Thursday, December 06, 2007

NY Times DealBook: Tallying Activists’ Victories in 2007

From the NY Times' DealBook:

December 6, 2007, 4:42 pm

Shareholder activists have been unusually vocal this year. But that doesn’t mean they’ve been more successful, a new report by Thomson Financial finds.

This year about 39 percent of all shareholder-company disputes were settled in activists’ favor. By comparison, companies prevailed about 20 percent of the time (the jury is still out on 30 percent of the disputes, which are awaiting board votes are legal decisions). In comparison, between 2001 and 2006, activists’ demands were met in 45 percent of such disputes, while companies successfully held their own just 15 percent of the time.

Still there were several notable instances in which shareholders spurred important change. British hedge fund TCI, which indirectly triggered the $101 billion sale of Dutch bank ABN Amro, is a notable example. Just days after that fund called for ABN Amro to sell assets or seek a merger, the bank’s executives began discussing a possible merger with Barclays. A consortium led by the Royal Bank of Scotland eventually won the bidding war for ABN Amro, and that deal ranks among the top five largest of all time.

At the other end of the investor spectrum, small-time Yahoo investor Eric Jackson — perhaps an unlikely mover-and-shaker — led an online campaign against former Yahoo chief executive Terry Semel that stirred up enough support to secure Mr. Semel’s resignation.

Hedge funds and private equity firms were still the “most active” shareholder activists this year, but Mr. Jackson’s stand is indicative of a new trend in which private investors and mutual funds have become increasing vocal investors.

Carl Icahn was also at the ramparts of several high-profile activist vs. company disputes this year. He was involved in about ten percent of all shareholder agitations this year—more than any other single activist, firm, or fund. Mr. Icahn successfully imposed his agenda at three of the six companies he took on. His very public dispute with Motorola is a good example of that 50/50 track record. Mr. Icahn failed to claim a seat on the cell-phone maker’s board, but he did succeed in convincing fellow shareholders to vote chief executive Ed Zander out of a job.

Consumer discretionary companies and information technology businesses remained the most popular targets for activists this year. Companies in both sectors accounted for 46 percent of all shareholder-company disputes. However, there was evidence that the ongoing credit crunch had affected activists’ strategies. Financial and investment companies, which still hold valuable assets despite the current credit troubles, were more popular targets in 2007. Meanwhile, activist agitations at construction companies decreased markedly.

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