What's Up With Trian and Blackwells?

Occasionally two (or more) activists collide at a portfolio company. Sometimes they mostly agree, and quibble about trivial details. Other times, they have different theses for the company's direction, or divergent views about how much growth and risk the company can bear. This happened a few times in 2023 with varying success, mostly in line with previous years' experience. Also, we predicted universal proxy card would bring out more of these, which didn't really happen in 2023.

Much less frequently, one activist just goes after another. We saw that this past week, as Blackwells Capital publicly criticized Trian Partners at not one but two Trian portfolio companies, Disney (DIS) and Wendy's (WEN).

What Just Happened?

Last week, Blackwells sent a news release slamming Trian and its recent moves at DIS. ICYMI, Nelson Peltz revived Trian's earlier activist efforts at DIS, and indicated it would nominate candidates to stand for election at the 2024 AGM.

Blackwells pledges its staunch support for current DIS leadership in glowing terms, calling the current turnaround "transformative" and the BoD "enviable". It accuses Trian of "mindless, drum-beating activism." Blackwells has owned DIS since 2018, although it does not disclose how many shares.

In the release, Blackwells also accuses Trian of "nepotism" at WEN, one of Trian's oldest and biggest investments, where three Trian executives serve on the BoD. It calls WEN a "cautionary tale" for DIS shareholders.

Blackwells then evidently decided WEN deserves its own activist effort. A news report indicates Blackwells plans to nominate at least two director candidates at the next AGM. For the expected May 2024 AGM, Blackwells can submit a nomination notice by mid-Feb 2024, so it has some time to put together its plan. Blackwells also does not disclose how long it has owned WEN, or for how long.

Now, Who Is Blackwells?

CIO Jason Aintabi started Blackwells Capital in 2016. It acts larger than its apparent scale, and has several notable activist projects to its credit.

It hasn't filed a Form 13F or any recent Form 13Ds, so we don't know fund AUM or the size of the positions in its portfolio companies. Its collection of activist presentations and news releases doesn't reveal any interesting details about the fund or its team. The only Form 13D it filed, for a proxy contest at SuperValu in 2018, disclosed an investment of around $30 million then. Earlier this year it said it owns 2% of GNL, which was worth about $60 million at the time. So, it probably remains somewhere near that AUM.

It does pursue some interesting activist situations. Besides SVU, it has to its credit three successful projects at real estate companies, including at Colony Capital, whose CEO Tom Barrack was a buddy and early supporter of President Trump, and at Monmouth Real Estate Investment Corp, where he faced off against real estate luminary Sam Zell. It also pursued Peloton last year, and arguably is responsible for the CEO change there.

Alpha or Attention?

Clearly, Blackwells and Aintabi do not hesitate to confront the powerful. And, with about one project per year, the firm picks them with some care. Its presentations reveal thorough and thoughtful analysis of business and corp gov, too.

Escalating from relatively smaller companies with aging leaders to challenging Nelson Peltz and his team at DIS and WEN takes it to a new level, though. We can't see why, exactly, Blackwells would defend DIS when few other investors dare do so these days, other than to poke Peltz. Sure, WEN could probably use some shaking up after a stagnant few quarters. The likelihood of persuading other shareholders to displace Trian and its 16% ownership seems rather low.

Activists usually do well by critiquing leadership of portfolio companies, rather than other shareholders. More than a few activists merit a hard look at their process and results, and Trian can handle the same criticism.

We'll wait to see a thesis and detailed analysis of WEN, similar to how Blackwells works at other companies, and (ironically) similar to how Trian itself breaks down activist investments. Until then, at these most recent companies Blackwells appears to push for attention rather than portfolio performance.