Management. Weingarten and Rosewater have taken on the likes of McDonalds, Time Warner and CNET on behalf of Pershing Square Capital Management, SAC Capital and JANA Partners, respectively. This year, they have been involved in campaigns at SandRidge Energy, with its constant to-and-fro of litigation threats, and Stillwater Mining Company, where Clinton Group won four board seats and replaced both CEO and chairman.
The increasing size of activist targets presents its own problems. Proxy circulars need to be mailed to a larger shareholder base, boards tend to have more experience and larger treasuries with which to defend themselves. It is a trend that requires greater support from institutional shareholders, and wouldn’t be possible without the increasing sums they are willing to put behind activists. Defense teams have spent much of the year coming up with new tactics to fi ght off activists. The result is that activists increasingly engage legal counsel before even buying a stake in a company. Weingarten says that some company by-laws make it diffi cult to achieve anything except at an annual meeting, while companies with dual class equity splits and large insider ownership are “pretty impregnable.”
The proxy fi ght remains the most important weapon in an activist’s arsenal, with board seats representing the most common single demand of activist investors. In 2013, a number of consent solicitations suggested that activists might not have to wait for annual meeting season to achieve change, with Glenview Asset Management, Corvex Management and Sandell Asset Management all seeking to oust boards by petition. Rosewater says these are unlikely to be replacements for the traditional proxy fi ght, noting that they are occasionally useful tools but can be removed from company charters – and frequently are. “Secondly, when you’re voting at a meeting, abstentions don’t count. Someone who doesn’t show up at a meeting is irrelevant. Someone who doesn’t show up at a consent solicitation is voting against, for all practical purposes.”
In 2014, Schulte Roth & Zabel plans to expand its Shareholder Activism practice into Europe through its London offi ce. Weingarten says the fi rm is looking forward to a boom in activism, noting that, “Many people have been predicting it is going to move into Europe in a more signifi cant way than it has.” He adds that this will be a challenge, but not an entirely new departure. “The laws are not as favourable [to activists] in many ways, so it’s going to be diffi cult. However, as Europe comes out of recession, there’s going to be lots of value that activists can seek out. TCI, Cevian Capital, and some US activists such as Sandell Asset Management are now branching out there.” THFJ
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