RE-BRANDING THE GREEDY GUYS AS ACTIVIST INVESTORS?

Once again we are reminded that Wall Street gunslingers, now renamed “activist investors,” are usually the precursor to change. Precipitating organizational restructuring and layoffs to satisfy the self-serving agenda of large investors with short-term exit strategies.  

A relevant portion of the legendary Gordon Gecko speech from the 1987 movie Wall Street …

“Teldar Paper, Mr. Cromwell, Teldar Paper has 33 different vice presidents, each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can't figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I'll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents.

The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated.

I am not a destroyer of companies. I am a liberator of them!

The point is, ladies and gentleman, that greed -- for lack of a better word -- is good.

Greed is right.

Greed works.

Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.

Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind.

And greed -- you mark my words -- will not only save Teldar Paper, but that other malfunctioning corporation called the USA.”

Of course, as the movie develops, you see the corruption, the trading on insider knowledge, and the realization that Gecko cares nothing about the companies or its employees beyond his return on investment.

Not so far from real life where the same coercive forces are driving change in a number of large and medium-sized corporations.

Honeywell International follows Third Point Capital’s agenda …

Honeywell International Inc. said Tuesday it will pare its focus to four business lines, including aerospace, and spin off two businesses with $7.5 billion in revenue to help fund acquisitions.

The reorganization, which reduces revenue by about 18 percent, will simplify Honeywell’s broad portfolio, boost growth and give shareholders a tax-free benefit from the new companies, Honeywell Chief Executive Officer Darius Adamczyk said on a conference call on Tuesday. It also gives the diversified manufacturer scope to change its remaining portfolio along the lines sought by hedge fund Third Point Capital, which agitated for a spin-off of aerospace. Third Point said on Tuesday it was pleased with the changes and backed Adamczyk’s leadership, though it wants him to keep improving the portfolio. Adamczyk hinted at more to come, saying the two new businesses “can grow at an accelerated rate.” <Source>

GE Yields to Peltz's Pressure

General Electric added Edward Garden, chief investment officer of activist investor Trian Fund Management, to its board, responding to Trian's pressure for a more thorough restructuring. GE's share price has fallen nearly 20% since June and is now at a four-year low. The move came on the eve of a vote by Procter & Gamble shareholders on whether to appoint Trian CEO Nelson Peltz to the company's board, against the wishes of management. < Source>

Bottom line 

Change is coming. There will always be a tomorrow, no matter how much you may try to ignore it. There are no guarantees in life or promises for a bright future. Just because something bad hasn't happened yet, doesn't mean it won't. It can happen to anyone, anytime, anywhere. No one is guaranteed to wake up tomorrow and still have a job by evening. Are you now wondering, Am I Next?

DOWDUPONT -- JOBS WILL BE LOST

Once again we are seeing outside activist investors demanding restructuring and “efficiencies” to improve shareholder value. Creating mostly tradable spreadsheet profits without any real regard to the companies and their underlying personnel. Of course, we release that any merger will cost jobs as duplicative functions and non-productive operations are reduced or eliminated. The question is how fast will job loss occur and is it better to be among the first to leave, seek lateral transfers, or simply wait-it-out to the bitter end? A question that can only be answered by the affected (or should we say afflicted) individual and their particular circumstances.

Here we find four major activist investors (Third Point LLC, Trian Fund Management LP, Glenview Capital Management LLC, and Jana Partners LLC) attempting to persuade management that their vision for the company should supersede that of the Board of Directors and senior management. Think Gordon Gecko in Wall Street. Individually, these activists own a tiny part of the company, but it is huge when measured against other shareholders. 

This deal has been cooking since 2015, so perhaps the cautionary tale is to track the major activist groups and see which companies are involved. The original plan called for the combined company to be disassociated into three separate companies with each having a more narrow focus: materials, agriculture, and specialty chemicals. One of the biggest points of contention is that the activist investors believe that the “Dow-Corning” assets should be deployed into a separate company and not the materials group.  

We have seen the recent split up of RR Donnelly into three separate enterprises in a similar fashion. Unfortunately for the shareholders, share value plummeted, and dividends were significantly reduced. In fact, it appears that the result was to make the individual parts more attractive to potential purchasers who wanted to buy additional capacity or a foothold in their core businesses. Unfortunately it destroyed much of the company’s value and left one of the newly-created companies in Chapter-11 bankruptcy.

Read the business news; it is often a portent of the future. 
 

---