Activism Defense Practice

Transcription

1 Activism Defense Practice Peter Casey Executive Vice President Waheed Hassan, CFA Senior Managing Director Copyright 2017 by Alliance Advisors, LLC. ALL RIGHTS RESERVED.

2 Our Holistic Approach Vulnerability assessment coupled with surveillance and solicitation information ensures high level of activist preparedness Identify Vulnerabilities (key areas of shareholder criticism based on financial/share price performance) Target Company Monitor changes in ownership to proactively identify activist accumulation 2 Proxy Solicitation (provide intelligence on where shareholders custody their shares. Key in early identification of activist investors) Activist investors tend to hide their ownership behind different custodians Stock Surveillance (proactively monitor shareholder base to identify creeping accumulation by activist/hostile investors)

3 Value Proposition Shareholder Engagement Strong relationship with institutional investors Proprietary database and in-house call center i.e. enhanced ability to successfully connect with retail shareholders Proxy Advisory Firm Engagement Team lead from ISS Deep understanding of proxy advisory firm framework Proven track record in garnering support of proxy advisory firms Shareholder ID Ability to track increase in ownership by activist investor(s) Shareholder Messaging Extensive experience in helping formulate successful communication strategy/messaging for investors and proxy advisory firms 3

4 Proxy Solicitation Proxy Solicitation / ISS Experience (Ensures successful shareholder outreach and proxy advisory firm engagement) Institutional Investors: Strong relationship with governance teams at institutional investors Retail shareholders: On-site call center in NJ for retail shareholders (2.3 million individual investors contacted in 2016) Proxy Advisory Firm: High success rate in garnering favorable recommendation from ISS in contested situations. Extensive client coaching before shareholder and ISS engagement. Team led by Waheed Hassan, CFA, who formerly managed the research team at ISS Client Coaching : Only proxy solicitor that has the capability and experience to take ownership of ISS/Investor deck in proxy contests. Review of Proxy Statement and shareholder letters: Scope includes: a) review of preliminary and final proxy statements to proactively identify potential red flags and b) assist in drafting shareholder/fight letters Daily vote report and accurate shareholder ID: Data and relationship driven solicitation/shareholder engagement campaign Proven track record: +400 clients including numerous Fortune 500 companies 4

5 Market Intelligence/Shareholder ID Market Intelligence (Key to identifying who holds the shares and where) Best in class custodial database for activist investors: Monitoring of institutional voting of +400 proxy solicitation campaigns every year allows accurate detection and identification of custodians Track record of successfully identifying activist investors before 13D filing: Identified activists including Jana Partners, Value Act, Pershing Square, Carl Icahn Experienced team: Share ID team has 17 years of industry experience at IPREO and NASDAQ 5

6 Intelligent Stock Surveillance Program +400 proxy solicitation campaigns helps build and maintain best-inclass institutional custodian database Custodian data is then mapped to each institutional investor Annual Shareholder Meeting Alliance identified the following activists prior to 13D filing Monitoring of institutional voting, allows accurate detection and identification of custodians used by activist investors, hedge funds and traditional institutional investors Alliance Advisors has visibility on the custodian where vote was cast (JP Morgan, etc.) Votes cast is matched to reported ownership (13F and 13D filings) Investors cast their votes 6

7 Advised public companies on M&A and contested solicitations with value in excess of $90BN Recent M&A Clients Recent Contested Representations FirstMerit Corporation Acquisition by Huntington Bancshares Private Bancorp Acquired by Canadian Imperial Bank of Commerce TICC Capital Corporation Chioptle Mexican Grill, Inc. Value: $3.6 Billion Proxy Solicitation Value: $4.8 Billion Proxy Solicitation Solicitation Representing Management Solicitation Representing Management Keurig Green Mountain Inc. acquired by a JAB Holding Company-led investor group Modified "Dutch Auction" tender offer to repurchase shares of its common stock Wayne Savings Bancshares, Inc. Hill International Value: $13.9 Billion Proxy Solicitation Value: $2 Billion Information Agent Solicitation Representing Management Solicitation Representing Management against Bulldog Investors 7

8 Typical Proxy Fight Timeline TYPICALLY 3-4 MONTHS BEFORE SHAREHOLDER MEETING Activist states intent for proxy action. Company responds with press release to defend and contacts its stakeholders Both parties build up their case, research, compile materials and release public communications for more support Activist files proxy materials and proxy card with the SEC formally starting the proxy fight 1 MONTH BEFORE SHAREHOLDER MEETING Activist and Company send letters to shareholders, with proxy materials and the proxy card for voting Company board and activist try to meet with investors and make the case for their plans an investor road show Third party proxy advisors are used. ISS is the biggest (their decision will determine 30-40% of votes). Activist meets first and presents, then Company 1-2 WEEKS BEFORE SHAREHOLDER MEETING Final Stretch some weeks before the meeting, both activist and company try and secure votes Shareholders lock in their votes a couple of days before the annual meeting Shareholder Meeting votes are counted and the winner is announced 8

9 Address Potential Areas of Activist Criticism Valuation Operational Issues Balance Sheet/Capital Allocation Corporate Governance Total Shareholder Return (TSR) Revenue Growth Leverage Governance profile Valuation multiple premium/ discount Operating Margin Level of cash vs. Enterprise Value Executive compensation Change in Analyst Estimates ROIC Acquisition and R&D spending Prior Proxy Advisory firm recommendation Earnings Surprise Relative Segment Performance Share buyback/dividend 9

10 Guiding Principles for Response Preparation Maintain emphasis on key messages and anchor that the board is acting in the best interest of all shareholders, dispelling any notion of entrenchment Speak with one single, consistent voice Tailor message to address key stakeholders Refine and update messaging based on new developments Assess dissident s nominees and highlight weakness in potential messaging Aggressively rebut inaccurate or distorted information by the activist 02 Aggressive press outreach to ensure Company controls the dialogue Maintain high ground in the media On-the-record and on background 03 Prepare for mostly likely scenarios and attacks Anticipate events and draft an investor presentation deck Enhance speed and quality of response by preparing in advance 04 Maintain running tally on likely supporters, potential undecided, and certain opponents Assess ISS and Glass Lewis s influences on institutional shareholders Secure votes in support of management Focus outreach on undecided and swing votes

11 Near-Term Action Plan Assess the dissident s notice Analysis of nominees Investigate notice validity Refine and update response plan Hire advisors Prepare press releases Create media strategy Potential Vulnerabilities Assess feedback from investor outreach Consolidate reviews of potential attacks Refine responses and key messages Assess corporate governance changes, including new director candidates Investor Presentations Circulate examples of Investor Fight Decks and ISS reports Develop outline for company investor presentation ( fight deck ) Shareholder meeting Review logistics Preliminary proxy statement 11

12 Potential Responses: FAQs When is your Annual Meeting? When will I receive the Company s proxy material? The 2017 Annual Meeting has not yet been scheduled. We will make an announcement as soon as the date and location has been determined. Our proxy materials are currently being prepared. Once the company files its definitive proxy statement with the SEC, you will be receiving our materials in the mail, as you have always received them. I received a letter from the activist investor. What should I do about the letter? Simply ignore the letter from the activist. The company has responded to the letter in a letter dated March [ ], 2017, a copy of which has been mailed to you and has also been made public in a press release. Please let us know if you have any questions about our letter. The company welcomes constructive dialogue with all of its shareholders. What can I do now? Nothing, for now. Please continue to disregard all mailings and communications that you may receive from the activist investor. If the activist does contact you or sends you another mailing, please call us. What should I do if the activist contacts me via telephone? It is possible that you may receive additional letters and/or telephone calls from the activist or people soliciting on behalf of them. You can just ignore them. You do not have to talk with them. 12

13 Potential Responses: FAQ (cont.) Have you spoken to the activist investor? We regularly communicate with stockholders and periodically meet with many of them. As a practice, we do not comment on interactions with specific stockholders. Do you expect the dissident will run a full campaign? That s a question for the dissident. What I can tell you now is the company has a strong, independent Board comprised of proven leaders with extensive relevant business and financial experience. Each member is highly qualified to further advance the interests of the company s stockholders, customers and employee. Will you consider adding dissident s nominees to the Board? Our Board has a well-established process for evaluating candidates via the Corporate Governance Committee. Once the Board has completed its process, they will recommend a slate of nominees that it believes will act in the best interests of all stockholders. Are you prepared to fight the activist? The board supports plans and actions that are in the best interest of all stockholders. The Board will review the notice from the activist in keeping with those interests and will recommend a slate of nominees and prepare its proxy statement for the 2017 Annual Meeting. How many directors are up for re-election at the 2017 Annual Meeting? Which ones? Company has an annually elected Board. The full board will be up for election at this year s annual meeting. 13

14 Client Testimonial: Activism Advisory Recently, we retained Alliance Advisors activism defense team led by Waheed Hassan. We were impressed by Alliance s unique approach to managing the activist threat. Their proprietary Board Risk Score TM tool enabled us to proactively identify and monitor potential areas of activist attack in real-time. Similarly, we found Alliance s Mock Activist Deck to be extremely useful in understanding what an activist attack would look like. Alliance not only provided us with the right tools but Waheed also did a great job in explaining the key issues to the executive team. We would highly recommend Alliance to anyone looking to understand and manage their activist risk. Nicholas Estrela, Head of Investor Relations, Domtar Corp. Recently, Alliance Advisors provided services in managing a consent solicitation filed by an activist group against our Company. I can honestly say that Alliance Advisors, and specifically Waheed Hassan, provided exceptional services during our time of need. Waheed has a keen ability to listen, has strong analytic capabilities to parse through public information and data, and has a natural ability to formulate a clear strategy to respond to the consent solicitation. Alliance made it easy for the Board to rely on their work products and guidance. I would unconditionally recommend them. 14 Shirley Singleton, Former Chairman, President and CEO, Edgewater Technology

15 Unmatched ISS expertise for activist campaigns where proxy advisory firm support is critical TICC Capital was in a unique situation facing not one but two hostile actions: one to replace the entire Board so as to gain control of the management agreement, another representing a highly conditional unsolicited bid for the entire company. Before Alliance Advisors involvement, ISS recommended voting AGAINST management s proposal. Two weeks before the shareholder meeting date, Waheed got involved and with his assistance, we re-engaged with ISS with a modified message and update. This approach worked, and ISS reversed its recommendation to in favor of voting FOR the management proposal. We would highly recommend anyone considering ISS engagement (in particular, in a contested situation) to retain Waheed and his team at Alliance Advisors. Steve Novak, Chairman, Special Committee of the Board, TICC Capital Corp. We retained Alliance Advisors to assist us in the proposed merger with Fyffes. The Alliance team proved invaluable to these efforts, guiding both Chiquita and Fyffes through the ISS engagement process. Waheed and his team provided very accurate guidance and insight on ISS, which was instrumental in garnering ISS support for this contested transaction. We would highly recommend Alliance Advisors to anyone seeking any ISS engagement needs. 15 Edward Lonergan, Former CEO, Chiquita Brands International Director, Owens Corning

16 Select Activism Advisory Experience