Activist investors rarely scare CEOs the way they used to. A decade ago, the sector was a magnet for investment dollars, after some high-profile fights generated stellar returns and led to a wave of copycat campaigns to destabilize public companies.
However, the successes proved difficult to replicate. Boards of directors have developed better tactics to combat opportunistic activists, and investors are tired of the industry’s exorbitant fees, because low-cost ETFs often deliver returns that are just as good, if not better.
Elliott Investment Management is one of the few activists who still commands the respect they used to. The Florida-based company, founded by Republican power broker Paul Singer in 1977, is often cited as the most feared tribe. It is also often the most active. In 2021, it launched 10 public campaigns, more than any major activist, according to Insightia, which tracks the sector.
This reputation could well serve Elliott in her new battle with Suncor Energy Inc. SU-T, one of the giants of Canadian companies. Despite some recent stock market struggles, the Calgary giant is being treated as a property, and is well respected for spearheading a push to develop the oil sands into one of the world’s most prolific energy-producing asset bases.
Activist US hedge fund seeks to reform Suncor Energy
So far, Elliott has not been very active in Canada, usually focusing instead on the United States, Britain and Europe. But it has a history of targeting large companies, including AT&T Inc. TN, GlaxoSmithKline PLC GSK-N, Twitter Inc. TWTR-N, so Suncor is $60 billion Market value prior to Elliott’s announcement of its claims is not a deterrent. Last year, the average market capitalization of companies targeted by Elliott was $30.1 billion, according to Insightia.
Shark fishing isn’t the only thing that makes the company stand out. Elliot is also famous for being ruthless, if not a little snooty. Two high-profile experiences in particular have shaped her reputation.
In addition to his business, Elliott is also a conventional hedge fund that invests in credit and other assets. At one time, one of her debt investments was Argentine bonds. This position led Eliot into a protracted battle with the Argentine government.
Elliott often did not accept the terms of Argentina’s debt restructuring deals, and did not back down, including on Argentina’s trial in the United States. At one point, Elliott went so far as to persuade a court in Ghana to detain a 348-foot-tall Argentine Navy ship that had docked in its port, with the trust saying it had the right to take the ship.
Recently, in 2017, Elliott loaned more than 300 million euros ($403 million) to Li Yonghong, a little-known Chinese businessman who was trying to buy famous football club AC Milan from Silvio Berlusconi. The debt was charging an annual interest rate of 11 percent per year, and Elliott predicted that he would either get a huge annual return, or, at worst, be able to get a storied concession.
In 2018, just a year after buying the club, Mr. Lee defaulted on debt, and Elliott took control of the club. While Elliott pumped another 50 million euros into the franchise, the investment firm took in nearly 400 million euros, just over half the club’s sale price the year before, according to the Financial Times.
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As for the activist’s reputation, Elliott was accused of issuing a six-inch file during a meeting with managers that allegedly contained dirt on them and their families, exposing old divorce records to a CEO he hoped to get. They shot and allegedly leaked them to the media. (Elliott denied the allegations and declined to comment.)
But recently, activists of all stripes have tried to temper the way they are portrayed. Many of their investors are tired of bruising campaigns, especially after a number of them incurred huge losses. Sometimes, going to the throat isn’t worth it. In a letter to investors last month, Bill Ackman, who has had some high-profile outbursts, such as his campaign against Herbalife, called for agitation for change in a more calm and cooperative manner.
Elliott has participated in this transformation in her own way, in part by expanding the private equity division that buys companies outright and allows the company to make the changes it wants behind closed doors. Recently, Elliott and Brookfield Asset Management made a joint bid of $16 billion, including debt, to buy television rating giant Nielsen.
However, Elliott doesn’t stray too far from her activist roots. In its new battle with Suncor, the company hasn’t given its objective upside down or tried to engage the board of directors privately, opting instead to publish the old activist playbook of putting out a public message to directors proposing to sell nonessential retail.
But this time, Elliott is faced with a board that knows these tactics well. Mike Wilson, president of Suncor, used to run Calgary’s Agrium Inc. , which was targeted by Jana Partners, another well-known activist who advocated selling nonessential retail a decade ago. Despite the pressure, Mr. Wilson was able to move on and win, a rare feat at the time.
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