Engine Minus One Sputters, As Does Icahn and Returns of Activists | |
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The little engine that couldn’t. Engine No. 1, the little-known firm who made waves at Exxon Mobil two years ago, said they would be changing their activist approach as part of a “strategy shift” to focus on private investments instead of public proxy fights, the FT’s Ortenca Aliaj and Derek Brower reported. Engine’s founder and chief investment officer Chris James said that activism was “a tool of last resort” and Due Diligence noted that recent strategic moves have “left Wall Street a bit confused about what Engine is or wants to be,” especially considering the momentum the firm generated from the Exxon fight.
Engine’s strategy shift also comes as the WSJ’s Lauren Thomas reports that activists are having an even harder time making returns on their investments, trailing the S&P 500’s gains by about 6%, according to the latest data from HFR. Meanwhile, one such struggling activist includes Carl Icahn, who despite saying that activism has been “the best investment paradigm,” last week notified his IEP shareholders that he was cutting the dividend in half to $1 and will be resetting the firm’s focus on its core activism strategy after being on the other side of an activist attack by Nate Anderson’s Hindenburg Research.
As the stock market goes, so goes M&A. Dealmakers seemed to find their stride with transactions happening across a number of industries. . Tapestry, the owner of brands Coach, Kate Spade and Stuart Weitzman, acquired Versace, Jimmy Choo and Michael Kors owner Capri Holdings for $8.5 billion. The New York Times’ Jordyn Holman and Elizabeth Paton point out that this deal builds on the recent consolidation in the luxury goods space – Kering, the parent company of Gucci, purchased a stake in Italian fashion house Valentino a couple of weeks ago. In addition to loafers and handbags, private equity booked a deal this week. Publisher Simon & Schuster will be sold to KKR from Paramount for $1.6 billion.
And according to Centerview Co-Founder Blair Effron, the dealmaking party has only just begun. Effron joined CNBC’s Squawk Box on Wednesday, telling Andrew Ross-Sorkin that companies are becoming more optimistic about the economy, leading to higher capital expenditures – including M&A. Given these trends, he predicts the deal market will be much healthier by early 2024. When asked about the regulatory environment, Effron says it’s been this way for long enough that companies are accustomed to the heightened scrutiny and are more willing to test out deal market than they were even a year ago. From Blair’s lips…
Have a great weekend,
GPP Team
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Financial Times: Exxon nemesis Engine No. 1 drops activism in hunt for new identity
A mere two years after its unprecedented campaign against Exxon Mobil, which saw three directors ousted from the oil giant’s board, the fledgling activist fund has opted to end its pursuit of public proxy campaigns. Read More
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The Wall Street Journal: ‘It’s Hard to Be an Activist These Days’: Gadfly Investors Trail Stock-Market Returns
Lauren Thomas examines new data by HFR revealing that activist hedge funds are increasingly struggling to match the S&P 500 in their investment returns. These laggard returns accompany an increase in risky behavior by activists as sentiment around the deal environment begins to brighten. Read More
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The Wall Street Journal: Carl Icahn’s Firm Slashes Dividend in Half After Activist Pressure; Stock Slides
Carl Icahn reiterated his holding company’s decision to “reset [its] focus on [its] core activism strategy,” and announced it would cut the IEP dividend in half after a dismal year in which shares of the company have plummeted. Read More
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The New York Times: Coach Owner to Buy Parent of Versace and Michael Kors in Luxury Merger
Jordyn Holman and Elizabeth Paton report that Tapestry, the parent company of Coach and Kate Speed, plans to acquire Capri Holdings, which owns the luxury fashion brands Versace and Michael Kors, among others, in an $8.5bn deal. Read More
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Variety: Paramount Global, KKR Sign $1.6 Billion Deal for Simon & Schuster
Paramount Global has reached a deal to sell Simon & Schuster to KKR for $1.62bn, a year after federal regulators blocked the company's original plan to sell the book publisher to Penguin Random House, writes Brian Steinberg. Read More
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CNBC’s Squawk Box: You’ll see mergers & acquisitions be much better in 2024, says Centerview Partners’ Blair Effron
Centerview Co-Founder and Partner Blair Effron joined Andrew Ross-Sorkin to discuss, among other things, the state of dealmaking, considerations for companies in today’s regulatory environment and his predictions for M&A in 2024. Watch Here
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The Wall Street Journal: Hanesbrands Draws Activist Investor Seeking to Shake Up Underwear Maker
Barington Capital, writes Lauren Thomas, has taken aim at underwear producer Hanesbrand. The company, famed for its long-time marketing campaign with NBA legend Michael Jordan, has had a number of miscues over the last few years, according to Barington, the most damning of which are the company’s ballooning debt and inability to adapt post-pandemic. Read More
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Financial Times: NRG stands up to Elliott Management’s attack on ‘single worst deal’ in power sector
In a flashback to nearly six years ago, Myles McCormick reports that Elliott has once again targeted energy company NRG. Unlike the initial engagement, Elliott has now made it clear that they wish to oust chief executive Mauricio Gutierrez, branding his leadership as “deficient.” Read More
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The Wall Street Journal: Campbell Soup to Acquire Rao’s Parent Company for $2.7 Billion
After experiencing explosive growth in fiscal 2022, Sovos Brands, parent company of Rao’s pasta sauce and Noosa yogurt, has been snapped up by Campbell Soup for $2.7bn. Touted by executives as “completely complementary,” the deal is expected to close in December of this year, Dean Seal reports. Read More
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CNBC: Billionaire Charlie Ergen merging Dish and EchoStar to expand mobile and satellite telecom empire
Originally founded in 1980 and spun off from Dish in 2008, EchoStar is set to once again become a part of the telecommunications company. Michael Sheetz reports that the consolidation comes as Dish seeks to push beyond its longtime wheelhouse of satellite TV. Read More
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The Wall Street journal: NYSE, Nasdaq Battle for New Listings in Sign of IPO Awakening
In a promising development for the IPO market, competition between the nation’s largest exchanges for new listings is beginning to pick up in earnest. Corrie Driebusch and Laura Cooper report that Nasdaq has succeeded in luring chip designer Arm to its trading platform, while the NYSE has convinced the likes of Birkenstock and marketing platform Klaviyo. Read More
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Reuters: Exclusive: Amazon in talks to become anchor investor in Arm ahead of IPO
Amazon is said to be considering a major role in what may be the year’s biggest IPO, Echo Wang and Anirban Sen report. Arm, the chip designer, and its advisors are hoping for an initial listing in early September, with Amazon purportedly weighing a potential anchor investment. Read More
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Fortune: Ratings agency S&P Global stops grading borrowers’ ESG credit risk amid political backlash over ‘woke capitalism’
S&P has officially halted its practice of assigning numerical ESG scores to companies, reports Christian Hetzner. The ratings agency stated that numerical scores are superfluous given the thoroughness of “analytical narrative paragraphs” in their reports. Read More
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The Wall Street Journal: The Legal Assault on Corporate Diversity Efforts Has Begun
In the wake of the Supreme Court’s decision on affirmative action, Theo Francis and Lauren Weber discuss the growing attention corporations are paying to their diversity initiatives. Conservative groups, they worry, now have fodder to go after similarly positioned policies in the corporate arena. Read More
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Stanford Graduate School of Business: Follow the Leader: How a CEO’s Personality Is Reflected in Their Company’s Culture
Audrey Kim discusses research conducted by Charles O’Reilly and Xubo Cao—scholars from the Stanford Graduate School of Business— examining the role CEOs’ personalities play in the success of the businesses they helm. While some traits are more favorable than others, the research found that there is no one “perfect” suite of qualities, as the needs and idiosyncrasies of individual companies are far too complex. Read More
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FROM OUR DESK TO YOURS
GPPers recently ventured to the Pacific coast to taste potent potables from some of Sonoma County’s most interesting small wineries. Among our favorites: Two Shepherds, partly headquartered on an independent farm and specializing in oranges, piquettes and “Natty Pets” - their take on a pét-nat (shorthand for pétillant-naturel) - which is a sparkling wine fermented once in the bottle rather than fermented twice like champagne. We also loved Ryme Cellars, located in a repurposed farmhouse and excelling at chuggable chilled reds and rosés. Both focus on natural production methods for small-batch, seasonal releases. So if you’re in the market for French-style glou-glou wines when visiting friends and/or clients in San Fran, we recommend you go the “Slownoma” route instead of only Napa.
In a stemless glass closer to home, GPPers are also eyeing August 19, when Long Island will celebrate 50 years(!) of winemaking. While many a Hamptons fan will scoop up a perfectly chilled Summer in a Bottle from Wölffer Estate, we are lovers of the funkier Channing Daughters and the myriad varietals they make (and seven different rosés).
Finally, we at GPP were great fans of The Band (at least those of us of a certain age) and mourn the passing of Robbie Robertson. It’s an excuse to watch (or rewatch) The Last Waltz, Martin Scorsese’s masterpiece about The Band’s last show at the Winterland Ballroom in San Francisco in 1976. We’ve made it easy to listen to it here.
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PEOPLE MOVES
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Cory Weinberg has been named deputy bureau chief of finance coverage at The Information. Read More
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Zachary Kirkhorn has stepped down as Tesla’s CFO and will be replaced by the company’s Chief Accounting Officer Vaibhav Taneja. Read More
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ValueAct, the activist investor, has promoted partner Robert Hale to be co-chief executive alongside Mason Morfit. Read More
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Goldman Sachs’ chief of staff John Rogers is handing over the role and responsibilities to Russell Horwitz, who will return to the firm from Citadel. Read More
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