The scene on July 31st this year was reminiscent of the face-off between Gordon Gekko and Teldar Paper executives at the stockholders meeting in the 1980s film Wall Street, with billionaire investor Nelson Peltz in the Gekko role, and Heinz CEO William Johnson leading the somewhat hapless executive board.
In one of the year’s most contentious proxy fights, Peltz railed against food giant Heinz’s “clubby, caretaker board” and said he wanted “to create an entrepreneurial spirit that I don’t think exists today.” Heinz managers responded timidly under the weight of criticism of their record. CFO Arthur Winkleblack, for example, pleaded: “We have worked long and hard to get the company to this point and we just don’t want any further distraction.” After the proxy vote was tallied in early September, Johnson was forced to welcome Peltz onto his board, together with another Trian Group nominee, former Snapple CEO, Michael Weinstein. Such bitter proxy fights go back decades, but what marked the July Heinz versus Trian debate was the fact that it was conducted for the benefit of investors via webcast under the auspices of the Governance Forum, a service launched in 2005 by ISS, a governance and proxy adviser.
During the course of the fight, both sides used an array of communications techniques to sway the investor base, but Trian Group always went that bit further. For example, while Heinz followed the webcast debate days later with a point-by-point rebuttal via an emailed press release, Trian immediately refreshed its temporary dedicated website, Enhanceheinz.com, to ram home its case.
Such techniques already have reached Europe, though more concentrated share ownership and cultural differences shade their use on this side of the Atlantic. Nonetheless, the arrival of leveraged buyout firms and hedge funds, as well as the emergence of activism among traditional institutional investors and small-investor organisations, all are spurring more sophisticated communications techniques.
A high-profile example of this was the purchase in late 2005 of Danish telephone operator TDC for €12 billion by a consortium of private equity buyout firms, led by Apax Partners, which operated under the moniker Nordic Telephone Company. In what ultimately became the largest-ever leveraged buyout in Europe, the initial offer was rejected. As with Heinz, the buyout firms set up a temporary dedicated website—Nordictelephone.dk—to make their case directly to investors and to make documents easily available.
Despite pressure to get aggressive, TDC’s management laid low. “A lot of people asked, ‘Why don’t you say more,’ but we didn’t consider any aggressive communication,” says Ib Konrad Jensen, a TDC executive handling communications at the time of the bid. The Nordic Telephone consortium was competing more with alternative buyers than with the incumbent management. Arguably, the management’s approach was vindicated as shareholders ended up with €2 billion more than the original bid, though the CEO and other top executives lost their jobs.
More aggressive communications approaches are on the rise in Europe, says Julie Selby, European director of London-based Lake Isle M&A, which provided proxy services to Nordic Telephone, including the dedicated website. (Lake Isle is the European arm of Innisfree M&A in the US, which advised Trian Group on its Heinz proxy campaign.)