After buying big US brands like Apple Inc, PepsiCo Inc and Yahoo Inc, activist shareholders — investors in search of big dividends, or “activists” — are now setting their sights on European companies like Nestle SA.
“No company is really immune from activism except perhaps for the very largest companies,” said Gregory Taxin, managing director of Spotlight Advisory, a consulting firm for activists.
Activists’ favored targets are “companies that have a lot of cash that haven’t been returned to shareholders,” Wachtell, Lipton, Rosen & Katz corporate attorney David Katz said.
In announcing plans last week to buy US$3.5 billion of Nestle shares, US billionaire Daniel Loeb revealed the European ambitions of these investors with bulging wallets, who say they want to restore power to shareholders.
In addition to cost-cutting, Loeb is asking Nestle to sell its historic stake in L’Oreal SA in order to boost the share price and dividends.
“L’Oreal has been a fantastic investment,” Loeb’s spokeswoman Elissa Doyle told reporters. However, it is “a non-core investment for a primarily Food & Beverage and packaged goods business.”
In the wake of Loeb’s move, Nestle announced the acquisition of US$21 billion of its own shares, which should boost the stock price.
However, Katz said: “I do not know if this will be enough to remove the pressure.”
Loeb is not the first US activist to go after a foreign giant. His compatriot Nelson Peltz, through his investment fund Trian Partners, holds a stake in the French yogurt maker Danone SA. And Paul Singer has invested, via his Elliott Management fund, in South Korea’s Samsung Electronics Co, the Australian-British mining group BHP Billiton and the Bank of East Asia Ltd (東亞銀行).
All want the same thing: quick returns on investment by requiring cost-cutting, asset sales or share buyback programs. When they do not succeed, activists usually engage in high-profile media campaigns — and they often win.
More than 2,900 activist campaigns have been recorded in the US since 2010, including 645 last year alone, according to FTI Consulting.
Most sectors of the economy are affected, but “the US market remains crowded and generally overvalued, [so] activist investors will continue to focus their sights on foreign jurisdictions, including not only Europe, but Australia and Asia as well,” said Andrew Freedman, co-head of the Shareholder Activism group at law firm Olshan Frome Wolosky.
“The type of corporate self-reflection occurring in the US is happening to a much lesser degree in Europe, leaving more opportunities at European companies for activist investors to catalyze value creation,” he said.
Dan Zacchei, one of the leaders of Sloane & Co, a firm advising activists, said Europe is attractive because of friendly laws, and because many companies do not have deterrent measures against potential predators.
“European companies have less stringent corporate defenses and may be more shareholder (or in this case activist shareholder) friendly,” he said.
The Continent also is in the midst of political stabilization, with the start of negotiations on Brexit, while in the US there remain questions about the major reforms — tax cuts and infrastructure investment — promised by US President Donald Trump.
However, to succeed in Europe, activists will have to deal with strong trade unions and government interventions, which is rarely the case in the US.
“Activist investors do not invest in a company to immediately go hostile or start a proxy contest. Their hope is for a real, behind-the-scenes dialogue with receptive management and to only escalate the situation publicly if the company is unwilling to engage or consider recommended change,” said Freedman, whose law firm has set up an action plan to help activists in their campaigns in Ireland, the UK and France in particular.
Zacchei cautions that communicating their goals to pension funds can pose a real challenge for these investors, who need to understand what issues they care about most.
“It’s not dissimilar to a political candidate from the [US] northeast having to find a way to connect with voters in the heartland,” he said.
Even that may not be enough. The Elliott fund recently failed to convince the Dutch group Akzo Nobel, in which it has become a shareholder, to merge with the US’ PPG Industries Inc, despite its pressure.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has appointed Rose Castanares, executive vice president of TSMC Arizona, as president of the subsidiary, which is responsible for carrying out massive investments by the Taiwanese tech giant in the US state, the company said in a statement yesterday. Castanares will succeed Brian Harrison as president of the Arizona subsidiary on Oct. 1 after the incumbent president steps down from the position with a transfer to the Arizona CEO office to serve as an advisor to TSMC Arizona’s chairman, the statement said. According to TSMC, Harrison is scheduled to retire on Dec. 31. Castanares joined TSMC in