Canadian activism seen as ongoing despite slowdown

Jun 12, 2019
A record 75 Canada-based companies faced public activist campaigns last year

Industry advisers say activist investing in Canada is very much still on the agenda despite a drop-off from last year’s mini boom, a new report finds.

A record 75 Canada-based companies faced public activist campaigns in 2018, according to Activist Insight Online research. That number is up sharply from the 56 subjected to public demands the year before though up more modestly from the total of 70 and 66 in 2015 and 2016, respectively. Similarly, there were a record 22 activist short attacks at Canada-headquartered companies last year, with healthcare having been the most commonly targeted sector since 2013.

However, just 28 Canadian companies had faced activists’ public demands this year as of the end of April 2019. That figure is down sharply from the 47 companies targeted by the same point last year and is below the average of 30 for the same year-to-date periods in 2015-2017. Activism in the basic materials industry fell by 59 percent in the same period this year.

But these headline figures may obscure a greater range of activity taking place, in part behind the scenes, experts quoted in the report suggest. ‘A record year in 2018 and interesting recent developments make this a good time to take stock of activism in Canada,’ Activist Insight’s editor-in-chief Josh Black states. ‘While the level of activist interest in the resources sector has been volatile, the first few attacks on cannabis companies and high valuations in the US has made for an unpredictable start to 2019. As such, campaigns can come seemingly out of nowhere.’

Wes Hall, executive chair and founder of Kingsdale Advisors, says in the report: ‘While we don’t expect to reach a new peak this year, we have experienced a sustained high level of proxy contest activity since 2015, thanks to increased activism in M&A, favorable credit markets, a record number of investors engaging in public activism for the first time, and repeat activists going after the same target company again.’

The slowdown in activism in Canada this year is in line with global trends. Worldwide, there has been a 15 percent drop in the number of companies publicly subjected to activist demands so far this year, according to Activist Insight data on campaigns to the end of May.

Despite that, more than 500 companies globally have been publicly subjected to activist demands so far in 2019, although that is down from 619 in 2018’s record-breaking start to the year, Activist Insight notes in a separate report.

In Canada meanwhile, the report notes that other trends include M&A activism focusing more on opposing deals than in the US, with public demands to break up companies relatively infrequent. In Canada, 39 percent of all public M&A- and breakup-related activist demands since 2013 have been in opposition to M&A deals, compared to 21 percent in the US.

Nine percent of demands in Canada over that period were for break ups, compared to 16 percent in the US. Just of half (52 percent) of demands in Canada were for M&A deals, while almost two thirds (63 percent) of demands in the US pushed for deals.

The report also notes that another recent trend has been an increase in contested board seat campaigns. Fourteen such campaigns went to a vote in 2018, resulting in activists gaining 18 board seats. That was an increase from eight votes in 2017 that yielded 10 seats. But the number of settlements and related number of seats gained by activists has remained broadly similar since 2015, with 21 settlements and 34 seats last year.

‘That trend may be correlated to the relatively modest number of campaigns run by experienced activists, with newcomers prone to making less realistic demands,’ the report states.

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