Disney, Salesforce and Others Draw Activist ‘Swarm’ After Shares
Instances in which companies attract more than one activist
expected to grow
Salesforce, a software company beset by slowing growth and
executive turnover, faces at least four activists.
PHOTO: JOHN MARSHALL MANTEL/ZUMA
Feb. 1, 2023 5:30 am ET
Shareholder activists, newly emboldened by beaten-down
share prices, are increasingly crowding into the same big names.
The software company Salesforce Inc., beset
growth and executive turnover, faces at least four activists, while Walt
Disney Co. has drawn the attention of two well-known activists, one
of which is mounting a fight
for a board seat. The cloud-software company Splunk Inc. last
year drew two activists, and the toy maker Hasbro Inc.
fended off a pair in a challenge for board seats.
In all, there were 17 instances in which a U.S. company drew more
than one activist in 2022, situations that bankers refer to as swarming,
according to data compiled by Lazard Capital Markets Advisory Group. That was up
from nine in 2021 and seven in 2020. While there were 20 instances in both 2019
and 2017, industry experts anticipate the number to continue to climb this year
as overall levels of activism increase.
A down market for stocks has helped drive up the volume of
activist campaigns, as investors pounce on opportunities to push for change at
underperforming companies. There were 135 activist campaigns in the U.S. in
2022, a 41% jump from the prior year, Lazard found/
Big companies like Disney and Salesforce that are grappling with
issues including unpopular acquisitions and bloated cost structures and have
liquid stocks are particularly likely to draw multiple activists simply because
there are only so many such opportunities at any given time.
“You’ve got a number of established activists who are all looking
to make bigger and bigger investments,” said Avinash Mehrotra, global head of
the activism and shareholder advisory practice at Goldman Sachs.
The Wall Street Journal reported last week that Elliott
Investment Management LP is preparing to nominate a slate
of directors to Salesforce’s board after making a multibillion-dollar
investment in the business-software company, potentially presaging a
proxy fight. Starboard Value LP revealed in October that it had taken an
undisclosed stake in Salesforce, arguing that the company’s mix of growth and
profitability is far below that of its peers.
Jeff Ubben’s Inclusive Capital Partners LP recently owned more
than 1.5 million Salesforce shares, a stake worth about $250 million, according
to a person familiar with the matter. Mr. Ubben’s former firm, ValueAct Capital
Partners LP, has a stake in Salesforce, according to people familiar with the
matter. Salesforce announced Friday that ValueAct Chief Executive Mason Morfit
and two others had been named independent
directors, effective March 1.
bought a new Disney stake last year.
It couldn’t be determined whether other activists are circling
At Disney, Nelson Peltz’s Trian Fund Management LP earlier this
off a proxy fight for a board seat after Dan Loeb bought a new
stake in the entertainment company last year.
Mr. Loeb’s Third Point LLC had called on Disney to buy the rest
of the Hulu streaming service, explore spinning off ESPN and refresh its board.
Third Point ended up agreeing not to propose its own slate
of directors at Disney’s coming annual meeting after the company
added the veteran technology executive Carolyn Everson to its board.
Having multiple activists can turn what is already a headache for
executives into a potential nightmare.
Patrick Gadson, co-chair of the law firm Vinson & Elkins LLP’s
shareholder activism practice, said activists usually have their own respective
time horizons and return expectations, so that when more than one shows up in
the same stock, their objectives often clash.
“Just because they’re all there doesn’t mean they have similarly
situated goals,” Mr. Gadson said. “It’s possible that the funds tag-team behind
the scenes, but that is far less frequent.”
As for Salesforce, it couldn’t be determined whether the
activists have similar intentions. Mr. Ubben has expressed an interest in the
company’s steps to tackle climate change and other sustainability efforts,
according to a person familiar with his effort.
Elliott, known for advocating moves including M&A and governance
changes, has so far been mum about its plans for the company, while Starboard
has stopped short of making specific recommendations for how to boost growth and
Swarming often takes place when activists see the potential for a
deal, which presents an opportunity for a “quick and potentially meaningful
upside,” said Mary Ann Deignan, head of capital markets advisory at Lazard.
Indeed, Salesforce has been a voracious buyer, having made 72
acquisitions since 2006, according to data from FactSet, a pace some
analysts and investors have started to criticize.
There were 65 situations in 2022 in which activists agitated for
a sale or a breakup of a business, a 59% increase from the prior year, according
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