Activist investor Mick McGuire of Marcato Capital Management on Tuesday sent a letter to the lead director of Bank of New York Mellon Corp (NYSE:BK) demanding the ouster and replacement of the company’s Chairman and CEO, Gerald Hassel, according to a CNBC report. The investor considers this move necessary to drive change in Bank of New York’s operations, priorities and brand management, the source added. Bank of New York represents the largest holding in Marcato’s equity portfolio, according to the fund’s latest 13F filing.
A former employee of notorious activist Bill Ackman’s Pershing Square, Mick McGuire himself has become a big player when it comes to activism and currently manages around $3.0 billion in equities. In the recent past, he has been engaged with companies like Sothebys (NYSE:BID), Lear Corporation (NYSE:LEA), and Life Time Fitness, Inc. (NYSE:LTM). Moreover, Mr. McGuire has been one of the best performing activists in the last couple of months, with Marcato’s main fund returning almost 9% in February. Bank of New York Mellon and Lear Corporation, which were two of the largest positions in the fund’s equity portfolio at the end of 2014 have had a strong performance in the last 52 weeks, gaining around 20% each.
As it has been already mentioned, Bank of New York Mellon Corp (NYSE:BK) represents the largest position in terms of value as of the end of 2014. The fund disclosed holding 18.0 million shares, valued at $730.32 million. Mr. McGuire initiated a stake with 17.78 million shares during the fourth quarter and since the position currently amasses around 1.60% of Bank of New York Mellon Corp (NYSE:BK)’s common stock, the investor had not yet disclosed any particular intentions up until now. According to CNBC, Mr. McGuire in his recent letter stated that Bank of New York is not likely to achieve significant progress without new executive talent, which explains his decision to ask for the replacement of the CEO.
It’s not clear though what stands behind Mr. McGuire’s decision to oust Mr. Hassell. Since the new CEO was appointed in August 2011, the stock has gained around 60%. The stock of Bank of New York has gained around 80% in the last three years alone; by comparison Goldman Sachs Group Inc (NYSE:GS) gained 50% in the same period.
We shall see how this story develops in the next couple of days. The story is also interesting because banks and financial companies in general are rarely targeted by activists, which, however, is not the case for Bank of New York Mellon Corp (NYSE:BK), which has previously been targeted by two investors. Aside from Mr. McGuire, another activist that targeted Bank of New York Mellon is Nelson Peltz of Trian Partners. Mr. Peltz has been trying to push for cost cutting measures since adding the company to his equity portfolio, and in December, the bank appointed Trian’s representative, Edward Garden, to its board of directors. Last week, Trian disclosed raising its stake in Bank of New York Mellon Corp (NYSE:BK) to 29.96 million shares.
During the fourth quarter, Marcato has not made many significant changes to its equity portfolio. The fund initiated a stake in only one company, Packaging Corp Of America (NYSE:PKG), in which it disclosed a $255.06 million stake that contains 3.27 million shares. McGuire initiated a stake at the end of October, intending to push for a separation of Packaging Corp of America. The company, however, beat him to that and announced the spin-off of a part of its business into a master limited partnership (MLP), a move supported by the investor. Interestingly enough, McGuire went activist on Packaging Corp Of America (NYSE:PKG) as Jeff Smith of Starboard Value was pushing for a spin-off at another packaging company, MeadWestvaco Corporation (NYSE:MWV), the move being announced by the company earlier this year. The plans to create an MLP, sparked the attention of investors, with several funds initiating stakes or increasing their exposure to Packaging Corp Of America (NYSE:PKG). Among those funds was First Eagle Investment Management, which initiated a stake of 2.43 million shares during the last quarter of 2014.
The only other company in which Marcato raised its stake besides Bank of New York Mellon Corp (NYSE:BK) is Avis Budget Group Inc. (NASDAQ:CAR). The fund added 346,400 shares to its stake raising it to a total of 3.34 million shares, valued at $221.78 million. Avis recently expanded its services in Italy by acquiring Maggiore Group in a $170 million deal, following which Avis Budget Group Inc. (NASDAQ:CAR) will become the largest car rental c0mpany in the country.
Mr. McGuire initiated a stake during the second quarter of 2014, approximately the same period as one of Avis’ peers, Hertz Global Holdings, Inc. (NYSE:HTZ), was targeted by several activists including Carl Icahn and Barry Rosenstein, amid accounting and management problems. However, Mr. McGuire has not made any particular moves or declarations regarding Avis Budget Group Inc. (NASDAQ:CAR) and the company’s stock gained around 14% in the second half of last year. Andreas Halvorsen’s Viking Global also initiated a stake in Avis Budget Group Inc. (NASDAQ:CAR) during the fourth quarter, reporting ownership of 5.02 million shares in its last 13F filing.
Disclosure: None
