What are we looking for?
U.S. companies targeted by shareholder activism campaigns initiated this year.
Activists' goals and tactics vary greatly. Some may accumulate significant stakes in a company, attempting to gain control of the board through proxy contests, and spin off a more profitable division. Others may seek minority board representation and propose changes to executive management, returning excess cash to shareholders through stock buybacks or dividends, or delivering bottom-line expansion through operational efficiencies.
Companies susceptible to activist investors broadly exhibit similar characteristics such as underperforming their peers in an expanding sector, low price-to-book values or large amounts of idle cash. Activist funds apply proprietary research methods seeking companies with these traits, and address these issues by exercising their rights as shareholders, pressuring management to change business strategies, divest non-core assets or, as mentioned, return excess cash to stockholders.
Activists' ability to identify and deliver on these initiatives can unlock shareholder value, which can benefit non-activist investors as well.
Our screen highlights the five largest U.S. companies by market capitalization targeted by activist campaigns announced this year.
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What did we find?
The five companies that met our criterion are ranked by market capitalization. The table is broken down as follows:
- Announcement date: when the activist campaign was made public, either through a regulatory filing or through a management news release;
- Target: the company subject to shareholder demands;
- Activist: the activist fund that initiated the campaign;
- Stake at announcement: percentage of outstanding shares held by the activist.
Activist demands include: "strategic direction," often referring to mergers-and-acquisitions-related activism; "seek alternatives," suggesting a review of operating and strategic plans focusing on capital expenditures or financial restructuring; and "board-related," meaning a bid to gain board representation to influence future corporate strategy.
This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.
Khaled Eniba works in the financial and risk unit of Thomson Reuters and specializes in banking and research.
Select U.S. companies targeted by activist campaigns
|Target Company||Ticker||Announcement Date||Activist||Activist Demand||Summary||Stake at Announcement||Market Cap. ($ Mil U.S.)||P/E||P/B||Div. Yield|
|Procter & Gamble Co.||PG-N||7/17/2017||Trian Fund Management LP||Board Related||Elect Nelson Peltz as board member||1.3%||223,658||23.6||4.1||3.1%|
|Honeywell International Inc.||HON-N||4/28/2017||Third Point LLC||Strategic Direction||Spinoff aerospace division||1.4%||111,036||22.1||5.3||2.0%|
|NXP Semiconductors NV||NXPI-Q||8/4/2017||Elliot Associates LP||Seek Alternatives||Review operating plans to enhance shareholder value||1.6%||40,154||20.5||3.1||n/a|
|Hilton Worldwide Holdings Inc.||HLT-N||3/24/2017||HNA Tourism Group Co Ltd||Board Related and Strategic Direction||Nominate two dissident directors and seek merger partner||25.0%||23,257||734.2||16.1||0.8%|
|CenturyLink Inc.||CTL-N||5/8/2017||Corvex Management LP||Seek Alternatives||Keep Level 3's Jeffrey Storey CEO of CLT after merger||5.5%||16,548||26.7||0.7||14.0%|
Source: Thomson Reuters Eikon