Activist Investors Assemble

Nelson Peltz’s next target

Unilever has faced pressure on multiple fronts for weeks, including pushback from shareholders over its now-abandoned pursuit of GlaxoSmithKline’s consumer business. Now the consumer goods giant must deal with a potentially bigger headache: Trian Partners, the activist investment firm run by Nelson Peltz.

Trian has amassed a significant stake in Unilever, DealBook’s Michael de la Merced reports. It isn’t clear how big the firm’s holdings are, though Trian began buying shares before Unilever’s pursuit of the Glaxo business became public, according to a source.

Unilever has taken fire over strategic missteps. Investors and analysts scorned the $68 billion Glaxo bid, with Unilever’s shares falling sharply after the company said it still wanted to buy the business, despite being rejected three times. And another big Unilever shareholder accused the company of neglecting business fundamentals while overemphasizing its commitment to climate and social causes.

What does Trian want? It isn’t clear what the activist is pushing for, but Peltz’s firm often demands that huge corporations — including General Electric, Mondelez and Procter & Gamble — simplify and improve their operations, and sometimes calls for them to sell off underperforming divisions. Unilever said last week that it wanted to focus on higher-growth areas like health, hygiene and beauty. Streamlining its operations would be in keeping with recent moves at other conglomerates, including G.E., J&J and Toshiba.

Is a board fight in the future? Trian has won high-profile proxy battles before, including at P.&G. in what was the most expensive war for a board seat on record. Peltz may have support from restive shareholders if he mounts a challenge at Unilever. Shares in Unilever are up 6 percent so far today.

HERE’S WHAT’S HAPPENING

An activist investor with “grave concerns” pushes Peloton to sell itself. In a letter to the embattled at-home fitness equipment maker, Blackwells Capital called for directors to fire the company’s C.E.O., co-founder John Foley, and to weigh a sale as its shares tumble amid falling sales. The company is in worse shape now than before the pandemic propelled its growth, Blackwells said, with “high fixed costs, excessive inventory, a listless strategy, dispirited employees and thousands of disgruntled shareholders.”

Chinese state media puts more pressure on Ant Group. In a documentary, the state-run China Central Television suggested that the Alibaba affiliate made “unreasonably high payments” to the brother of a former government official. (Ant wasn’t mentioned by name.) That turns up the heat on Ant, which scrapped its I.P.O. in 2020 after opposition from regulators.

The Omicron wave may be peaking in the U.S., Dr. Anthony Fauci says. He told ABC yesterday that the latest coronavirus surge was “going in the right direction,” but cautioned against overconfidence. In other pandemic news, public health experts worry that new coronavirus treatments could lead to more resistant strains; The Times takes a sweeping look at President Biden’s efforts to fight the pandemic; and Winter Olympics athletes are going to great lengths to avoid getting sick.

Financial firms want employees back at the office soon. Citigroup told New York-area workers to prepare for a return to office work from Feb. 7, while Goldman Sachs and JPMorgan Chase have planned for Feb. 1. In London, where government restrictions are ending on Wednesday, banks are bringing back workers this week.

More workers move to unionize. Employees at an REI store in Manhattan filed for a union election in hopes of organizing 115 workers. Workers at Raven Software, a studio owned by Activision Blizzard that helps create the video game series Call of Duty, are also seeking to unionize. Both follow efforts to organize workers at Starbucks and Amazon in recent months.

Why activists are going after Kohl’s, too

The retailer Kohl’s has received a roughly $9 billion offer to go private in a deal with an investment consortium led by Acacia Research, which is backed by the activist hedge fund Starboard Value, DealBook’s Lauren Hirsch reports. The offer came days after another activist firm, Macellum Advisors, which is threatening a proxy fight with Kohl’s, urged the retailer to explore strategic alternatives, including a sale.

The quick procession of Macellum’s letter and the consortium’s offer could put pressure on Kohl’s to consider a sale — or find another way to boost its share price. Will the pressure work?

A key question is whether the bidders have the funds to finance a buyout. Starboard has helped Acacia raise equity capital to fund its offer; Acacia has received a letter of confidence from a bank pledging support for arranging debt; and Acacia is in talks with a property firm that would sell off part of Kohl’s real estate to help fund the bid. Kohl’s is up nearly 30 percent in premarket trading, suggesting that investors are taking the bid seriously.

Other buyers may be interested. Sycamore, the private equity firm, has also reached out to Kohl’s about a potential deal, though it’s unclear whether it will lead to an official offer. Sycamore is known for its willingness to take on challenging retail deals, like Staples, but its recent acquisition of the department store chain Belk, which resulted in bankruptcy, may limit its appetite for similar deals. Other large private equity firms remain wary of retail buyouts, but debt is cheap and funds are looking for ways to spend their so-called dry powder.

Part of the pitch is unlocking high e-commerce valuations. Among other things, Macellum is urging Kohl’s to consider splitting its online operations from its brick-and-mortar business, an increasingly popular request by activists. (That’s what Saks has been planning to do.) But many online retailers that went public last year have tumbled, like Lulu’s Fashion (down 48 percent from its I.P.O. price) AKA Brands (down 43 percent) and AllBirds (down 18 percent). Some experts question the logic of separating online from offline, given a push to interweave the two shopping experiences.

Kohl’s has performed better than some of its department store peers, in part because of its smaller stores and off-mall locations, which put it in a better position for today’s shopping habits. It has also signed partnerships with the likes of Amazon and Sephora. But activist investors think it can do better, and the biggest challenge may be its middle-of-the-pack positioning among department stores.

“The age of mobile and cloud computing has created so many new business opportunities. But now there are trickier problems.”

— Margaret O’Mara, a professor at the University of Washington who specializes in the history of Silicon Valley, on the tech industry’s challenges in coming up with the next big thing, like quantum computing and self-driving cars.

Behind the sports-crypto sponsorship complex

An investor lawsuit, which DealBook’s Ephrat Livni is the first to report, has accused insiders at a crypto company of misappropriating hundreds of millions of dollars. The case shines a light on the fast-blooming union between sports and the cryptocurrency industry.

Crypto companies have signed numerous splashy sports deals. Last year the little-known crypto firm DigitalBits, along with a related entity, Zytara, paid around $140 million in sponsorship deals with the Italian soccer clubs AS Roma and Inter Milan, and also secured the services of the soccer star Francesco Totti and the boxer Floyd Mayweather. Now, a major early investor alleges in a suit in New York State Court that company insiders diverted money needed for development to those sports deals, among other things like luxury travel.

Attention from sponsorships has helped raise the profile and price of cryptocurrencies like XDB, the DigitalBits cryptocurrency. DigitalBits describes itself as a “blockchain for brands,” or corporate crypto-based rewards programs, and Zytara says it creates NFTs “to accelerate customer engagement in a unique and trendy way.”

“There is nothing behind the project,” said the plaintiff’s counsel, Adam Ford of Ford O’Brien. He said that reviews of the code reveal little work: The defendants “do not have a publicly accessible blockchain or anything to show other than big-dollar sponsorship deals and constant announcements that the real thing is coming.” DigitalBits and Zytara did not respond to requests for comment.

The hype created by crypto sponsorships is raising concern:

• There is growing pressure for crypto promotions in Britain and the E.U. to follow stricter rules on transparency, as crypto sponsorships for sports teams flourish in Europe.

• A recent proposed class action lawsuit in California accused Mayweather and fellow celebrity sponsor Kim Kardashian of helping to artificially inflate the price of the cryptocurrency EthereumMax, causing investors losses.

• In November, the British soccer club Manchester City backed out of an agreement with an obscure decentralized finance project called 3key, while the Spanish club FC Barcelona canceled a deal with Ownix, an NFT auction platform, amid reports that a company associate was charged with crypto-related fraud.

And then there is the crash in crypto prices, which has erased more than $1 trillion in value since November, with a particularly steep drop in recent days. As a result, blockchain businesses seeking attention may find that they have less to spend on sponsorships — and everything else.

THE SPEED READ

Deals

• Alphabet, Amazon and Microsoft all announced more deals in 2021 than in any year over the past decade, seemingly to get ahead of a regulatory crackdown on tech M.&A. (CNBC)

• IBM agreed to sell its Watson Health division to the private equity firm Francisco Partners. (NYT)

• The advertising company M&C Saatchi rejected a new takeover bid from the SPAC run by its biggest shareholder. (Reuters)

• Vodafone, the British wireless carrier, reportedly explored a takeover bid for a rival, Three. (Bloomberg)

Policy

• U.S. companies are shying away from investments in Saudi Arabia, despite the kingdom’s efforts to court Western businesses. (WSJ)

• President Biden is hoping to use Intel’s plans to build a new plant in Ohio to jump-start his call to invest billions more in domestic manufacturing. (NYT)

• German publishers like Axel Springer are lobbying E.U. officials to block Google’s plan to eliminate third-party cookies in its Chrome web browser. (FT)

• Turkey’s banking regulator reportedly advised the country’s banks not to pay dividends, as a plunge in the lira has eroded lenders’ capital buffers. (Bloomberg)

• Sarah Palin’s libel lawsuit against The Times begins today. (NYT)

Best of the rest

• Morgan Stanley paid its C.E.O., James Gorman, $35 million last year, the highest paycheck for a Wall Street bank chief. (FT)

• A documentary about pay inequalities at Disney, co-directed by a descendant of Walt Disney, premiered at the Sundance Film Festival. (NYT)

• How empty private jets helped lead to the ouster of António Horta-Osório as Credit Suisse’s chairman. (WSJ)

• “You Quit. I Quit. We All Quit. And It’s Not a Coincidence.” (NYT)

• Merrill Lynch fired a broker who publicly berated workers at a smoothie store after he believed his son had an allergic reaction to a drink from the shop. (NBC News)

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