Elliott's 'smart and scary' playbook
Happy Friday!
This week, Svea Herbst-Bayliss authored a smart analysis on the playbook of Elliott Investment Management, one of the world’s most feared activist investors, on the back of their two most recent high-profile campaigns – BP and Phillips 66.
When Elliott buys into a company to agitate for change, bankers and lawyers who have faced the hedge fund say executives can expect a strong view on their shortcomings, backed by meticulous research and financial firepower.
The investment firm, which manages $70 billion, has not disclosed the size of its stake in BP or what changes it wants to see. But the mere whiff of Elliott playing the corporate agitator this week sent BP shares to their highest since August, on expectations the fund will force improvements to unlock shareholder value.
The day after news of Elliott's position broke, BP promised to reset its strategy as it reported weaker-than-expected results.
It was not immediately clear whether Elliott played a role in the company's move, and BP’s chief executive declined to comment on the hedge fund's investment.
Bankers and lawyers who have worked for the hedge fund or defended companies against it said Elliott is not an investor a board can ignore. The fund has built a reputation as a relentless activist, sometimes labeled as the most powerful player, but also hostile, in bankers' notes.
On the flip side, Elliott argues its toughness will ultimately earn investors in the target company and its own portfolio bigger returns.
"Elliott's team is truly scary smart. Sometimes the emphasis is on 'smart' and other times it is on 'scary'," said Kai Liekefett, co-chair of law firm Sidley Austin's shareholder activism and corporate defense practice.
The investment firm is known for deep fact-finding on a target company, its peers and sector, possible buyers if a sale is considered.
Sometimes executives are caught off guard by Elliott's investment, lawyers and bankers said, noting a call or news article announcing a position will spark a fevered defense.
Elliott, while finding its roots in founder and co-CEO Paul Singer's middle name, is not a one-man show like some other prominent activist firms. Instead the firm, which employs roughly 600, relies on a large team of portfolio managers and analysts who keep tabs on sectors ranging from energy to retail and in every part of the world.
The team prefers to stay out of the media limelight to let the work speak for itself, whether it is trying to break apart a corporate deal in Asia or a conglomerate in the United States.
But if a company resists and Elliott can't be convinced of its counterarguments, discussions can rapidly escalate into public threats of proxy battles and special meetings.
Lawyers, bankers and other investors, who know the firm well by having worked for or against it, say Elliott delivers an unmistakable message to a company: Agree with us and we'll let you take credit for positive changes, or resist and face consequences.
Elsewhere, Sabrina Valle and Patricia Weiss teamed up to scoop that Merck KGaA, the German healthcare and technology group, is in advanced talks to acquire U.S. cancer and rare diseases drugmaker SpringWorks Therapeutics.
Merck, in a statement, said its negotiations to buy SpringWorks are ongoing, confirming the Reuters exclusive. The Darmstadt, Germany-based company said that no legally binding agreement has been signed and there is no certainty a deal will materialize.
If the talks are successful, a deal could be signed in the coming weeks. Shares of SpringsWorks, which has a market value of $4.3 billion as of Friday’s close, initially jumped nearly 49% on the Reuters report, and touched its highest level since April 2022.
Dealmaking in the U.S. healthcare sector is showing signs of picking up, after a slowdown in activity in 2024 as large pharmaceutical companies took a breather to integrate big acquisitions they completed the previous year. Johnson & Johnson last month agreed to buy Intra-Cellular Therapeutics for about $14.6 billion.
Stamford, Connecticut-based SpringWorks, which listed its shares in New York in 2019, is a commercial-stage biotech firm that develops drugs to treat various forms of cancer, including rare tumors and uterine cancer. Its monotherapy drug for the treatment of desmoid tumors, which are dense, soft-tissue tumors, has been approved in the United States. The company is expecting the approval of a product that treats neurofibromatosis type-1, a rare genetic disorder, later in February.
Abigail Summerville produced a very buzzy scoop on Dave’s Hot Chicken, the wildly popular hot-chicken chain which counts rapper Drake among its investors, and its plans to find a buyer – talk about striking when the chicken’s hot!
A sale could value the Pasadena, California-based chain at about $1 billion or more. Dave’s is working with investment bank North Point on the sale process, which is attracting interest from private equity firms.
The deliberations come at a time when restaurant operators like Dave's are facing increased labor costs and are attempting to pass on some of the recent bout of inflation to consumers by increasing menu prices.
Dave’s, which is known for its Nashville-style hot chicken, has capitalized on the growing consumer demand for chicken in recent years. It currently operates over 250 locations globally and generates roughly $1 billion in annual sales.
Dave's, which is majority owned by its founders Dave Kopushyan, Arman Oganesyan, Tommy Rubenyan, and Gary Rubenyan, brought Drake on as an investor in 2021 and has received backing from other big names such as actor Samuel L. Jackson.
In 2017, Kopushyan and the other founders scraped together $900 and launched the company in an East Hollywood parking lot. In 2019, Dave's brought in Bill Phelps, who co-founded restaurant chain Wetzel’s Pretzels, as its chief executive officer.
And finally, Milana Vinn reported that Bain Capital, Advent International and EQT AB are among the private equity firms that are competing to acquire Japanese cybersecurity firm Trend Micro, which has a market value of 1.32 trillion yen ($8.54 billion).
The buyout firms have expressed interest in taking Trend Micro private in recent weeks. KKR is also an interested party.
A successful takeover of Trend Micro would rank as one of the world's biggest leveraged buyouts in recent months and signal that private equity dealmaking is starting to bounce back, after the pace of debt-fueled buyouts was hit hard by interest rate hikes from central banks to fight inflation in the aftermath of the pandemic.
Trend Micro has been exploring a sale since the company received acquisition interest last year, Reuters previously reported.
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And here’s the best of the rest from the Reuters corporate finance file:
Nissan was deep in trouble late last year when rival Honda offered a lifeline: a $60 billion tie-up that would help both Japanese automakers compete against the Chinese brands upending the car industry.
President Donald Trump's administration may not support Intel's U.S. chip factories being operated by a foreign entity, a White House official told Reuters.
China oversaw its largest-ever wave of rural bank mergers last year, a Reuters review of official data showed, but analysts say Beijing's efforts to tackle risks in the small banking sector could end up creating more problems down the road.
Nokia is set to secure unconditional EU antitrust clearance for its $2.3 billion acquisition of U.S. optical semiconductors and networking equipment maker Infinera, people with direct knowledge of the matter said
Investors in BNP Paribas are starting to consider who might lead the bank once long-time chief executive Jean-Laurent Bonnafe leaves amid a scarcity of obvious internal candidates to succeed him, sources familiar with the matter said.
Japan's largest oil refiner, Eneos Holdings, aims to raise at least 400 billion yen ($2.61 billion) by listing its wholly owned metals unit, two sources said, in what would be the nation's biggest IPO in seven years.
U.S. President Donald Trump is scheduled to attend a meeting of global financiers and tech executives hosted by Saudi Arabia's sovereign wealth fund in Miami later in February, according to several people with knowledge of the event.
Buyout firm Warburg Pincus has clinched a deal to acquire Vermont Information Processing, which makes software for beverage distributors, for about $1 billion including debt, according to people familiar with the matter.
To all my US readers – enjoy the long weekend!
Best, Anirban
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Anirban Sen
Editor in Charge, U.S. Mergers & Acquisitions
Reuters News
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