Feb 10, 2014
Helen of Troy: Another Activist Strikes,
By Maureen Farrell
Less than a week after an activist shareholder pushed consumer products
Helen of Troy
to “maximize value for [its] shareholders,” Helen of Troy Ltd. responded
with a big, bold plan to buy back roughly 29% of its stock.
Such is the cycle of life for companies these days: An activist investor
begins agitating, and the company quickly responds with a buyback or circles
the wagons with a poison pill.
It’s not just the brand-name activists like
Dan Loeb and Bill Ackman that are forcing companies to respond. Small funds
with small stakes are also getting things done.
Sachem Head Capital Management is the latest to pounce. The firm, which was
founded in July 2013 and has roughly $1 billion under management, recently
acquired 1.2 million shares in Helen of Troy, a 3.7% stake, and has been
pushing the company to sell.
In a letter to Helen of Troy’s board of directors released on Feb. 4, Sachem
Head urged the company to run an auction process. Should the right buyer
fail to materialize, the fund said that Helen of Troy should then consider
other ways to optimize its balance sheet.
Shares of Helen of Troy have risen more than 60% over the past year.
Instead of kicking off a sales process, Helen of Troy announced on Monday
morning that it would repurchase $550 million of its stock, or 29% of its
shares outstanding. The company said it would conduct a modified “Dutch
auction” for $300 million of those shares immediately, and would repurchase
the rest over the next three years.
Such a massive buyback had been in the works long before Sachem Head started
publicly calling for changes, said a person close to the company.
is advising Helen of Troy on these buybacks, the person said.
spokesman for Sachem Head wouldn’t comment on Helen of Troy’s decision, but
simply referred back to the firm’s letter last week.
Shares closed up 7.1% at $63.56 on more than three times the stock’s average
The question now is whether these buybacks can keep Sachem Head and other
potential activists at bay. Helen of Troy didn’t directly follow Sachem
Still, buybacks appear to be a powerful defense mechanism, as they typically
boost a company’s share price. Activists’ arguments carry less weight when a
company’s stock price is popping.
Mr. Icahn agitated for $150 billion in buybacks at
and then lowered his demands to $50 billion. Apple didn’t follow Mr. Icahn’s
recommendations, but came close enough that
Mr. Icahn was willing to