7th Annual
Alternative Investment
Management Seminar
October 22, 2014
Overview
• Emerging Trends in Shareholder Activism
• Marketing Your Fund: Regulatory
Implications
• Asset Raising for Fund Managers
Emerging Trends in Shareholder
Activism
Panelists
George Hall, The Clinton Group
Douglas Hirsch, Sadis & Goldberg LLP
Sam Lieberman, Sadis & Goldberg LLP
Featured Panelist:
• George Hall, Founder of Clinton Group
• Roughly $8 billion under management
• Recent successful majority-slate proxy contests vs.
ValueVision Media, Stillwater Mining, Wet Seal
• Dozens of Negotiated Activist Campaigns
4
Incumbent Boards More Likely to Engage Activists
• Boards Are Engaging More as Activism Has Become More
Successful
• More of an Opportunity to Achieve Objectives Through
Settlement & Negotiation
• Conversely, Hostile Boards are More Likely to Have Serious
Flaws and/or Entrenchment Motives
• Examples of Desperate Board Tactic: Stockholder Meeting at
Mineshaft Log Cabin – No Cell Service
5
Majority Slates More Popular & Successful
•
Clinton Group Successfully Uses Majority Slates in Proxy Contests vs. Value Vision Media, Stillwater
Mining, and Wet Seal.
•
Key Focus: Presenting a Strategic Vision Justifying Wholesale Change of the Board – Showing that
Activism is About Creating Long-Term Value (Not Corporate Raiding)
•
Focused on ValueVision failure to Monetize Wide Cable Distribution as Effectively as Competitors
•
ISS: Clinton Group “has laid out a plan to create proprietary brands, improve product mix and develop
creative programming, which appears needed at ValueVision.”
•
“Clearly, ValueVision is not monetizing its distribution as effectively [as HSN and QVC]. … The
disconnect in household monetization appears to be driven by ValueVision’s misaligned merchandise mix, a
lack of proprietary brands and outdated programming.”
•
“[L]ooking at the programming [schedule] … it is easy to see why QVC and HSN are attracting more
viewers to [their] more differentiated, diversified and engaging content. … [T]he company needs to
diversify and create more engaging programming and programming personalities.”
6
Choosing a Slate Reinforcing Long-Term Value Message:
•
Value Vision: Clinton Group Value Vision Slate included:
– Former CEO of Home Shopping Network (Mark Bozek)
– Former CEO of SONY Music (Tommy Mottola)
– Former Presidents of Tommy Hilfiger & Saks Fifth Ave.
– Senior Marketing VP from QVC
– Producer of American Idol
•
Recruiting Quality Candidates Not as Difficult as You Think (Clinton Group has recruited
former Montana Senator, CEO of Appleby’s)
•
Industry-Veteran Nominees Can Help Develop Activist Strategy
7
Persuading Proxy Advisory Firms
•
Persuading Stockholders and Proxy Advisory Firms: Both ISS & Glass-Lewis endorsed
Clinton Group slate in Value Vision (ISS endorsed four directors; Glass-Lewis, all six).
•
Proxy Advisory Firms More Open to Majority Slates in Recent Years
•
A Strong Strategic Vision for Wholesale Change is Necessary
•
Role of Proxy Advisory Firms in Making it Easier to Win Majority Slates
– ISS and Glass-Lewis Positions Against Staggered Boards and In Favor of Annual
Election of All Directors Makes Majority Proxy Contests More Likely
– ISS and Glass-Lewis Positions on Governance Provide Additional Angle to Get
Approval: E.g., Requiring Shareholder Approval for Significant Bylaws, Compensation
Issues, etc.
8
Using Social Media to Reach Stockholders
•
Websites are Efficient Way to Reach Stockholders Directly
– Example: www.addValueandVision.com: Website for Clinton Group position
– Video Presentation by Board Members Adds Enthusiasm for Strategic Vision
•
Twitter: Can release multiple messages quickly directly to stockholders, by
notifying them of Twitter site and getting them to follow.
– E.g., Icahn/Apple.
•
Can Reduce the Costs of Wholesale Activism Dramatically
•
Example: ValueVision spends $3 million vs. ~$700,000 Clinton Group
9
Other Recent Developments
•
Bylaws Barring Nominees/Directors from accepting compensation from third parties
– ISS characterized bylaw adopted by Provident Financial a “material failure of governance” because it
restricted ability for activists to select nominees & recommended voting against Board’s governance
committee directors. Formally Oppose in Early 2014
– Entrenchment vs. preventing conflicts from activist incentive compensation
•
Liquid Alternatives Mean Activists Are Well-Funded: Ackman Raises Billions in Netherlands, Clinton
Long-Short Equity Fund through Wakefield (WKCIX)
•
13D/13G Poison Pills: Upheld in Third Point/Sotheby’s Case. Counter-Strategy is that a Large Position is
No Longer Necessary for Effective Activism
•
Negotiating Settlement Agreements with Companies to Reimburse Costs
– Delaware companies have discretion to pay expenses if contest benefitted company,
– Will settlement achieve enough? Willing to agree to stand still?
10
Marketing Your Fund:
Regulatory Implications
Panelists
Martin Kornish, MJ Hudson
David Charnin, Strategic Value Partners
Lance Friedler, Sadis & Goldberg LLP
Daniel G. Viola, Sadis & Goldberg LLP
Asset Raising for Fund Managers
Panelists
Betsy Battle, Lone Peak Partners
David Solomon, Goldman Sachs
Ron Geffner, Sadis & Goldberg LLP
Yehuda Braunstein, Sadis & Goldberg LLP
Thank you for attending
Sadis & Goldberg’s
7th Annual
Alternative Investment
Management Seminar