USS), were denied the chance to discuss, and vote on, the chairmanship of Akzo Nobel. USS co-Head of Responsible Investment, Daniel Summerfield, said “this portrays Dutch governance in a very negative light”. The Akzo board has thrice rejected PPG’s takeover offer.

Asia makes up a small percentage of hedge fund assets but is now punching above its weight in activism, with 88 public actions last year. In this issue, EY reviews the landscape in Asia and cites research showing that activism has been associated with increased shareholder returns. Earlier this year, we featured the Japanese activist campaigns of Seth Fischer’s Oasis Management, who presented at the SYZ hedge fund summit in Geneva. Other managers that have pursued activism in Japan include Masaki Gotoh’s Misaki Capital, Alexander Roepers’ Atlantic Investment Management, Chris Hohn’s The Children’s Investment Fund, and Dan Loeb’s Third Point. There are high hopes that Japanese Prime Minister Abe’s support for the new corporate code will permit a more constructive climate for the strategy.

Latin America is also seeing some activity, with Teresa Barger’s Cartica Capital and Paulo Bodin’s Tempo Capital both publicly expressing opinions on merger deals. Russia was not receptive to the activist efforts of Bill Browder’s Hermitage Capital however, and some emerging markets may well be off limits. The next frontier for activism might be frontier markets, where we have not yet heard of any campaigns taking place. Of course all statistics on public actions ignore the fact that many agitations remain private.