Proxy battles against activist investors have cost US corporations an average of $4.9 mn each so far this year, a sharp increase on the average of $3 mn each last year, after a series of particularly costly fights, according to a report from Activist Insight.
Companies with a market cap of between $250 mn and $2 bn have spent an average of $1.5 mn to $2 mn per battle. Companies with a market cap of up to $10 bn engaged in proxy fights have spent an average of $10 mn fighting activist investors so far in 2014, says Activist Insight in a press release. Companies with a higher market cap spent an average of $12.5 bn.
The costs include disputes settled before annual meetings, which may cover costs reimbursed to activists, the report says. This year, costs were driven up by pricey battles at Sotheby’s and CommonWealth REIT, it adds.
‘Activists and their advisers claim US companies are willing to spend any amount of shareholders’ money to defend themselves,’ says Josh Black, editor of Activism Monthly Premium, Activist Insight’s publication, which specializes in covering activist investors. ‘Our analysis suggests issuers both outspend activists on proxy solicitation services and use more people to repeatedly call investors. That said, when the stakes are high, some activists can spend significant sums themselves.’
The report notes that activist investor Bill Ackman, for example, spent $1.75 mn in his struggle for a special meeting at Allergan and more than $20 mn at Canadian Pacific in 2012.
Activist investors spent an average of $184,000 on proxy solicitor fees while companies spent an average of $388,000 this year. The average activist investor employed 35 proxy solicitors on each fight while companies used an average of 44, the report adds.
