The Activist scene remains elevated with most of the focus continuing to be on campaigns that launched last month (Ardent Leisure, Asia Pacific Data Centres, AWE, Reffind), long running campaigns (Molopo Energy, BHP, Surfstitch) and campaigns that finally reached a resolution (Central Petroleum, Brickworks/Soul Patts). We also look at Spicers where offshore activist, Coastal Capital, is challenging the board almost three years after its last intervention.
Ardent Leisure v Ariadne
Ariadne continued a public campaign against the Ardent board throughout July for its poor performance as well as taking credit for the former CEO’s departure. The company has defended itself by saying the activist had selectively chosen periods to assess its achievements.
On 27 July Ariadne published a 41-page paper detailing its plan for Ardent, in an effort to gain shareholder support in an upcoming proxy contest where it is seeking to have four directors elected to the board. It said it has a strategy that may deliver up to $1 billion in shareholder value, nearly double the company’s current market capitalization. The activist’s plan focuses mainly on the U.S., where it sees a $600 million opportunity through building 24 new Main Event centers and turning around existing ones. In addition, they identified a $300 million opportunity at theme parks in Australia by increasing attendance to the levels before the incident at Dreamworld that killed four visitors. Finally, Ariadne sees potential for reducing $100 million worth of costs.
Among the shareholders Ariadne is trying to convince is Sun Hung Kai Global Opportunities Fund, which is owned by the same family that owns property investor Mulpha. Another activist, Alex Waislitz of Thorney Investment Group, is reportedly endorsing change, while Wilson Asset Management is still undecided. The shareholder vote is scheduled for September 4.
Ardent criticized Ariadne’s plan, saying similar steps were already underway.
Asia Pacific Data Centre Group v 360 Capital
Asia Pacific Data Centre Group (APDC) has received a takeover proposal from NextDC, paving the way for a bidding war with 360 Capital. NextDC offered to buy all the shares it does not already own for AU$1.87 per share, 7 cents higher than 360 Capital’s offer. NextDC owns more than 18% of the shares and is the tenant in all 3 of APDC’s properties.
On 26 July, 360 Capital confirmed it had received access to due diligence, after which it may withdraw or increase its bid. A confidentiality agreement was expected to be signed, with 360 Capital then undertaking due diligence for a three-week period.
Before making a bid for Asia Pacific, 360 Capital, led by real estate expert Tony Pitt, had been running a proxy fight to replace the external manager with itself, but did not have the support of Institutional Shareholder Services (ISS). The activist has now withdrawn the proxy contest and a shareholder meeting will not take place on July 28.
AWE v Dawney
Former stockbroker Mitch Dawney issued a proposal on 4 July to acquire 20% of the shares in Australia-based AWE. This follows a rejection by ASIC of an earlier proposal in June.
Dawney is not planning to acquire the shares himself but is asking investors to give him the right to seek a buyer for 20% of the shares at a price of $0.56, representing a premium of around 27% to the unaffected stock price. The activist also promised to pay 95% of the proceeds from any sale of shares above $0.56.
Reffind v Stirling Wealth
Communication tools provider Reffind has published proxy materials for its upcoming annual meeting on August 21, when shareholders will decide whether to replace co-founder and non-executive director Ben McGrath with Tim Shaw, managing director of activist Stirling Wealth Group.
Stirling Wealth owns more than 5% of Reffind’s stock.
Molopo Energy v Aurora Funds
Aurora Funds Management has launched a bid to takeover Molopo Energy after being forced by the Takeover Panel to reduce its stake in the company. On 27 July, Aurora said the takeover offer, at AU$0.18 per share, would be launched by its Aurora Fortitude Absolute Return Fund, and represented a 28.6% premium to the unaffected price. The offer values Molopo, whose primary asset is $60m in cash, at $45m.
In June, the Takeover Panel prevented Aurora from voting in a proxy contest waged by Keybridge Capital, and forced it to reduce its stake in the company, after finding that the two shareholders had failed to disclose they had links, giving rise to “unacceptable circumstances.” In 2016, Aurora was sold by Keybridge to an entity owned by its director John Patton, and when the proxy contest was launched Molopo filed a complaint with the regulator arguing that the two firms were acting in concert in the proxy contest. After the Takeover Panel’s intervention, the board challenge concluded with a defeat of Keybridge’s proposals.
BHP v Elliot Management
Activist investor Elliott Management came out against a decision by BHP to increase its diversification into potash, expressing deep concerns about the viability of the move.
Elliott has been calling on the company for months to increase shareholder value by splitting its U.S. shale assets, dropping its dual listing in London and Australia and returning cash to shareholders. BHP has ignored the activist’s demands and instead decided to accelerate the development of a potash mine in Canada, which needs a $4.7 billion investment to become productive.
A week later Elliott launched a billboard campaign mocking BHP’s slogan ‘Think Big’, suggesting that the company should instead think smart. This style of activist campaign is new to Australia with Elliott said to have ordered 40 billboards across Sydney, Melbourne, Brisbane and Perth, targeting Australian retail investors who typically side with management.
Surfstitch v Crown Financial
SurfStitch Group has updated the market ahead of a showdown with dissident shareholder Crown Financial. On 27 July, the company said it was facing a litigation by Crown Financial, two associated class actions, and an investigation by the Australian Securities and Investments Commission (ASIC).
SurfStitch noted that the disputes and the investigation all link back to “a series of purported contracts” between members of its board and Crown Financial before March 2016, and noted that its current directors and senior executives were all appointed after the events. The ASIC investigation commenced as an investigation into SurfStitch’s disclosure, including in relation to the Crown Financial contracts. The company said it was willing to settle all legal disputes.
On August 2, shareholders in SurfStitch will vote on the removal of chairman Scott Weiss at a special meeting requisitioned by Crown Financial in June.
Central Petroleum v OptionCo
Central Petroleum has defeated a board challenge by a group of activist investors. The group of activists, which calls itself OptionCo, failed in its bid to replace three of four directors, with its nominees receiving around 36% of votes in favor.
The highly-regarded CEO, Richard Cottee, who had threatened to resign if OptionCo took over the board will probably continue in his role.
The activists had launched the action because they were dissatisfied with the company’s decision to sell itself to lender Macquarie Group. They had argued the A$87 million or 20 cents per share deal undervalued Central Petroleum’s prospects. Cottee, however, said the company badly needed financing to develop Northern Territory assets and criticized the activists for not coming up with a viable alternative plan.
Washington Soul Pattinson and Brickworks v Perpetual
Australia’s Federal Court has sided with Washington H. Soul Pattinson and Brickworks in the legal battle waged by shareholder Perpetual in an attempt to end cross-shareholdings between the two companies. The court ruled the cross-shareholdings did not violate the rights of minority stockholders.
Washington H. Soul Pattinson, also known as Soul Patts, owns 44% of Brickworks’s stock, and Brickworks has a 42.7% stake in Soul Patts. Perpetual and activist investor Mark Carnegie are invested in both companies and since 2013 have been battling against the arrangement between them. They claimed that the cross-shareholding was used by the Millner family to entrench itself and secure its control over the two firms.
Spicers v Coastal Capital
Paper merchant Spicers is facing a board challenge from Coastal Capital International and other separate shareholders. On 12 July Coastal advanced a proposal to remove director and chief financial officer Wayne Johnston and appoint two new directors, Todd Plutsky, the fund’s managing director, and Vlad Artamonov.
Spicer’s board, which is composed of three directors, said it opposes Johnston’s removal because he made an “invaluable contribution as a director in addition to his executive duties.” Two directors retired recently and the company said it would put forward three new ones at the special meeting on September 6. However, it said that shareholders, including Coastal, advanced eight additional candidates for election to the board. Coastal owns 14.4% of outstanding stock in Spicers.
Coastal last made demands of Spicer’s board (formerly Paperlinx) in 2014 when it made an application to the Takeovers Panel seeking to block PaperlinX’s acquistion of securities in PaperlinX SPS.