Billionaire activist investor Carl Icahn has recently reached an agreement with Gannett Co., Inc. (NYSE:GCI), following which he decided to withdraw his nominees to the company’s board of directors and other proxy proposals. Under the terms of the agreement, Gannett adopted a new corporate governance profile to its publishing company that will be spun-off in 2015 as a separate public company under Gannett’s name. Mr. Icahn owns around 14.97 million shares of Gannett, according to his latest 13F filing, the position representing 6.6% of the company’s outstanding common stock.
Mr. Icahn is a notorious activist investor, considered the best on Wall Street. Over the years, Mr. Icahn actively participated in the development of many big companies, such as Netflix, Inc. (NASDAQ:NFLX), Hertz Global Holdings, Inc. (NYSE:HTZ), and Family Dollar Stores, Inc. (NYSE:FDO), among others. Among recent moves, Mr. Icahn was the catalyst that led to eBay Inc (NASDAQ:EBAY) spinning-off its PayPal division, which is expected to be completed this year. The investor also urged Apple Inc. (NASDAQ:AAPL) to take advantage of its large cash position and return more capital to its shareholders. In fact, the list of companies in which Mr. Icahn has gotten involved over the years is large and he won in the majority of cases, gaining substantial profits. Because of his aggresive strategy back in the 1980’s, Mr. Icahn earned the reputation of a “corporate raider”. However, recently Mr. Icahn’s investment portfolio has posted its first annual loss since the financial crisis of 2008. The loss was caused mainly by the fall of oil prices, although it was slowed down by the better performance of Apple’s stock. Icahn Enterprises posted a loss of $373 million in 2014, a significant fall from a profit of $1.03 billion a year earlier. Icahn Enterprises holds around 80% of CVR Energy, Inc. (NYSE:CVI) and 66.45 million shares of Chesapeake Energy Corporation (NYSE:CHK), which are two of its largest equity investments in the oil & gas segment.
In Gannett Co., Inc. (NYSE:GCI), Mr. Icahn disclosed a 6.6% activist stake in August and announced plans to discuss the split of the company. However, the same day, Gannett announced its intention to separate its publishing unit into an independently-traded public company. Later on, the investor announced that he planned to gain two seats on Gannett Co., Inc. (NYSE:GCI)’s board in order to counter some measures that would insulate the board from potential takeover bids. In an interview with CNBC in January, Mr. Icahn said that he acts for the benefit of all shareholders of Gannett and that he will try to negotiate in order to avoid launching a long and expensive proxy fight.
Therefore, the latest agreement between Mr. Icahn and Gannett Co., Inc. (NYSE:GCI) is another success for the investor. Under the new corporate governance, the spun-off company will have a Board of Directors that will be elected annually and shareholders with at least 20% of the stock will be able to call special meetings. Moreover, shareholder rights plans will expire after 135 days (unless extended by a majority vote of shareholders) and uncontested director elections will follow the majority voting standard.
Mr. Icahn, aside from the withdrawal of his director nominees and other proposals, also agreed to some standstill provisions. The investor also expressed his position regarding the agreement and said that he is pleased with the deal and that the corporate governance provisions will increase shareholder value. He added another provision that if the board of the spun-off company rejects an unsolicited bid in favor of another one, and permits the second bidder to conduct diligence, then the first bidder will also be allowed by the board to conduct due diligence if they plan to increase the offer above the second bid.
“Similar to our agreements with eBay Inc. and The Manitowoc Company, Inc., we believe this agreement marks another large step forward for good corporate governance. With this agreement, Gannett ensured that SpinCo shareholders will truly have a say in what happens at their company, including the ability to decide for themselves whether to accept an offer for SpinCo if one is made,” Mr. Icahn added.
With Gannett Co., Inc. (NYSE:GCI) announcing its split into two companies and Mr. Icahn’s involvement, investors have been bullish on the company. As our data show, at the end of the last quarter of 2014, the majority of investors raised their stakes in Gannett and 27 funds among those that we track reported holding some $1.08 billion worth of stock, up from $979.26 million the previous quarter. The stock meanwhile lost around 6% in the period between August and December.