Morning Brief: Icahn, Corvex Team Up in Fight With Energen

Carl Icahn and Corvex Management, headed by one-time Icahn protégé Keith Meister, have teamed up to take an activist stake in Energen. In January Corvex, which owned a shade less than 10 percent of the shares at the time, nominated four individuals to Energen’s staggered board of directors. In March Corvex reached a compromise agreement under which the oil and gas producer agreed to expand the board of directors by two members, to a total of 11.

The new directors include Vincent Intrieri, who has been associated with Carl Icahn’s investment funds since at least 2004. On Monday, the two investors disclosed a stock purchase agreement under which Icahn Group agreed to purchase two million shares from Corvex entities. Of that sum, 750,000 will be bought on July 18 or after Icahn receives routine Justice Department antitrust clearance.

In a joint statement, Icahn and Corvex said the shares are undervalued and they may join others to acquire the company. “Too many boards do not do their jobs, which is to hold management accountable, and/or are unwilling to merge and get the many benefits that come with it,” Icahn told The Wall Street Journal.

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Engaged Capital said it has reached a cooperation agreement with Aratana Therapeutics. Under the deal, the animal therapeutics company agreed to boost the size of its board by one member, accepted the resignation of one of its directors, and appointed Craig Barbarosh and Lowell Robinson to its board. Both individuals were previously nominated to the board by Engaged Capital. Barbarosh will be a member of the compensation committee, and Robinson will be a member of the audit committee.

In addition, the company agreed to establish an ad hoc strategic review committee of the board by July 1 to conduct a review of Artana’s business and make recommendations regarding the company’s strategy and opportunities to boost its stock. Under the deal, Engaged also withdrew its nomination of director candidates.

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Hedge funds raised their overweight position in energy stocks in the first quarter by 172 basis points, or 1.72 percentage points, according to Goldman Sachs. This is the largest sector increase, the investment bank points out in its quarterly analysis of 13F filings. Altogether, consumer discretionary stocks remained the sector with the largest overweight relative to the Russell 3000 index. However, in the recent quarter, hedge funds trimmed their position to their lowest overweight stance since 2010. Goldman also points out that hedge funds cut their exposure to financials by more than 100 basis points, or one percentage point.