Investment idea generation.

Blog

Our thoughts.

Activist Daily: While You Were Reading About ConAgra

Activist corroborator, longest newsletter to date, which comes after most of the investing community was in a masturbatory frenzy over Jana Partners targeting ConAgra. 

Activist investing news and stories for June 19 below. You should know by now that the free newsletter is on a 24-hour delay. Subscribe to Activist Strategy to get it on publication day or request a two-week free trial here. As usual, check out the tweets on @activiststocks to stay in the know and get on the free daily newsletter list.

News-

  • After Corvex Management “bullied” ConAgra into the buyout of Ralcorp in 2013, Jana Partners is now getting involved with the food company. It owns 7.2% and cites gross underperformance since the Ralcorp buyout. Jana already has board nominees ready and is looking to wage a proxy battle if necessary [our initial thoughts here] Side note - recall yesterday’s newsletter when we highlighted that of the financial engineering tools employed by activists, forcing acquisitions led to the lowest total return, actually destroying value on average - email us if you missed that one.

  • In all the confusion with ConAgra yesterday, Blue Harbour’s newest activist target, AGCO, was overlooked. Blue Harbour owns 5.3% after upping its stake by 20%, buying up shares between $50 and $52. No plans were laid out.

  • GAMCO also announced a new activist stake in Rally Software, owning 2.9%. Rally has a buyout offer from CA; most likely GAMCO is betting on a higher offer or it could just be an arbitrage play, albeit it a small one.

  • The activist laden Town Sports jumped 20% yesterday after it announced the CEO was stepping down. This doesn’t change much for the troubled gym operator, however. We’ve covered $CLUB as part of Activist Strategy in the past.

  • Elliott Associates upped its Samsung C&T campaign yesterday, putting out a presentation [seen here]

  • Darden reports earnings next week; the big question is will they announce a sale-leaseback or REIT? [link to previous thoughts on REIT for $DRI]

  • Blue Clay Capital founder and activist Adam Wright was named Famous Dave’s interim CEO. The stock is up 70% since Blue Clay went active in 2Q13. The fund owns 8% of the restaurant. Lioneye Capital is also still active here with a 12.8% stake.

  • Vertex Capital sold off most of its stake in Audience Inc. Now owning 1.7%, down from 7.2% It went active in February.

  • Meanwhile, Vertex Capital did up its Maxwell Tech from 5.1% to 6.8%. It just went active last week. Story covered via Activist Strategy.

  • Deputy U.S. attorney in Manhattan is, Richard Zabel, is leaving his post to become the general counsel for Paul Singer’s Elliott Management.

  • Chris Sacca put out another letter on Twitter yesterday [linked here] lots of good nuggets if you’re into the Twitter scene. Will let you read for yourself, but I’ll try to get around to putting out some broader thoughts given there is a lot of outcry for an activist to target Twitter

  • Macellum Advisors sent a letter to Christopher & Banks saying it plans to vote against re-electing all board members at the shareholder meeting [link to thoughts/letter]

  • Office Depot shareholders gave the nod to the Staples merger yesterday. We’re still waiting on regulatory approval. Office Depot is now up 273% since Starboard went active in 2012.  

Stories-

  • @bethjinks has a profile of Blue Harbour’s Cliff Robbins. Of note, Cliff used to be a “barbarian” as in barbarians at the gate - working in private equity at KKR before founding his hedge fund. The key takeaway is that Cliff isn’t barbarian at all, rather taking a constructive approach when it comes to activist investing [link]

  • In a morning risk report from the WSJ, Chevron’s counsel for corporate governance, Rick Hansen, laid out some guidelines for handling activism. It’s paywalled to WSJ subs, so I’ll give you the long form takeaway, Rick says that companies should do a “vulnerability assessment” to find red flags that might attract an activist, i.e. “identify areas of weakness and develop and enforce management’s story line around those weaknesses.” This could be a business segment needing to be spun off, history of poor performance or undervalued assets. Rick also notes, “I think a company like DuPont could fend off an activist because it had good relations with institutional investors” [link]

  • WSJ has a story on how the hedge fund push at Macy’s to get the retailer to spin off its real estate is a long-term negative. Of note, “A sale-leaseback is a nice headline and you can get a ton of value, but it doesn’t make sense for the long run, by locking themselves into long-term leases, they’d be stuck in B or C malls for the next 20 years” [link] We’ll have a follow-up story as well [here’s our initial thoughts from the other week]

What we’ve been working on-

  • The Jana thesis at ConAgra [full paywall]

  • Coverage of Blue Harbour and AGCO

  • Macy’s hedge fund talk