The Morning Brief: Dan Loeb’s Third Point Adds to Gains
Dan Loeb’s Third Point Offshore, managed by his hedge fund firm Third Point, rose 0.6 percent in December, bringing its return for the year to 6.1 percent. Gains were driven by the long book in both equities and credit. The sometime-activist firm lost money in its short books for both strategies. Entering the new year, Third Point modestly increased its net long exposure, to 58.3 percent, in its long-short strategy and 26.3 percent in its credit strategy.
Shares of Marathon Petroleum rose more than 5 percent, to close at $52.93, after the energy giant provided details about ways it plans to boost shareholder value in response to urging from activist hedge fund firm Elliott Management Corp. Marathon said it expects to “drop down” about $1.4 billion worth of assets to its master limited partnership, MPLX LP, sometime this year and expects to receive newly issued MPLX common units in return. It also said it will look for ways to monetize its Speedway retail chain of gas stations, which could include a tax-free separation. “Driving long-term value for our shareholders has always been and remains a top priority,” said Gary Heminger, Marathon’s chairman, president and chief executive officer, in a press release. “We believe MPC is undervalued in the public markets and have been working diligently to execute the initiatives we announced in late October.”
Said Quentin Koffey, portfolio manager at Elliott Management, in the release, “We are pleased with the additional decisive actions MPC announced today that will accelerate value creation for all shareholders. We appreciate the open and candid dialogue we have had with the management team, and expect these additional actions to be important elements of the value realization MPC continues to drive for its shareholders.”
Back in November Elliott disclosed it owned 4 percent of Marathon and suggested the company undertake a major restructuring, including spinning off several of its businesses. At the time, the company said in a statement: “We agree with Elliott Management that there is upside to our valuation, which we are addressing with the value-creating actions we announced last month, but we disagree with their letter and presentation.” In mid-December Marathon extended the deadline for submitting director nominations to January 9, 2017.
Depomed shares surged nearly 13 percent, to $20.34, on reports that Henry Kravis’ private equity giant KKR may make a bid for the maker of opioids by the Wednesday deadline for bids. According to the New York Post, KKR is expected to combine Depomed with another one of its holdings, Arbor Pharmaceuticals. Activist hedge fund Starboard Value disclosed owning 9.9 percent of the pharmaceutical maker’s stock in early April.
Starboard threatened to submit its own slate of director nominees at Depomed’s annual meeting. It also set November 15 for a special meeting of Depomed shareholders, stressing that the company needed to replace its entire board of directors, and publicly asserted that the company would be “extremely attractive” to many potential buyers. However, before that date Depomed agreed to appoint three Starboard nominees to its board, increasing the number of directors from six to nine.