Trian's Disney bet proves costly; Choice nominates slate at Wyndham; EnCap launches sale of Grayson Mill; and much more
Happy Friday!?
Earlier this week, Svea Herbst-Bayliss reported that a $3 billion bet on Walt Disney by Nelson Peltz's Trian Fund Management was largely responsible for the investment management firm's underperformance last year relative to its activist hedge fund peers.
The previously unreported details illustrate the high financial stakes for Trian as it seeks to shake up Disney's board in this year's highest-profile proxy contest.
Trian's fund returned 10% last year, according to the investor, half the 20% return on average that activist hedge funds scored based on data compiled by Hedge Fund Research.
Trian's position in Disney, which accounted for roughly 40% of its total portfolio at the end of the third quarter, was a major contributor to the underperformance. Disney's shares ended 2023 up 4%, while the S&P 500 index rose 24%.
Trian amassed a Disney stake at the end of 2022 and threatened the company with a board challenge in January 2023, criticizing it over losses in its streaming business, poor corporate governance and its succession plan.
Peltz, Trian's CEO, dropped the board fight in February 2023, after Disney announced an extensive restructuring program that included cost cuts and 7,000 layoffs. "Now Disney plans to do everything we wanted them to do," Peltz said at the time.
But as Disney's shares languished for most of 2023, Trian changed its stance. It increased its ownership fivefold to roughly 2% of the company and accused Disney CEO Bob Iger and the company's board of failing to deliver on its promised turnaround.
To be sure, Trian also enjoyed wins last year. Its portfolio was lifted by double-digit gains in plumbing parts distributor Ferguson and asset manager Janus Henderson.
Elsewhere, yours truly was first to report that Choice Hotels pressed ahead with its $8 billion hostile bid for Wyndham Hotels & Resorts by nominating a slate of directors to replace Wyndham's eight-member board.
It is Choice's latest attempt to break a stalemate after trying for most of the last year to negotiate a deal with Wyndham, which has rebuffed the bid as low-premium and fraught with antitrust risk. Wyndham has also raised concerns about the combined company carrying too much debt and a slowdown in Choice's business.
Choice said its slate of nominees includes hospitality industry veteran Jay Shah, who currently serves on the board of private equity-backed HHM Hotels; Susan Schnabel, founder of aPriori Capital Partners which advises private equity on leveraged buyouts; James Nelson, CEO of real estate investment trust Global Net Lease; and Fiona Dias, who served on Choice's board from 2004 to 2012.
Choice's board nominees also include Barbara Bennett, founder of consulting firm Bennett West and a former Discovery Communications executive; Emanuel Pearlman, who serves on several public-company boards including Diebold Nixdorf, and Network-1 Technologies; Nana Mensah, who serves on the board of Darden Restaurants that operates brands such as Olive Garden and Longhorn Steakhouse; and William Grounds, a veteran of the real estate and hospitality industries, who serves on the board of PointsBet Holdings.
Reuters was first to report on Nov. 27 that Choice was preparing to nominate directors to the board of Wyndham. The move gives Wyndham shareholders a way to push for the deal by turning the vote on board directors in the spring into a referendum on whether the company should open negotiations with Choice.
Last month, Choice unveiled an exchange offer for Wyndham's stock, appealing directly to its shareholders, after disclosing a stake worth more than $110 million. While that offer cannot become effective - even if a majority of Wyndham shareholders take it up - without the backing of Wyndham's board, it is aimed at adding to pressure on Wyndham to engage.
Wyndham said it would evaluate Choice's nominees and make a formal recommendation to Wyndham shareholders in due course, adding that the company remains open to negotiating a proposal that addresses all its concerns about a tie-up between the two sides.
David French and Shariq Khan scooped that private equity firm EnCap Investments is exploring a sale of Grayson Mill Energy that could value the Bakken shale-focused oil and gas producer at around $5 billion, inclusive of debt.
EnCap has tapped investment bank Jefferies Financial to run a sale of Grayson Mill. The process will kick off later in 2024, subject to market conditions.
Merger and acquisition activity in the U.S. shale patch hit record levels in 2023, as exploration and production companies sought to boost scale and add premium drilling locations. Major deals included $50 billion-plus purchases by Exxon Mobil and Chevron of, respectively, Pioneer Natural Resources and Hess.
This makes for a favorable environment for private equity firms such as EnCap to cash out on assets. Last year, EnCap sold a trio of companies to Ovintiv for $4.275 billion, while Earthstone Energy - in which EnCap held a significant minority stake - was bought by Permian Resources for $4.5 billion.
Grayson Mill was formed in 2016 by EnCap and its management team and grew to become one of the largest privately held energy producers in the Bakken, which stretches across North Dakota and parts of Montana. The company also has some assets in the neighboring Powder River Basin of Wyoming.
Its growth was boosted by acquisitions. In 2021, Grayson Mill bought the Bakken operations of Equinor for $900 million. Last year, Grayson Mill spent $825 million to buy the entirety of Ovintiv's position in the basin.
And finally, Abigail Summerville reported earlier on Friday that the private equity firm that owns Hometown Food Company is exploring a sale of the maker of Pillsbury's shelf-stable baking products and Birch Benders.
Brynwood Partners, which has owned Hometown for the last five years, is working with investment bank Houlihan Lokey on a sale process that could value Hometown at around $800 million, the sources said.
Hometown generates around $90 million in 12-month adjusted earnings before interest, taxes, depreciation and amortization.
The sources requested anonymity because the matter is confidential. Brynwood and Houlihan Lokey declined to comment. Hometown did not respond.
Hometown supplies grocery stores, convenience stores, wholesalers and other channels.
In 2018, Brynwood acquired the Pillsbury shelf-stable baking business, Hungry Jack, Funfetti and other assets from the J.M. Smucker company for $375 million. Brynwood created Chicago-based Hometown to acquire the assets from Smucker.
In 2019, Hometown bought the Arrowhead Mills and SunSpire brands of the Hain Celestial Group. Last year, it acquired Birch Benders from Sovos Brands. Birch Benders makes pancake and waffle mixes, frostings and toaster waffles with keto, paleo, and organic options.
?
领英推荐
And here’s a quick recap of the?highlights from the Reuters corporate finance file from the past week:?
Cleveland-Cliffs sought to convince U.S. Steel last month that its cash-and-stock acquisition offer was worth $1.4 billion more than an all-cash winning bid from Nippon Steel, a regulatory filing showed.
Trustbusters are living rent-free inside the heads of deal-making chief executives. United States Steel boss David Burritt and his Cleveland-Cliffs counterpart, Lourenco Goncalves, are two of them, evidenced by documents released on Wednesday related to their negotiations, which eventually led Burnitt to opt for a $14 billion sale to Nippon Steel instead. It’s a revealing portal into just how much competition authorities are altering merger decisions.
The cycle of unfashionable ideas has arrived at Macy’s doorstep. The department store owner is the latest to be targeted by retail bargain-shoppers. Most of the time, such pitches focus on real estate or e-commerce. If Saks Fifth Avenue and Kohl’s are anything to go by, neither is an especially good look.
The private equity firm that owns Rise Baking Company is preparing to launch a sale process for the U.S. bakery provider that could value it at around $2.5 billion, including debt, according to people familiar with the matter.
KPS Capital Partners recently explored a bid for UK specialty chemicals maker Elementis but has since paused its work, two people familiar with the matter told Reuters.
Private equity firm Yellow Wood Partners is in advanced talks to acquire ChapStick, a lip balm brand, from Haleon, the former consumer health division of drug developer GSK, four people familiar with the matter said. The deal was confirmed the following day.
London-listed investment firm Bridgepoint has agreed to buy RoC Skincare from Gryphon Investors, according to people with knowledge of the situation. The deal was confirmed the following day.
Spain's Cellnex is considering selling a minority stake in its Polish operations, four sources close to the talks said, which would be the latest asset disposal by the mobile phone tower operator as it seeks to reduce its debt.
Swiss stock market operator SIX Group is considering a bid for fund distribution company Allfunds, according to two sources with knowledge of the situation, a move that could be complicated by the difficulty of raising acquisition financing.
French lender BPCE has approached rivals including AXA, Deutsche Bank-backed DWS and Generali over merging their asset management operations, but reluctance to cede control makes a deal challenging, two people with knowledge of the talks told Reuters.
?
Thank you for reading this week’s edition. Please do share the newsletter with anyone you think might find it useful.
Have a wonderful weekend!
Best,
Anirban?
· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·?
Anirban Sen
Editor in Charge, U.S. Mergers & Acquisitions
Reuters News
Thomson Reuters