2012 Preview - A Quiet(er) Year for Activist Investors?

January 27th, 2012
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Contributed by: Michael R. Levin, The Activist Investor
It seems a little quiet right now. Too quiet. Does this portend a less-contentious year for activist investors? Or just the calm before the storm? At the moment, we can think of just a few things that will stir things up in 2012.

Some activist investors feel exhausted by the events of the past year or two, and just want to concentrate on fixing the dogs in their portfolios. Calm may meet a need right now. The adrenaline junkies among us that thrive on controversy may, on the other hand, feel a bit of loss this year.

Where are the activists?
We do see plenty of action in the dozens of Form 13D filings each week. Yet, we can identify at most only a couple of significant activist situations right now, with some of the usual suspects (Nelson Peltz, Ralph Whitworth) oddly silent.

The one significant case so far involves Bill Ackman from Pershing Square Capital Management (of course), who owns a significant chunk of Canadian Pacific Railway. Atypically, both for him and activists generally, he has demanded that the BoD appoint his CEO candidate to replace the incumbent. We don’t often see that specific a demand about the senior executives. He has threatened to nominate his own BoD candidates as a means of getting satisfaction.

We’re very familiar with another interesting situation, at Mac-Gray Corporation (NYSE:TUC). For the fourth year in a row, unhappy investors will
push for better BoD representation and company accountability. A sometime activist fund, Moab Capital Partners, has taken up the cause this time.

Proxy Access, Part Two
Investors now have some barely satisfactory clarity around how proxy access will work. Shareholders can propose specific proxy access structures at a given company, either as a non-binding resolution, or as a binding bylaw amendment.

So far this year, we count 16 such proposals, predominantly non-binding resolutions, and largely at bigger companies. Deadlines have mostly passed to file these proposals for Spring 2012 annual meetings.

Companies have started to test the SEC’s willingness to sustain efforts to exclude these proposals. We think the SEC won’t cooperate, after what these corporate interests did to the SEC in court last summer over mandatory proxy access.

We also predict, though, that emboldened companies will litigate these matters beyond the SEC staff, taking the controversies well into 2012.

Say-on-pay Becoming Routine
Say-on-pay votes have become a standard part of the annual meeting agenda, finally, for better or worse. Proxy advisors now have their system down for reviewing pay, and investors have designed policies for voting. This year, companies that lose say-on-pay votes will do so as part of more general protests against poor corporate performance.

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For Detailed Investor Profiles on these Investors, click below:
Pershing Square Capital Management
Relational Investors LLC
Trian Group
Related People: David Batchelder; Ed Garden; Frank Hurst*; Glenn Welling*; Henry Jay Winship; John A. Sullivan; Kirt Karros; Nelson Peltz; Nicholas Botta; Peter May; Ralph Whitworth; Roy J. Katzovicz; Scott Ferguson*; William 'Bill' Ackman
Related Entities: Leucadia Corporation (NYSE: LUK); Pershing Square Capital; Pershing Square IV; Pershing Square LP; Relational Investors Alpha Fund I LP; Relational Investors IX LP; Relational Investors LP; Relational Investors Mid Cap Fund; Trian Capital; Trian Credit Partners; Trian Fund Management, L.P.; Triarc; Triarc Companies*; Wendy's/Arby's Group, Inc.(NYSE: WEN)
Related Article Tags: Shareholder Activists, Corporate Raiders and Proxy Battles; Hedge Fund Resources and Featured Partner News


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