What will activist investing look like in the second half of 2020? That is the question that we’ve been asking ourselves this week, with a view toward setting our agenda for the months ahead.
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I thought it would be worth looking at what the data from Activist Insight Online tell us about the July-December period over the past five years. These months typically see a sharp drop in campaigns data, reflecting the fact that proxy season usually ends in June. On average, only 55% as many companies are publicly subjected to activist demands as in the first six months of a year and the number was as low as 50% in 2018 and 2019.
RV Capital Co-Investor Letter for the first half ended June 2020, titled, “Business Owner TGV vs. the DAX.” Dear Co-Investor, The NAV of Business Owner was €777.13 as of 30 June 2020. The NAV increased 4.5% since the start of the year and 683.2% since inception on 30 September 2008. The DAX was down 7.1% Read More
Within that headline figure, there is some variation of course. Australia’s proxy season takes place later in the year – although most calendar years see a pretty even split with 30-40 companies publicly subjected to activist demands in each period. The U.S. market cools significantly, reflecting the high number of shareholder proposals and takeover defenses such as advance notice bylaws and restrictive special meeting rights.
Other countries might want to watch out. In the U.K., where special meeting rights are guaranteed in law, the second half of the year usually sees 75% to 90% as many companies publicly subjected to activist demands as in January through June. Canada sees fewer board campaigns overall in the second half of the year but more proxy contests going to a vote. And Asia, although it has become more proxy season-centric, has seen some years where more than 50 companies were targeted between July and December.
Then again, the end of proxy season does typically allow for some other forms of activism to take flight.
Globally, there is almost as much M&A and breakup activism in the second half of the calendar as in the first (94%). It is especially prevalent later in the year in the U.K. and – in some years – in Continental Europe. But if expectations about the nature of the recovery leading to a wave of M&A – and, by extension, activism – are correct, this will be a fairly historic year for the U.S. M&A and breakup activism rarely ever increases after the summer holidays on these shores.
Another interesting tactic to consider is proxy fights – defined by Activist Insight Online as board representation demands where the dissident nominees are initially rejected by the issuer. In the U.S., practically as many proxy contests are settled in the second half of the year as in the first half and in some years more are.
So the consensus that the second half of the year is a time to take stock and prepare for the onslaught of proxy season might hold true in some ways but not others. Anyone planning on using the next few months for that purpose following a subdued but successful proxy season, with activists fundraising on the back of the crisis and the Dow, Russell 3000, and MSCI World Index all down year-to-date, may be in for a turbulent end to 2020.
Pershing Square Tontine Holdings Raised Its Optimistic IPO Target
Pershing Square Tontine Holdings, a special purpose acquisition company (SPAC) raised its already optimistic target this week. Bill Ackman’s blank check vehicle was already set to be the largest SPAC ever but could now raise $7 billion including capital from Pershing Square Capital Management and its affiliates. With debt, the SPAC could find itself buying a $10 billion mature unicorn. Also fast approaching is a vote on Far Point Acquisition’s purchase of Global Blue Group – once backed, then opposed by Dan Loeb’s Third Point Partners. The deal now has slightly sweetened terms, courtesy of private equity firm Silver Lake, and set a record date of July 24. The date of the actual vote has not yet been set.
Quote Of The Week
Quote of the week comes from London-based asset manager Davidson Kempner Capital Management, which is concerned that Dutch molecular diagnostics firm Qiagen is selling itself to Thermo Fisher Scientific and rejected its second offer this week, although it clarified its valuation ranged from 48 to 52 euros per share, a slight shift from the 50 euros per share it specified on Wednesday. How many activists step in to bid up deals, or whether they are limited to businesses turbo-charged by the coronavirus crisis, will be an interesting trend to watch later this year.
“While we are encouraged that Qiagen finally acknowledges COVID-19’s material long-term impact (albeit using very conservative numbers), the fact that the company has so far decided not to update the transaction documentation (Offer Document, Fairness Opinions, Reasoned Position Statement, Guidance and any ad hoc disclosures) or their recommendation in light of its dramatic profit upgrade has become even more unacceptable.”