The Morning Brief: A Good Day for Elliott’s Activism

February 09, 2017   Stephen Taub


Two of Elliott Management Corp.’s activist stocks surged Wednesday after the hedge fund firm received some good news on the two targets.

Cognizant Technology Solutions Corp. announced a cooperation agreement with the multistrategy firm that is perhaps best known for its activist investing. Cognizant, an IT consulting and services firm, agreed to name three new directors to its board, two at this year’s annual meeting and one at 2018’s meeting. Three existing board members will not stand for reelection. Under the agreement, Elliott has also agreed to certain customary standstill provisions. Late last November Elliott announced a new position in Cognizant. Shares of Cognizant jumped about 5 percent, to close at $56.45.

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Separately, First Pacific Advisors reportedly said it plans to support Elliott in its proxy fight with Arconic, the aerospace and automotive-parts maker. In late January Elliott bought about three million shares of Arconic, boosting its stake in the Alcoa spinoff from 9.6 percent to 10.3 percent. Elliott also said it would nominate five directors to the board and urged CEO Klaus Kleinfeld to be replaced. In the past week, Elliott has stirred up controversy after filing two different estimates for valuing Arconic. Its latest revision reduced its estimate for its value of the stock to $46 from as high as $54. In a February 7 press release, Arconic asserted that Elliott posted "no fewer than five versions of its shareholder presentations — each with significantly restated calculations, industry data sources and valuation analyses — during the first week of Elliott’s campaign to change management at Arconic."

It added that just two of these presentations have been filed with regulators. "Arconic believes that the rapid succession of revised analyses calls into question Elliott’s grasp of Arconic’s business and industry, and whether Elliott truly understood Arconic and its opportunities prior to launching its proxy fight," the company said in a statement. Shares of Arconic surged 2.55 percent, to close at $27.30.

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Starboard Value’s Jeffrey Smith is one of three individuals who will be joining the board of directors of Perrigo Company in a deal between the activist hedge fund and the Ireland-based drugmaker. Under the deal, Starboard, which owns 6.7 percent of the shares, will also get to recommend two additional independent directors to be added to the Perrigo board. Four current directors are also stepping down from the board, effective immediately. Another board member will resign after the appointment of the second additional director recommended by Starboard at a later date. In mid-September, Starboard disclosed a 4.6 percent position and called on the company to make changes to "reverse the trajectory of poor operating and financial performance." Shares of Perrigo rose slightly to close at $77.93.

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Keri Findley, a partner at Dan Loeb’s Third Point, left the multistrategy firm last week, according to businessinsider.com, citing people familiar with the matter. She was one of four partners at the firm, which manages about $15 billion. She had been with Third Point since 2009, initially working as an analyst in structured credit.

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January was no doubt a good month for most hedge fund strategies. And one firm that fared better than most was Bienville Capital Management, which manages several niche strategies. For example, its $325 million Bienville Argentina Opportunities Fund surged 14.7 percent last month. The fund, which invests in Argentine real estate; public securities including financial services, energy, homebuilders and other sectors; and private equity, is up 58.6 percent since its July 2014 launch. January’s big gains were driven by banks and agriculture as well as investments in energy after president Mauricio Macri announced the elimination of a 15-year-old export duty on oil and oil products.

The Bienville Brazil Opportunities Fund, which invests in Brazilian equities — mostly mid-sized companies — rose 9 percent in January and is up 12.9 percent since its August 2016 inception.

Bienville, which manages $1.2 billion, was launched in 2008 by Cullen Thompson, Billy Stimpson, and Ralph Reynolds.

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Shares of Buffalo Wild Wings surged 5 percent or so, to close at $7.60, even though several investment banks cut their price targets after the specialty dining chain sharply missed fourth-quarter earnings estimates. UBS, for example, pared its target from $180 to $170 but retained its buy rating on the stock while Credit Suisse slashed the price target from $165 to $150 and maintained its neutral rating.

In a note to clients, Credit Suisse says the company "still has a long ways to go to regain stability and visibility." It also fears that 2017 guidance "could prove optimistic amidst a backdrop of rising labor costs, elevated wing costs, intense competition, and limited pricing power."

Earlier this week and before the company reported its financial results, activist hedge fund firm Marcato Capital Management nominated four people to the board of Buffalo Wild Wings, including Mick McGuire III, who heads up the San Francisco-based firm.


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