Companies, Activists Mired in Ongoing Proxy Battles

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By Michael Greene

Many activist campaigns are stretching over years, suggesting that corporate boards may be balking at quick settlements.

Of 205 campaigns launched since the beginning of 2015 tracked by Bloomberg Law, only 69 have ended.

More than half of the campaigns embarked on in 2015 alone are still ongoing—57 out of 110.

In one long-running fight, Third Point LLC, the hedge fund founded by activist Dan Loeb, May 24 suggested that Dow Chemical Co. and DuPont Co. create six focused companies after their planned merger. Loeb’s campaign at Dow started in 2014.

While many companies are still settling with activists, there has been more pushback from boards than in years past, said Eleazer Klein, a New York-based partner at Schulte Roth & Zabel LLP who represents activist investors.

“Settlements aren’t as automatic or quick as they were,” Klein, who co-chairs his firm’s global shareholder activism group, told Bloomberg BNA. He also said more companies are looking to litigation or other defensive measures to fend off activists.

The larger activist firms increasingly are demanding management and operational changes, which can result in longer engagements with boards, lawyers who represent companies told Bloomberg BNA.

Bloomberg Law tracks the actions of a select group of activists based on Securities and Exchange Commission Schedule 13D filings and press releases. The data considers a proxy campaign at an end if the activist sells its shares or if the company delists from public trading.

According to the data, Elliott Associates LP, Trian Fund Management LP, and JANA Partners LLC were the top firms from the beginning of 2015 to 2017 in terms of the market cap of the companies they targeted.

Changes in Demands?

The longer campaigns may be partly attributable to a shift in activist goals and how boards are responding to their requests, defense bar attorneys told Bloomberg BNA.

A lot of “low-hanging” fruit is gone, as boards have gotten better at thinking about the strategies that a potential activist would pursue, Douglas Schnell, a Palo Alto, Calif.-based partner at Wilson Sonsini Goodrich & Rosati, told Bloomberg BNA.

Many of the easier demands that activists traditionally make have already been tried at companies, said Schnell, whose practice focuses on shareholder activism and mergers and acquisitions. So directors may feel that they don’t need a fresh perspective on their board for something that they have already considered, he said.

Activists also are asking for changes that are less likely to garner board support.

Larger activists have become less focused on capital allocation and more often are looking to improve a business’s operations, sometimes through management changes, Mark Gerstein, a Chicago-based partner at Latham & Watkins LLP, told Bloomberg BNA.

Activists this year have sought operational changes at companies such as Whole Foods Market Inc., Arconic Inc., and Athenahealth Inc.

These are more “culturally challenging” changes that boards are less receptive to—often for good reason, said Gerstein, who leads his firm’s Activism Task Force. “It’s much easier to convince a board to make a capital allocation decision than change its leadership, as these changes bring risk along with possible reward.”

The result in many cases is a longer campaign in which the board either fights off the activist or engages it in more dialogue, he said.

To contact the reporter on this story: Michael Greene in Washington at mGreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

For More Information

Bloomberg Law's Investor Activism Analytics data is available at https://www.bloomberglaw.com/product/corporate/cp_home/page/cp_investor_activism_analytics

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