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Activists Continue to Target Larger Companies
New York - April 24, 2013 John Laide

With news this week that prominent activists Trian Fund Management, L.P. has taken stakes in Mondelez International, Inc. and PepsiCo, Inc. and ValueAct Capital Management LP's purchase of $2 billion in Microsoft Corporation stock, we look at the increasing trend of activists setting their sights on larger targets. As of April 22, almost 30% of the companies targeted in a financial or board seat activist campaign this year had a market capitalization over $1 billion at the time the campaign was announced. This is the highest proportion of campaigns involving companies of this size in the eight years we have been tracking this information on FactSet SharkWatch. Among the noteworthy campaigns against large companies announced in 2013 are Greenlight Capital Inc.'s request that Apple, Inc. return cash to shareholders via the issuance of a new perpetual preferred stock, Elliott Management Corporation's proxy fight for five seats on Hess Corporation's board of directors, and Carl Icahn's proposed leveraged recap or possible competing bid against Dell Inc.'s buyout. Conditions also appear favorable for this trend to continue. The Wall Street Journal recently reported, citing HFR Inc. data, that assets under management in activist funds have risen to more than $65 billion at the end of 2012 and that activist funds have outperformed HFR's weighted composite index for all hedge funds for the past four years - a fact that should continue to make activism an attractive asset class. Many commentators have also noted an increased willingness by mainstream mutual funds and other institutional investors to side with activists which is absolutely essential to effect changes with a small ownership stake as is often the case when targeting larger companies. Additionally, as companies continue to shed takeover defenses, a trend most pronounced with large cap companies, more tools are potentially available to activists. De-staggered boards, the lack of poison pill limits, the ability to take action by written consent or call special meetings, and the lack of supermajority or cause requirements to remove directors, can loom large in an activist campaign.

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