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2017 SUMMIT COVERAGE

  • Ed Garden’s interview with David Faber

  • Keith Meister’s interview with David Faber

  • Jeff Smith’s interview with David Faber

  • ValueAct’s newest position in KKR

Activist ValueAct says invested in private equity pioneer KKR

Reuters (04/27/17) Michael Flaherty, Svea Herbst-Bayliss

ValueAct Capital said it has invested in asset management group KKR & Co, as the $16 billion activist investment fund deepens its reach into the financial sector. The holding brings together a San Francisco-based activist investor with the legendary leveraged buyout shop founded and still run by Henry Kravis and his cousin George Roberts in 1976. Shares of KKR were up more than 6 percent. "One of the oldest and most storied LBO firms that has operated through market cycles has built up a tremendous brand," ValueAct President Mason Morfit said at the Active-Passive Investor Summit. Morfit said ValueAct's current exposure to the stock is under 5 percent. "The company has 8 to 10-year locked up capital and generates a great management fee," said Morfit. "I think the future is quite bright." ValueAct had not previously disclosed its position in the company. ValueAct, based in San Francisco, owns major stakes in some of the most prominent U.S. companies, including software maker Microsoft Corp., media group 21st Century Fox Inc. and energy company Baker-Hughes Inc. Morfit, who is the No. 2 person at ValueAct behind co-founder and CEO Jeffrey Ubben, is on the board of Microsoft. The fund also has holdings spread across the financial sector, including a stake it built last year in investment bank Morgan Stanley. Morfit said on Thursday that he likes KKR's business at a time that investors are leaving actively managed funds in favor of both alternative investments and passive investments. Alternative assets have compounded at a high rate and Morfit says there is no end in sight for that trend with demand coming from Asia and the Middle East.

KKR Finds an Activist at Its Gate as ValueAct Reveals Stake

Bloomberg (04/27/17) Beth Jinks, Melissa Mittelman, David Carey

KKR & Co., the original Barbarian at the Gate, now has an activist knocking on its own front door. ValueAct Capital Management has amassed a stake in the buyout giant in an investment that puts KKR co-founders Henry Kravis and George Roberts in an unfamiliar position: Under an investor’s spotlight rather than holding the torch themselves. But while KKR built its name on a series of not-always-friendly deals in the 1980s, the relationship with Jeffrey Ubben’s hedge fund seems amicable. ValueAct has held friendly talks with the investing firm, including discussing the possibility of converting KKR from a partnership to a corporation, according to a person familiar with the discussions. The switch may be beneficial under potential changes to the U.S. tax code proposed by President Donald Trump, said the person, who asked not to be identified because the talks were private. KKR welcomes ValueAct’s investment, Scott Nuttall, KKR’s head of global capital and asset management, said Thursday on the firm’s first-quarter earnings call. “We have had interactions with them and they’ve been great,” Nuttall said. “We like having smart, long-term investors as shareholders.”

2016 SUMMIT COVERAGE

  • Meister on activism, favorite stocks

  • Ed Garden: General Electric 'amazingly resilient'

  • Starboard's Smith seeks 9 seats at Yahoo

  • Blue Harbour's Robbins: AGCO does all the right things

Starboard Value's Jeff Smith: May Need to 'Pick Up the Pieces' of Yahoo

CNBC (04/19/16) Rosenfeld, Everett

Jeff Smith, CEO of Starboard Value, said Tuesday he is preparing to potentially pick up the pieces of a broken Yahoo (YHOO). Speaking from 13D Monitor's Active-Passive Investor Summit in New York City, Smith explained that he has launched a proxy fight for Yahoo in case its board is unable to do what needs to be done. "They're going to feel the pressure to make sure they're doing the right thing for the shareholders in order to not get to the result of a change of board members," Smith said. "But we need to protect ourselves because if we get to the annual meeting and the company has not moved forward as they're supposed to — there's a question here as it relates to capability and credibility of the board members and management team in terms of running the process. If we get to the end, and they haven't been successful as it relates to getting the company sold — the core business sold — well we're going to need to pick up the pieces," he added. The ideal outcome for Yahoo, Smith stated, is for its core business to sell for "the highest possible price that they can get," but he declined to say how much he thought that should be. Smith has said he sees "a lot of opportunity" in Yahoo.

U.S. Activist Investors Finding Fewer Opportunities; Compromise More Common

Reuters (04/19/16) Herbst-Bayliss, Svea; Delevingne, Lawrence; Flaherty, Michael

At a prominent activist investor conference on Tuesday, panelists appeared less optimistic about upcoming corporate board contests and focused on current holdings rather than presenting bold, new investment opportunities. “We have stopped holding our breath waiting on new activist campaigns,” Don Bilson, head of event-driven research at Gordon Haskett, said in a note ahead of the 13D Monitor Active-Passive event in New York. Hedge fund managers in attendance discussed the usual complaints about complacent boards and underperforming companies but seemed to acknowledge the increased difficulty in finding new opportunities. According to 13D Monitor data, the amount of money invested by activists in the first quarter dropped by more than 75% to $1.4 billion, down from $6 billion a year ago. Lawyers and executives from proxy advisory firms also agreed that proxy contests are increasingly settled ahead of a vote. “There are still about 30 to 40 votes but there are so many more fights” that are resolved with some concessions, said Okapi Partners President Bruce Goldfarb. The HFRI Event Driven Activist Index, a sector benchmark, is down 4.26% for 2016 through March. It gained just 1.15% for 2015 after rising 6.57% the previous year.

Blue Harbour Group's Robbins Says AGCO Offers Margin Growth

Bloomberg (04/19/16) Jinks, Beth

Blue Harbour Group CEO Cliff Robbins believes farm-equipment supplier AGCO Corp. (AGCO) will benefit from improved margins and an eventual uptick in agricultural spending. Speaking Tuesday at 13D Monitor's Active-Passive Investor Summit in New York, he said AGCO is performing strongest in the European farming equipment market and has growth potential in Brazil. In addition, he noted, AGCO's work to standardize some equipment engineering will reduce costs. Blue Harbour owns approximately 7.9% of AGCO's shares, manages about $3.2 billion, and generally prefers to discuss corporate changes with management instead of engaging in proxy fights or other aggressive moves.

Starboard's Smith Warns a Full Board Sweep Is Not Always Possible

Reuters (04/19/16) Herbst-Bayliss, Svea; Flaherty, Michael

Starboard Value’s Jeffrey Smith says replacing an entire board is often the best way to revive a struggling company, but that tactic is not always possible. A full sweep of a board “seems to work really well,” Smith said at 13D Monitor's Active-Passive Summit. He added that it helps activist investors earn trust with management, and lays the foundation for a true partnership. Starboard is currently angling to oust the entire board at Yahoo Inc. (YHOO), a feat it accomplished two years ago at Darden Restaurants Inc. (DRI). Smith just stepped down from Darden's board after 18 months of working to turn around the business. While a full sweep often works best, Smith said, he acknowledged that companies are much more ready to find solutions so they can avoid the embarrassment and disruption of a costly proxy fight. In addition to Yahoo, Starboard is pursuing six board seats at Depomed Inc. (DEPO), frustrated that the company rejected a takeover bid. “We are in the process,” Smith said. He added that Starboard may start other contests, but gave no further hints. “It will be a case-by-case basis.”

Blue Harbour's Robbins dishes: What I look for in a CEO

CNBC (04/19/16) Balakrishnan, Anita

Cliff Robbins, CEO of Blue Harbour Group, which manages capital for institutional investors like endowments and pension funds believes when you invest in a company for two years or more, you need to invest in the management team. When deciding whether to invest in agricultural equipment maker AGCO, for instance, it was crucial to spend time with the CEO, Martin Richenhagen, and get to know his record. "We came to the conclusion that this gentleman was the type of man we'd want to back," Robbins said. "[He's] looking for ways to win. Right now, while business is a little soft, he's working on his margin profile, as he should be, to improve the margins in the business. I think he's open-minded to buying back stock, and he knows he has a very strategic asset, as well." Robbins spoke from the 13D Monitor Active-Passive Investor Summit in New York City, which focuses on shareholder activism.

2015 SUMMIT COVERAGE

  • Jana Urges
    Qualcomm Split

    Jana asks Qualcomm to consider spinning off its chip unit from its patent-licensing business and accelerate share repurchase program.

  • Activist Investing Is Not a Fad

    Keith Meister, Corvex Management, weighs in on the state of the activist investor and why activism does well.

  • Starboard’s Smith
    Proud of Darden’s
    Turnaround

    Cheap gas and better weather helps Darden, but it's not all smooth sailing ahead.

  • At Trian, We Put
    Our Money Where
    Our Mouth Is

    Ed Garden, Co-Founder and Chief Investor of Trian Partners, discusses Trian's plans for DuPont.