Corporate battles will
get noisier in 2015
investor Carl Icahn speaks at the World Business Forum in New
York. (Photo: Mark Lennihan, AP)
Activist investing has never been polite. But their battles could get
even uglier in 2015 as hedge funds continue their trend toward piling
into the same stocks.
So-called activists, who push for change at undervalued companies,
have been crowding into many of the same companies in recent years,
including gadget-maker Apple, auction house Sotheby's, car rental
company Hertz and restaurant operator Darden Restaurants.
It's a trend expected to intensify in 2015 as stock prices rise, which
could narrow value-driven investing opportunities, experts said.
That will lead to louder campaigns against companies, which could
increase their chances of success. It could also open the door to
"There are too many players and not enough companies," says Andrew
Freedman, an attorney with Olshan Frome Wolosky who works with
activist investors in New York. "With that comes the potential to butt
heads on the same positions. It's bound to happen."
Freedman cited the now infamous brawl between billionaire Carl Icahn
and hedge fund manager Bill Ackman over energy drink company Herbalife.
Technically, Ackman is not doing shareholder activism in Herbalife
since he's pushing for the stock to decline rather than rise. Still,
it's an example of how too many outspoken and aggressive hedge fund
managers in the same place can lead to fireworks, experts say.
Medical technology company ConMed also got caught in an activist brawl
in 2014. Two days after the board announced plans to settle an
impending board battle with New York-based hedge fund Coppersmith
Capital, activist investor Voce Capital, which was also seeking board
seats, cried foul in a press release that also attacked Coppersmith's
Bruce Goldfarb, who helps activists run campaigns for board seats,
says disagreements are already happening behind the scenes — thanks to
Apple CEO Tim Cook
introduces the new Apple iPad Air 2 during an event at Apple
headquarters on Oct. 16, 2014, in Cupertino, Calif. (Photo:
Marcio Jose Sanchez, AP)
"What we see is that different investors do disagree at times on
strategy and approach," says Goldfarb, CEO of Okapi Partners. "But
most reasonable people will agree to disagree or find a way."
Indeed, when investors can agree on a strategy, or agree to take the
backseat to another investor's plan of action, they may be increasing
their chances of success.
Sotheby's CEO William Ruprecht stepped down in November, six months
after Third Point's Dan Loeb won three seats on the board, which he
gained with support from fellow activist Mick McGuire of Marcato
In October, hedge fund Starboard succeeded in replacing the entire
board of Darden Restaurants, the owner of Olive Garden, with backing
from fellow activist investor Barington Capital.
Pet supply company PetSmart recently agreed to sell itself to a group
of investors for about $8.7 billion due to pressure from Rosenstein's
Jana Partners, which found support from fellow shareholder Longview
Assets. Together, the two funds owned close to 20% of PetSmart's
Even giants like Apple and Yahoo have been getting tag-teamed by vocal
hedge fund critics.
Yahoo CEO Marissa
Mayer appears on NBC's "Today" show in February, 2013 to
introduce the website's redesign. (Photo: Peter Kramer, AP)
Yahoo's Marissa Mayer is under pressure, meanwhile, from two outspoken
investors, hedge fund Starboard and Eric Jackson of IronFire Capital.
Both Starboard and Jackson have called for Mayer to consider acquiring
competitor AOL, among other changes.Icahn kicked off his very public
campaign to get Apple's Tim Cook to return more money to shareholders
in the form of buybacks only after fellow hedge fund manager David
Einhorn drew attention to Apple's cash-rich coffers with a similar
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