CAP Capgemini

By Corrie Driebusch 

Being a shareholder activist investor isn't such a good look right now.

Executives are struggling to keep their companies afloat and their workers employed as the coronavirus spreads, and activists' demands in many cases seem less pertinent than they did just a few weeks ago. That's led many of the investors to walk away from campaigns or settle them early.

Last week, Carl Icahn agreed to end his campaign to oust the entire board of beleaguered oil company Occidental Petroleum Corp., settling instead for two seats and a say in choosing a third. Starboard Value LP reached a settlement with Box Inc. that will put three independent directors on the cloud-software company's board.

Elliott Management Corp. recently ended its opposition to Capgemini SE's bid for Altran Technologies SA, saying in a regulatory filing it's willing to sell its Altran shares to the French consulting firm.

Elliott -- like Mr. Icahn and Starboard, one of the most feared activists in corporate America -- is seeing more opportunities for behind-the-scenes, "constructive" ways to work with companies, a person familiar with the matter said. That could mean helping shore up their finances by buying up the companies' beaten-down bonds or equity.

The shift comes at a normally busy time for activists, known as proxy season, when they have the opportunity to nominate directors ahead of annual meetings that tend to take place in the spring.

This year, however, it falls as companies are focused on keeping employees safe and making payroll as revenue dissipates.

"Companies right now are struggling to keep workforces together," said Edward McCarthy of D.F. King & Co., who canvasses shareholders to gather votes in proxy contests. "To take away from that is just bad for everyone."

Activist hedge funds, for their part, are struggling with the whipsawing stock market. An index of their performance tracked by data group HFR was down by about 11% through the end of February, the most up-to-date information available. A greater drop could be coming in March, as the S&P 500 has fallen more than 14%.

Some activists with concentrated portfolios are under even more pressure. Mantle Ridge LP, run by a former lieutenant of William Ackman who tends to hold positions for many years, has been buffeted by a steep decline in shares of Aramark Corp. Mantle Ridge owns a roughly 18% stake in the food-service giant, whose shares have fallen by more than 50% this year as schools and other institutions across the country shut down.

"Any single major bet is a bold move," said Bill Anderson of Evercore Inc., one of the top activism-defense bankers. "And for the short term, any bold move can be scary."

While this proxy season may be quieter than usual, it could give way to a busy period for corporate raiders should share prices remain low and the challenges companies now face linger.

Not all activists are retiring from the battlefield. Some privately argue that in a crisis it matters even more to have good managers, making it necessary in certain situations to press on.

Starboard, led by Chief Executive Jeff Smith, recently published a letter to eBay Inc.'s board confirming an earlier Wall Street Journal report that it has nominated directors to the board of the online marketplace and urging it to search for an external CEO. Starboard acknowledged the unique period the world is in, with Peter Feld, managing member of the company, signing the letter "Best regards and stay healthy."

In its response, eBay said it was disappointed that Starboard decided to announce its nominations "amidst the global Covid-19 pandemic while the board and management are trying to focus on the business, employee health and safety, and the important CEO search and portfolio review that are under way."

"With the volatility and the virus, it's going to be slower this spring, sure, but that doesn't mean 2020 is a washout," said Bruce Goldfarb, head of Okapi Partners LLC, a proxy-solicitation firm that helps activists and companies communicate with shareholders.

Either way, many companies are taking no chances. Some are seeking standstill agreements with activists or settlements that they might not otherwise have agreed to, advisers say. Others are attempting to delay their annual meetings.

Still others, fearful that rivals or activists may take advantage of their beaten-down stock prices to take big stakes they can use to wield influence, are rushing to adopt so-called poison pills, with implementation of the defense tool lately spiking to a rate unseen in years.

Write to Corrie Driebusch at corrie.driebusch@wsj.com

(END) Dow Jones Newswires

March 29, 2020 05:44 ET (09:44 GMT)

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