T O P A C T I V I S T S TO R I E S

A REVIEW OF FINANCIAL ACTIVISM BY GENEVA

N10
May 15th, 2013

PARTNERS

Activist makes his point to Sony

Third Point, Mr Loebs $11bn hedge fund, has amassed a $1.1bn stake in Sony, equivalent to about 6.5 per cent of the Japanese conglomerates total stock.

Dell Committee Asks Icahn for More Information on Plan

Dell Inc. (DELL)s special committee asked billionaire Carl Icahn for more information about his proposed takeover of the personal-computer maker, made last week as a challenge to founder Michael Dells $24.4 billion buyout.

Hess in compromise move over board battle

Hess, the US oil group, has offered to bring on to its board two directors nominated by hedge fund Elliott Management as the battle for control of the company enters its final week.

TW Telecom Jumps After Investor Says It May Be Takeover Target

TW Telecom Inc. (TWTC), a supplier of phone and Internet services to businesses, jumped the most in almost two years after shareholder Corvex Management LP said the company may be a takeover target.

Activist investor to push for new debt deal at PagesJaunes

Activist investor Guy Wyser-Pratte said he is seeking board seats at French phone directories company PagesJaunes to force its biggest shareholder - U.S. private equity firm Cerberus - to cut the group's debt.

UBS Looks at All Investor Input on Knight Vinke Proposal

UBS AG (UBSN) is always looking at all shareholder suggestions, Chief Executive Officer Sergio Ermotti said, a day after investor Knight Vinke Asset Management LLC called for a spinoff of the lenders investment bank.

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T O P A C T I V I S T S TO R I E S
A REVIEW OF FINANCIAL ACTIVISM BY GENEVA

N10
May 15th, 2013

PARTNERS

Activist makes his point to Sony

By Sam Jones and Jonathan Soble May 14th, 2013 There used to be few surer ways of losing money in the investing world than undertaking an activist campaign in Japan. On Tuesday, however, one of the most high-profile investors in the US, the billionaire hedge fund manager Daniel Loeb, turned his attention to the country. Third Point, Mr Loebs $11bn hedge fund, has amassed a $1.1bn stake in Sony, equivalent to about 6.5 per cent of the Japanese conglomerates total stock. More to the point, last weekend Mr Loeb delivered a carefully-worded two-page letter the activist investors calling card in person, to Sony chief executive Kazuo Hirai. The approach may have been velvetgloved, but its content was substantial: Sony should float as much as 20 per cent of its entertainment business to raise much-needed cash, Mr Loeb said, and concentrate on its underperforming electronics base. Mr Loebs investment is typically bold, but it is also being seen as symptomatic of a broader trend. Interest in Japan is soaring among foreign investors and, in particular, hedge fund managers thanks to Abenomics: the programme of expansionist monetary and fiscal policies unleashed by Japans new prime minister, Shinzo Abe, which have propelled the Nikkei on to a sixmonth rally that has yet to show signs of fading. Japan was, until eight months ago, an irrelevant place, says Philippe Jabre, one of Europes most prominent hedge fund managers. People used to say to us, why are you wasting your time there? But, powered primarily by Japanese investments, Mr Jabres flagship global fund has made 35 per cent this year. The violence of the move in the Nikkei just shows how under-owned the market is. You dont have a market that goes up 50 per cent when lots of people own it, says Mr Jabre. Abenomics certainly played its part in attracting Mr Loebs eye. After visiting the country to look for opportunities in April last year, Third Point laid on a series of macro trades to short the yen and buy the Nikkei in anticipation of Mr Abes policies. The trades were a huge success. But extracting concessions from Japanese companies is an altogether different challenge. Mr Loebs gently worded letter to Sony a contrast to the often scathing messages he is known to send US companies suggests he is aware of the suspicion with which activist shareholders, particularly foreign ones, are still viewed in Japan. We called it a mission impossible to our investors when we took a stake in Japan Tobacco, says Chris Hohn, head of The Childrens Investment Fund, one of the worlds biggest activists. Although TCIs JT bet has been a success the stock has risen 140 per cent since they acquired it it is an exception to the rule, according to Mr Hohn: Japan is not a good place for activist investors. Although there are a huge number of mismanaged companies that are cheap and should be taken over, the laws are catastrophic for activists. And the jury is still out on Mr Loebs softly-softly approach. Diplomatic exchanges, larded with compliments, have been the starting points for many activists campaigns in the country but, in the face of corporate intransigence, stances can quickly harden. Culturally, there are very few people who are willing to think outside the box, says Mr Hohn. People who have tried to do activism in Japan have failed. The success of shoot-from-the-hip, too direct, culturally insensitive activists in Japan ranges from spottily poor to very poor, says Nicholas Benes, a corporate governance activist and founder of the Board Director Training Institute of Japan. Mr Loeb, for all his polite words, is pressing for a seat on Sonys board and has taken his campaign public almost immediately, Mr Benes notes tactics that could mark him as an aggressor in Sonys eyes. The thing to do here is to give it nine months to gel. Still, Mr Benes says Sony is a grownup company with a relatively open and global outlook that might ultimately benefit from Mr Loebs prodding. If were lucky, this could be a catalyst for focus and change.

Source : Financial Times

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Dell Committee Asks Icahn for More Information on Plan

By Lisa Rapaport and Aaron Ricadela May14th, 2013 Dell Inc. (DELL)s special committee asked billionaire Carl Icahn for more information about his proposed takeover of the personal-computer maker, made last week as a challenge to founder Michael Dells $24.4 billion buyout. In a letter to Icahn today, the committee said it wants more details about the financing for his transaction and asked him to identify the persons he would expect to form the senior management team. It also requested a draft of a definitive agreement for the transaction. Icahn and his partner Southeastern Asset Management Inc. plan to borrow money for Dell to offer $12 a share in cash or stock to investors, while also letting them retain stakes in a public company. The payout would dilute existing Dell shares, which Icahn said would have a value of at least $1.65 apiece. In contrast to Michael Dells plan to take the company private, Icahn is asking investors to bet on the future of a PC maker beset by rising competition, tumbling demand and mounting debt. The most likely scenario at this point is that Michael Dells deal goes through, Lance Vitanza, an analyst at CRT Capital Group LLC, said in an interview today. There are a lot of people who dont want the volatility. Icahn is also seeking a seat on Dell board and proposed five other potential board members, according to a filing today. Dells shares rose less than 1 percent to $13.52 at the close in New York, about 1 percent below the $13.65-ashare price CEO Dell and Silver Lake Management LLC are offering to take the company private. Committees Questions It is not clear to us whether you intend to formulate your transaction as an actual acquisition proposal that the Board could evaluate and potentially endorse or accept or rather to propose it as an alternative that the Board could consider in the event the pending sale to Silver Lake and Michael Dell is not approved, the special committee said in todays letter. In addition to working capital, Dell is likely to have other significant cash needs, such as approximately $1.7 billion of debt maturities within about 12 months after closing, according to the letter. Lee Harper, a spokeswoman for Southeastern, and Icahn didnt immediately return calls seeking comment. Gordon Goldstein, a spokesman for Silver Lake, declined to comment on Dells letter to the two investors today. Icahn, who along with Southeastern owns almost 13 percent of the shares, said last week that if he prevails, he would look to replace founder and CEO Michael Dell. Financing for their proposal will come from existing cash at the PC maker and about $5.2 billion in new debt. Board Proposals Icahn today proposed himself and five other potential board members, including Harry Debes, former CEO of business-software maker Infor, and Rajendra Singh, CEO of investment firm Telecom Ventures LLC, as part of the effort to scuttle the original agreement. Icahn also said he would nominate Icahn Enterprises President and CEO Daniel Ninivaggi, and Icahn Enterprises Managing Director Jonathan Christodoro. Southeastern nominated Bernard Lanigan, Jr., CEO of Southeast Asset Advisors Inc., and five other people, including New York City Chief Information Officer Rahul Merchant. Merchant is an appointee of New York City Mayor Michael R. Bloomberg, who is the founder and majority owner of Bloomberg LP, the parent of Bloomberg News. Potential Growth To prevail, Icahn will have to persuade those investors who want to keep an equity stake in Dell that fresh leadership can do a better job playing catch-up in cloud computing while managing greater debt and combating the biggest sales decline in the history of personal computing. Investors who dont want Dell stock face bigger risks under Icahns plan. While they would receive $12 a share, theres no guarantee that theyll be able to find a buyer willing to pay $1.65 or more for their existing holdings -- a prospect that may make the Silver Lake-Dell bid more alluring. Icahn and Southeastern said last week their proposal gives investors a chance to benefit from potential future growth. Mathematically, there is no question it is superior, Icahn said in an interview on Bloomberg Television last week. You have a choice of getting $12 and still owning Dell, which has great potential. Lackluster Growth Dells board is predicting another year of lackluster growth as demand for PC ebbs, underscoring the urgency behind the companys decision to be taken private, documents filed in March showed. Sales for the year ending next January will slip to $56.5 billion, and Dells PC business will shrink by $10 billion over four years, according to projections in a proxy statement filed with regulators. I think Icahn is gesticulating in order to push Dell/Silver Lake to bump so that he can get out break-even or with a small profit, said Albert Saporta, managing director at at AIM&R, an investment research firm based in Geneva. It should be pretty clear by now that Dell is not worth a lot more than $13.65. Cash Certainty Even so, Jefferies Group LLC, the investment bank that Icahn said may

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commit $1.6 billion to help finance his takeover, told clients in a research report that Dells investors are more likely to favor a competing offer. Most shareholders would prefer the certainty of $13.65 in cash from Michael Dell and Silver Lake, Peter Misek, an analyst at New York-based Jefferies, wrote in a note today. Investors may accept that rather than risk the uncertainty and the

ensuing stock volatility if the Silver Lake proposal were voted down and Icahn/Southeastern attempt to install a new board of directors. Richard Khaleel, a spokesman for New York-based Jefferies, declined to comment on whether the firm has committed funding or on the analyst note. Owning Dell hasnt been such an attractive option for shareholders in

recent years. The shares were trading above $30 in 2007 after Michael Dell returned as CEO following a hiatus, yet they have been sinking amid plummeting demand for PCs and accelerating competition for selling the data-center products and services Dell has opened its coffers to acquire. Source : Bloomberg

Hess in compromise move over board battle

By Ed Crooks May 13th, 2013 Hess, the US oil group, has offered to bring on to its board two directors nominated by hedge fund Elliott Management as the battle for control of the company enters its final week. In a suggested compromise, Hess said that if its slate of five nominated directors was elected, it would quickly appoint two more board members from the rival list proposed by Elliott, which has been pushing for change at the company. The proposal follows Elliotts decision to drop a controversial remuneration plan for its slate of five nominees. Elliott described the move as a PR stunt, made because Hess was seeing the writing on the wall. The battle for Hess, which will come to a head at the companys annual meeting on Thursday, reflects rising shareholder activism among US investors in general and particularly in the energy industry. Separately on Monday, Transocean, one of the worlds largest offshore drilling contractors, said Chairman Michael Talbert planned to step down this year, in another last-minute concession before its annual meeting on Friday. It is under pressure from Carl Icahn, the activist investor who owns 5.6 per cent. The offer from Hess over Elliotts board nominees follows a U-turn last week, when it offered to strip chief executive John Hess of the chairmanship, replacing him with John Krenicki, a former senior General Electric executive. Both Institutional Shareholder Services and Glass Lewis, the investor advisory firms, have backed the directors nominated by Elliott. However, they said several shareholders had favoured a compromise bringing in new directors from both sides an outcome that Hess has now offered, albeit with five of its own nominees joining the board compared to just two of Elliotts. In a statement, Elliott said: Shareholders want real change, yet Hess is doing everything they can to avoid it . . . Hess should accept all five shareholder nominees and replace as many of their incumbent directors with managements nominees as is reasonable. Earlier on Monday Elliott, which owns 4.5 per cent of Hess, moved to neutralise one of the main objections to its directors by dropping their planned bonus scheme. It had intended to pay them $30,000 for every percentage point by which Hess shares outperformed its peers by 2016, leading to concerns that the board could be divided because the directors were rewarded differently. The plan had been criticised by Glass Lewis. In a statement, the Elliott nominees described the controversy over their pay as an ongoing distraction. They added: While each of us believes that these arrangements are appropriate and consistent with the performance of our duties as independent directors, each of us has made the decision to waive our right to receive these payments from Elliott. Meanwhile, Transocean said that if Mr Talbert, its chairman since 2002, was voted back on to the board at the meeting on Friday, he would step down as chairman by November and leave the company no later than next years meeting. Mr Talbert, who was chief executive for eight years before becoming chairman, has been criticised by Mr Icahn for presiding over the destruction of at least $11bn of shareholder value, most of it resulting from the merger with GlobalSantaFe, another drilling contractor, in 2007. ISS and Glass Lewis had both recommended voting against Mr Talberts re-election to the board. Transocean said the company would promptly begin a search for a replacement, and would take into consideration the views of the companys shareholders in making an appointment. In another example of increased shareholder activism in energy, investors this month removed Ray Irani, executive chairman of Occidental Petroleum, following concerns over his disagreements with the companys chief executive.

Source : The Financial Times

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TW Telecom Jumps After Investor Says It May Be Takeover Target

By Saijel Kishan and Joshua Fineman May 8th, 2013 of billionaire Carl Icahn before starting Corvex, which owns stakes in both companies. Meister said he is bullish on the industry and sees the stocks of the two companies climbing. TW Telecom could rise about 40 percent to $38 a share, while Level 3 may reach $34, he said. Great space, growing trends, great companies, Meister said at the conference. TW Telecom is particularly attractive as an acquisition, he said. There is massive value in an M&A context. Shares of TW Telecom, based in Littleton, Colorado, climbed 7.1 percent to $29.13 at 1:43 p.m. in New York after his remarks. The stock rose as high as $29.24 during the session, marking the biggest intraday jump since August 2011. Level 3, located in nearby Broomfield, Colorado, rose as much as 6.7 percent to $24.76.

TW Telecom Inc. (TWTC), a supplier of phone and Internet services to businesses, jumped the most in almost two years after shareholder Corvex Management LP said the company may be a takeover target. Level 3 Communications Inc. (LVLT), the operator of a global fiber-optic network, would be a good acquirer for TW Telecom, Keith Meister, the founder and managing partner of New York- based Corvex, said today at a conference. Meister was a protege

Source : Bloomberg

Activist investor to push for new debt deal at PagesJaunes

By Christian Plumb and Matthieu Protard May 13th, 2013 Activist investor Guy Wyser-Pratte said he is seeking board seats at French phone directories company PagesJaunes to force its biggest shareholder - U.S. private equity firm Cerberus - to cut the group's debt. PagesJaunes has been struggling with big debts since a private equity buyout of the company in 2006. The firm has also had to cope with the impact of the Internet on its printed directories businesses. Wyser-Pratte, a U.S. investor who focuses on European companies, has built up a 0.85 percent stake in PagesJaunes, which he said was enough to mount a challenge to Cerberus. Cerberus became PagesJaunes' biggest shareholder, with 28 percent of voting rights, via the purchase of debt from Mediannuaire, a holding company controlled by Goldman Sachs Group and private equity firm KKR & Co. A restructuring earlier this year has cut the debt but Wyser-Pratte said this had not done enough for PagesJaunes. "These people have left them hocked up to the eyeballs, and it's not right," told Reuters on Monday. "That's the first goal, get this thing renegotiated, and with two people on the board ... I think we've got a good shot at it." He plans to seek investor support to vote himself and Pierre Nollett as independent directors at PagesJaunes' June 5 shareholder meeting. Wyser-Pratte said his 0.85 percent stake was enough to propose resolutions for the annual meeting. "We're on the side of management," he said. "They feel like they've gotten short shrift. They're in shackles with this debt." Cerberus was not immediately available for comment. PagesJaunes' net debt was more than four times its earnings before interest, tax, depreciation and amortization in 2012, compared with an industry average of 0.78 times, according to Thomson Reuters data. PagesJaunes said it had received a letter from Wyser-Pratte demanding the appointment of two board members. The company declined further comment. Shares in PagesJaunes, which is renaming itself Solocal Group, rose 4.2 percent. "Guy Wyser-Pratte's activist stance is fuelling speculation on the stock," Gilbert Dupont analyst Jean-Baptiste Sergeant said. "If he manages to unite the minority shareholders, he'll seek a sale to a big group and work out the problem of the remaining debt."

Source : Reuters

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UBS Looks at All Investor Input on Knight Vinke Proposal

By Elena Logutenkova May 3rd, 2013 UBS AG (UBSN) is always looking at all shareholder suggestions, Chief Executive Officer Sergio Ermotti said, a day after investor Knight Vinke Asset Management LLC called for a spinoff of the lenders investment bank. Were taking the input and suggestions of every shareholder always very carefully, Ermotti, 52, told Bloomberg News in an interview at a conference in St. Gallen, Switzerland today. Yesterday was a good opportunity for all our shareholders to come to the AGM and voice their opinions. Ermottis comments come a day after New York-based Knight Vinke said in an open letter to shareholders before UBSs annual general meeting that ownership of the investment bank, which nearly destroyed UBS during the financial crisis, could be transferred to employees and managers. In 2011, a $2.3 billion loss from unauthorized trading at the unit led to the exit of former CEO Oswald Gruebel, three years after the bank received a government bailout to ward off a collapse. UBS shares rose 0.4 percent to 16.85 Swiss francs at 4:20 p.m. in Zurich. They have gained about 18 percent this year, trailing Credit Suisse Group AGs 24 percent increase. Knight Vinke, led by founder Eric Knight, targets large, publicly traded companies and seeks to recruit other institutional investors to press the companies management to change course. In 2007, the firm said that HSBC Holdings Plc (HSBA), Europes largest bank, misled investors about a new share plan payable in 2008 to reward management. Serious Threat estimate of 321 million francs. The unit had a pretax return on equity of 49.5 percent for the quarter, up from 17 percent a year earlier. The lender has changed its pay structures, limiting cash payouts, after almost 37 percent of shareholders voted last year against its 2011 compensation report. Yesterday, the 2012 report was approved with 83 percent of the votes. Clearly our shareholders understand that were fixing past mistakes in a critical and constructive way, but the firm also needs to look forward, Ermotti said today. Were pleased with the recognition of our shareholders for these efforts. Ermotti, who was appointed CEO in November 2011, said later during a panel at the conference that had UBS introduced its current pay structure in 2004 or 2005, it would most likely not have needed the bailout as clawback provisions are linked to longterm performance. The real problem is to make sure that people are paid for sustainable performance, Ermotti said. And you can only measure sustainability over the next at least three to five years.

The firm wrote in the letter that it questions the merits of keeping the investment bank under the same roof as the wealth management and Swiss banking businesses. Investment banking is a very risky business, which poses a serious threat. No Knight Vinke representative spoke publicly at yesterdays shareholder meeting in Zurich and the proposal to split off the investment bank wasnt discussed. The firm says it owns almost 1 percent of UBS shares. Ermotti announced plans last year to eliminate 10,000 jobs and exit most debt-trading businesses to concentrate on money management and boost profitability. UBS this week posted first- quarter earnings that exceeded analysts estimates.
Pay Structures The investment bank posted a 92 percent gain in first- quarter pretax profit to 977 million francs ($1 billion), UBS said on April 30. That was more than triple the average analysts

Source : Bloomberg

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