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What are we looking for?

U.S. companies targeted by shareholder activism campaigns initiated this year.

The screen

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 CompanyTickerAnnouncement DateActivistActivist DemandSummary Stake at AnnouncementMarket Cap. ($ Mil U.S.)P/EP/BDiv. Yield
Procter & Gamble Co.PG-N7/17/2017Trian Fund Management LPBoard RelatedElect Nelson Peltz as board member1.3%223,658 23.64.13.1%
Honeywell International Inc.HON-N4/28/2017Third Point LLCStrategic DirectionSpinoff aerospace division 1.4%111,036 22.15.32.0%
NXP Semiconductors NVNXPI-Q8/4/2017Elliot Associates LPSeek AlternativesReview operating plans to enhance shareholder value1.6%40,154 20.53.1n/a
Hilton Worldwide Holdings Inc.HLT-N3/24/2017HNA Tourism Group Co LtdBoard Related and Strategic DirectionNominate two dissident directors and seek merger partner25.0%23,257 734.216.10.8%
CenturyLink Inc.CTL-N5/8/2017Corvex Management LPSeek AlternativesKeep Level 3's Jeffrey Storey CEO of CLT after merger5.5%16,548 26.70.714.0%

Source: Thomson Reuters Eikon

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