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Morning Brief: Marcato Cuts Its Deckers Board Slate to Three Nominees

The activist hedge fund firm made the move after proxy adviser ISS declined to endorse the firm’s full slate of nine directors.

  • By Michelle Celarier

Mick McGuire’s Marcato Capital Management said Monday it had reduced its slate of board directors for UGG footwear maker Deckers Outdoor Corp. to three people from nine. The change was made after Marcato’s proxy effort hit a snag when Institutional Shareholders Services, the influential proxy advisor, declined on Friday to endorse its entire slate.

Instead, ISS recommended that shareholders withhold three votes on management’s slate to allow for some of Marcato’s nominees to win. A similar split recommendation by ISS led to a defeat for Pershing Square Capital Management last month in its proxy battle with ADP, the human resources software provider.

In its recommendation, ISS said that the company’s “prolonged underperformance” means “some degree of board change is necessary.” But it said Marcato’s slate “could not meet the requirements of ISS’ framework...involving a possible change of boardroom control.”

ISS said only four of Marcato’s nominees had significant boardroom experience and that the firm had not outlined a business plan.

Marcato trimmed its slate to three independent directors: Kirsten Feldman, Steve Fuller, and Anne Waterman. Marcato’s Matthew Helper is no longer running for a seat.

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Dan Loeb’s Third Point Offshore Fund was dragged down by its short bets in November, gaining only 0.1 percent during the month, for a year-to-date performance of 18.1 percent. While still among the best performers this year among its hedge fund peers, Third Point now trails the Standard & Poor’s 500 stock index, which is up 20.5 percent this year.

Losses in Third Point’s equity short book took down performance. In November, Third Point’s portfolio was 32 percent short, and shorts fell 1.1 percent during the month as the bull market continued, compared with a 1.4 percent gain from its long positions, including such activist plays as Nestle and DowDupont, both of which were up about 2 percent. Third Point also had losses on shorts in another undisclosed category, according to the fund’s monthly report. Shorts constituted 34 percent of the portfolio.

Even though its shorts were losers in November, that hasn’t been the case for most of 2017, according to Third Point. In its third quarter letter to investors, Third Point — which has been bullish all year — noted that its shorts also have been winners this year.

“While our long book has been the standout, single name shorts, which account for almost 20% of equity exposure, have generated substantial alpha,” the letter said.

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Larry Robbins’s Glenview Capital Management looks to be the big hedge fund winner in the latest healthcare merger after CVS Health Corp. inked its deal to buy Aetna on Sunday.

CVS agreed to buy Aetna for $207 a share, in a mix of cash and stock. Glenview, which has long focused on healthcare stocks, first bought Aetna shares in 2013, when it was trading around $65, according to Bloomberg.

Glenview was the 14th largest shareholder of Aetna, with 3.8 million shares as of September 30, according to a filing with the Securities and Exchange Commission. That stake would be worth about $786 million if the deal closes.

Other hedge fund holders as of the end of September, according to SEC filings, include AQR Capital Management, with 2.2 million shares. Hedge funds holding fewer than 2 million shares in Aetna include Orbimed Advisors, Millennium Management, and Citadel.

Aetna shares have surged 46 percent this year, in contrast to the 20.5 percent gain for the S&P 500.

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