By David Benoit
Stock index provider MSCI Inc. rejected activist investor
ValueAct Capital Management LP's request to join its board,
ValueAct said, bucking a trend in which companies have lately
succumbed to such overtures.
ValueAct Chief Executive Jeffrey Ubben said in a letter filed
publicly Monday that he first requested the board seat at New
York-based MSCI in August. ValueAct offered up an "extensive
reference list" from 37 boards on which the investment firm has
held board seats, and MSCI told the activist it didn't follow up on
any of them, the letter said. ValueAct, which first disclosed a
position in 2012, now owns an 8.3% stake.
In a statement, MSCI said it "appreciates and values input from
its shareholders" and has "had extensive interactions with ValueAct
since their initial investment in MSCI over two years ago. The MSCI
Board has carefully considered ValueAct's views regarding the
Company, including their ideas on director representation. MSCI has
delivered significant value to shareholders."
MSCI shares are up 9.4% over the past 12 months, just shy of the
S&P 500. In September, the company outlined plans to return
about $1 billion in capital to investors by the end of 2016. That
included the company's first quarterly dividend along with share
repurchases.
The letter marks a rare public escalation for ValueAct, which
has been credited with congenial relations with corporate targets.
In 2013, it gained a board seat at previously clubby Microsoft
Corp. without so much as the whisper of a fight.
The letter to MSCI doesn't actually threaten a board fight, an
approach typical for other activists. It also widely praises the
company and its brands, though it is critical of the company's
margins. The letter was released "as a last resort out of great
frustration," it says. In addition to its index benchmarks, MSCI
provides investor risk-management tools. It has a market
capitalization of about $5 billion.
MSCI's rejection comes amid trends in which more companies have
been opening their boardrooms to activists, as other shareholders
increasingly support activists in fights for board seats. In 2014,
more than 73% of proxy fights wound up with the activist settling
for or winning at least one board seat, according to data tracker
FactSet.
Boards have seemed particularly willing to welcome activists who
are viewed as more constructive rather than antagonistic. ValueAct
has earned the former reputation, with Mr. Ubben calling other
activists too shortsighted.
In August 2013, Microsoft's granting of a board seat to Mr.
Ubben's partner Mason Morfit was widely viewed as a watershed
moment for activists, and for ValueAct. The firm held less than 1%
of the stock, and Microsoft had never given a board seat to a
shareholder in such a fashion.
Still, corporate advisers say giving board seats to dissidents
is concerning for many directors, and many boards still say no if
they view the activist's ideas as off base.
Tess Stynes contributed to this article.
Write to David Benoit at david.benoit@wsj.com
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