The Morning Brief: Activist North Tide in Health Care Play
A relatively new hedge fund has taken an activist stake in two home health care companies and is urging them to merge. Boston-based North Tide Capital, a $1.5 billion hedge fund firm founded in 2010 by Conan Laughlin, disclosed that it owns 12 percent of Amedisys and 11.5 percent of Almost Family. The two companies have market capitalizations of $872 million and $270 million, respectively.
In a letter to both companies, Laughlin says a combination of the two companies “represents an extremely compelling value creation opportunity for both companies and their respective shareholders.” He says the industry is consolidating rapidly in the face of a widespread contraction in margins, adding that “scale and efficiency gains from these activities” will likely provide a long-term competitive advantage for companies that agree to merge and become larger. The hedge fund firm says the two healthcare companies have more than a 60 percent overlap of shareholders.
North Tide calls itself a value-oriented manager with a focus on the healthcare industry. Prior to founding North Tide, Laughlin was a portfolio manager at Israel (Izzy) Englander’s New York-based Millennium Management from 2005 through 2011. Prior to that he was an equity research analyst covering the healthcare sector in the asset management group at American Express, and before that spent seven years on the sell-side as an analyst at Morgan Stanley Dean Witter, SG Cowen and Deutsche Bank Alex. Brown. Earlier this year North Tide settled with Healthways, which agreed to nominate three directors selected by North Tide. The hedge fund firm, in turn, agreed to drop its planned proxy fight with the provider of wellness programs.
New York activist hedge fund firm Trian Fund Management announced changes to the boards of directors of two of its activist targets. Trian said Nelson Peltz has resigned from the board of Legg Mason, saying he wants to devote more time to other commitments. “Legg Mason has successfully addressed its legacy issues, increased shareholder value, strengthened its balance sheet, is seeing positive net flows and is positioned for future success,” the activist states in a letter to the investment firm’s chairman and chief executive officer, Joseph Sullivan.
Meanwhile, BNY Mellon, one of Trian’s newer activist targets, announced that Edward Garden, chief investment officer and a founding partner of Trian, has been elected to the board of directors, effective immediately. Garden’s addition boosts the number of directors by one, to 14. “We have had valuable discussions with Ed and Trian over the past several months about our progress towards improving our financial performance and capitalizing on the expanding opportunities in the markets we serve,” said Gerald Hassell, BNY Mellon’s chairman and CEO, in a press release. Garden will join the human resources and compensation committee and the risk committee of BNY Mellon’s board.
Daniel Loeb has ratcheted up his bet on stocks in his hedge funds. At the end of November, the Third Point Offshore Fund had a net exposure of 62.6 percent in its long-short equity portfolio, according to its latest monthly report. This is up from 52.5 percent the previous month. Its net exposure to credit, on the other hand, remained relatively flat, at 23.5 percent. The fund is managed by Loeb’s New York-based Third Point.
Daniel Och’s multistrategy fund, the OZ Master Fund, rose 2.60 percent in November, boosting its gain for the year to 4.53 percent. It is managed by New York-based Och-Ziff Capital Management. Och’s two other main funds moved into positive territory last month. The OZ Asia Master Fund jumped 4.32 percent and is now up 1.55 percent for the year, while the OZ Europe Master Fund rose 1.96 percent for the month and is up 0.52 percent for the year. Och-Ziff also reported that as of December 1, it had $47.1 billion under management, up $1.1 billion in the past month.
The Credit Suisse Liquid Alternative Beta Index rose 1.40 percent last month and is up 3.89 percent for the year. The managed futures strategy was the top performer, jumping 7.21 percent in November alone and 11.84 percent for the year. The LAB indices seek to replicate the aggregate return profiles of hedge fund strategies using liquid, tradable instruments.