Actionable Ideas for Companies and Sponsors
The New Face of Activism – Traditional Institutional Investors
2019 has seen traditional long-only institutional investors taking the step of actively embracing activism. As a new milestone in the evolution of activism, Wellington Management (~$1 trillion AUM), and a long-term 7.2% owner of Bristol Myers Squibb, issued a press release on February 27 opposing Bristol-Myers Squibb’s (BMY) $74 billion buyout of Celgene (CELG). Their opposition to the transaction is several-fold including, 1) the transaction bears too much risk; 2) the transaction terms offer BMY shares to CELG shareholders at well below its implied asset value; 3) execution success is too difficult to achieve; and 4) BMY management needs to pursue alternative paths to create value.
In an even more aggressive action by a mainstream long-only institutional investor, M&G Investment Management, one of the U.K.’s largest (~$360 billion AUM) and longest established institutional investors, and a long-term 16.5% investor in Methanex, a $4.5 billion Canadian company, officially nominated an opposing slate of four board members for Methanex on Mar 25th. In a statement released by M&G, “In our 85-year investment history we have been able to fulfil our responsibility for stewardship of our investments almost exclusively through private and informal communication. Engaging in a proxy contest is extraordinary action for us, but in this situation, we feel we have no alternative but to do so.”
Both Wellington’s opposition and M&G’s activist stance have awakened board members and CEOs across the U.S. and Europe to the fact that even the longest-term institutional shareholders are now prepared to aggressively intervene in Board decisions. These events also highlight the critical importance to Boards and management teams of consistent engagement with long-term shareholders to preempt such shareholder responses.