The Morning Brief: Elliott, Hess Reach Compromise; Starboard Strikes Deal With Quantum

Hours before its showdown annual meeting, Hess hammered out a compromise with relentless activist hedge fund firm Elliott Management. The energy giant announced that it would add three of Elliott’s director nominees — Rodney Chase, Harvey Golub and David McManus — and the hedge fund agreed to withdraw its slate of five director nominees, thereby avoiding a contentious proxy fight. Hess agreed to name five new directors of its own. In addition, Hess said the Board would appoint two of the Elliott nominees to a five-member nominating and corporate governance committee, and one Elliott nominee would be appointed to the compensation committee.

“We…believe that the new Board will provide effective oversight to ensure that we continue to create meaningful long-term value for all Hess shareholders,” said John Hess. Last week the company agreed to separate the chairman and CEO roles and agreed to de-stagger the board. In the first quarter, Greenlight Capital and Appaloosa Management each took new positions in the stock, presumably in anticipation of the proxy fight.


Meanwhile, in a separate announcement Elliott Management extended its standstill agreement with Compuware Corporation to July 15, 2013. The activist hedge fund had initially entered into a confidentiality agreement with the business software company on February 14, which was scheduled to expire on May 15, after Compuware rejected Elliott’s takeover offer.


In a much lower-profile deal, the hedge fund firm Starboard Value announced yet another settlement, this time with Quantum Corp., a data management company with a $339 million market cap. Under the agreement, Starboard CEO and chief investment officer Jeffrey Smith was named to Quantum’s board of directors, and the size of the board was expanded from eight to nine members. Quantum also agreed to nominate two additional Starboard-recommended directors for election at the 2013 annual meeting in place of two incumbent directors. Starboard, which owns 17 percent of the stock, including convertible senior subordinated notes, agreed to vote all of its shares in favor of each of Quantum’s nominees.


Steve Cohen’s SAC Capital reported a 5 percent passive stake in Tessera Technologies. The maker of imaging systems for smart phones is currently a target of a proxy battle with activist hedge fund Starboard Value, which is gearing up for the May 23 annual meeting. Starboard, which owns 7.7 percent of the company, has nominated six of its own directors.


Eight of Newedge’s 11 hedge fund indices were in the black in April. The Newedge Trend Index increased 3.85 percent for the month and 7.67 percent for the year, while the Newedge CTA Index gained 1.45 percent in April and 4.36 percent for the first four months. The Newedge Commodity Index (Trading) fared the worst in April, down 1.38 percent. “CTA strategies continue to perform well in 2013,” said Ryan Duncan, global co-head of Newedge’s advisory group for Alternative Investment Solutions,” noting that the Newedge CTA Index has produced five consecutive positive months of performance. Top performers for the year include Campbell & Co. FME Large fund, up 7.15 percent; Man Investments AHL Diversified, up 6.11 percent; and Graham Capital K4D-15V, up 5.03 percent.