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Source: Bloomberg, December 15, 2014 article

Bloomberg.com   Businessweek.com


Bloomberg

Activists Jana, Elliott Each Gain 40% on PetSmart and Riverbed

By Beth Jinks  |  Dec 15, 2014 4:49 PM ET

Activist investors Jana Partners and Elliott Management each made at least 40 percent on bets that targeted companies would appeal to private-equity buyers -- in one busy weekend.

Jana will pocket about $230 million in profits from its investment in PetSmart Inc. (PETM), which agreed to a buyout led by BC Partners less than six months after Jana pushed it to find a buyer. Elliott’s profit will be about $110 million when Riverbed Technology Inc. (RVBD)’s sale to Thoma Bravo and pension investment group Teachers’ Private Capital is completed.

In a year where booming strategic transactions have kept corporate lawyers and investment bankers busy, many of the deals -- including spinoffs, buybacks, inversions and asset sales -- came with an activist shareholder publicly or privately pressuring change, or the fear of one lurking.

PetSmart’s $8.3 billion buyout is the biggest leveraged deal for an American company this year. Riverbed agreed to sell itself for about $3.6 billion almost a year after Elliott first agitated for an auction and bought its shares.

Other targeted companies also capitulated to some activist demands before the holidays. Allison Transmission Holdings Inc. agreed to allow activist ValueAct Capital Management’s partner Gregory Spivy to join its board in the future in a standstill deal with its biggest shareholder, according to a statement today. Separately today, Armstrong World Industries Inc. added Spivy to its board in another deal with ValueAct, its second-largest shareholder.

Activist Sandell Asset Management Corp. welcomed the announcement that Bob Evans Farms Inc. Chief Executive Officer Steve Davis is stepping down. The board -- which includes four Sandell nominees following a proxy fight earlier this year -- is searching for a replacement, the restaurant and food-processing company said today in a statement.

Energy Rout

Not all activist campaigns look as likely to be profitable. Talisman Energy Inc. (TLM), which was trading at about C$13 a share when Carl Icahn disclosed a stake in October 2013, is nearing a sale to Repsol SA for C$6 to C$8 a share, people familiar with the matter have said. The stock dropped below C$5 this year for the first time since 2000 after a plunge in crude oil prices, which fell to a five-year low last week.

While Talisman also may get a potential rival bid from Canada Pension Plan Investment Board, people with knowledge of the matter have said, it’s not likely to help Icahn, the company’s second-largest shareholder with two board seats, recoup his money let alone make a profit.

Activist Funds

Funds managed by activists jumped by almost $19 billion this year through Sept. 30 to $112.07 billion, after almost tripling during the previous five years, data from Chicago-based Hedge Fund Research Inc. show. Activists targeted 371 companies this year through Dec. 11, according to data compiled by Hedge Fund Solutions LLC. That’s a 13 percent jump from the same period last year.

Activist investors buy sizable stakes in publicly traded companies and agitate for management and directors to increase shareholder returns. Once they buy more than 5 percent of a company’s stock, they’re required to flag their intention to actively engage management and the board by disclosing their holding in a 13D filing with the U.S. Securities and Exchange Commission.

To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

To contact the editors responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net Elizabeth Wollman

 


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