Boardroom Alpha Daily Read

by | Apr 18, 2022

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News of the Day

Nielsen’s Largest Shareholder Opposes Deal

The WindAcre Partnership purchased 31.6M NLSN shares for a total of $1.5 billion from April 6-13 at an average price of $27.47. WindAcre currently owns ~91 million Nielsen shares, which equates to a stake of 25.3%. With these purchases, WindAcre is the largest holder of Nielsen shares, edging out Vanguard Group, which owns ~44.6 million shares.

Nielsen have been a volatile stock since the company’s rejected takeover bid. The bid came from a consortium led by Evergreen Coast Capital Corp.– an affiliate of Elliott Investment Management– and Brookfield Business Partners and valued the company at $25.40 a share. WindAcre, a Nielsen shareholder since 2013, argued that the offer undervalued the company and argues that Nielsen is worth “well in excess of $40 per share.”

Days later, the consortium raised its bid to $28, which Nielsen’s board subsequently accepted. Including the assumption of debt, the total value of the transaction is roughly $16 billion. The sweetened offer represented a 10% premium over the first, and a 60% premium to NLSN’s stock price prior to news that a takeover offer was on the table.

Although the board has approved the deal, the transaction is still subject to approval by shareholders and regulators. Nielsen has a 45 day go-shop window in which it can solicit alternative offers, although the board’s quick approval of this deal suggests that a materially better offer isn’t likely.

WindAcre still opposes the deal, indicating in an April 6 SEC filing that it “will take steps to attempt to block” it. WindAce is also rallying other Nielsen shareholders to reject the offer. In the SEC filing, WindAcre says that it has learned through a “reliable” third-party that despite its objections, the private equity consortium plans to go forward with the proposed transaction with “a scheme of arrangement” — a court-approved deal between a company and its shareholders. This requires the approval of at least 75% of holders voting on the transaction, with members of the acquiring consortium not eligible to vote their shares. WindAcre reportedly asked for $1.1 billion in equity in exchange for its support of the transaction.

These events have been a boon for Nielsen stock, which has run ~30% YTD, versus an 8% decline in the S&P 500 index.

NLSN Stock: What a Takeover Bid Can Do

Source: Boardroom Alpha

If the deal goes as planned, a close in the second half of this year is expected and NLSN would be taken private. For more background, see “What a Failed Nielsen Buyout Means for NLSN Stock.”

Special Situations/ Activism

Jana Now Has 3 Directors at TreeHouse Foods (THS)

Jana Partners Llc filed a 13D/A form with the SEC disclosing ownership of ~9.2% of private-label food company TreeHouse Foods (THS).TreeHouse Foods also appointed Scott Ostfeld, a Jana partner, to its board. Ostfeld’s appointment comes a year after settling with Jana and appointing two independent directors to the company’s board. Last month, TreeHouse said its board determined it would not pursue a sale of the whole company, but that it will continue to explore potential divestitures, including in its meal preparation business.

Ostfeld steps down from the Board at Conagra Brands (CAG). Notably, Jana was instrumental in pushing ConAgra to sell its private label business to Treehouse for $2.7B back in 2016.

TreeHouse, which has grown through more than 40 mergers, has spent the past several years downsizing, including closing plants, cutting jobs and divesting business units. THS stock price has languished, prompting Jana’s involvement early last year. We think it’s Jana may push to take the company private.

With LW trading at 17x EBITDA, THS shares appear discounted at these levels. As a comparison, in 2018, Post Holdings (POST) sold part of its private label business to Thomas H. Lee Partners for ~10 times EBITDA. Applying a conservative 10 times multiple on THS’s trailing EBITDA would imply a target price for THS in the $38 range, or ~15% upside to current levels. However, we argue that THS, with operational improvements, should be worth closer to 12x – 14x EBITDA, which would imply incremental upside.

For more background, see today’s Activist Alert: Treehouse Foods.

Original 13D filing: Emcore (EMKR)

Cannell Capital filed an initial 13D that disclosed ownership of 3.7M shares (10% of the total) of the fiberoptics company. The filing also disclosed the purchase of 48,690 shares on Feb. 10 at $4.06 apiece. Cannell indicated it had acquired the stock “in the ordinary course of business and not with the intent to change or influence control of the company.” However, the firm included a letter to Emcore’s chairman, Stephen Domenik, dated April 11, which disclosed it had presented two candidates to the board, but that Emcore had “made no attempt to reach out to either candidate, nor has it provided [Cannell] any basis for its rejection.”

Cannell noted the underperformance of the stock: “most, if not all, of the blame for this dramatic undervaluation rests upon the shoulders of [Emcore’s] officers and directors, many of whom have arguably violated their duty of service to shareholders.”

Increased Holdings: Groupon (GRPN)

Pale Fire Capital increased its aggregate holding of Groupon shares to 3.5M (11.9%) in the consumer-deals company. This figure includes stock held by partners Dusan Senkypl and Jan Barta. Combined, Pale Fire and partners bought 701,223 shares from March 7 through April 7 at $16.60 to $20.23 a share. The firm also sold 500 on March 4 at $22.79 each.

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