Keith Meister’s Corvex Capital has revealed further details regarding its negotiations with the management of American Realty Capital Properties Inc (NASDAQ:ARCP) through an amended 13D filing with the SEC. Two updates shed further light on the latest developments, including the fact that Meister has requested a seat on ARCP’s board to help in the process of selecting a new CEO for the company, a request which has thus far been denied.
Corvex Capital is an activist hedge fund founded by Meister in 2011 with $250 million in seed money from George Soros. It’s hardly surprising the Meister’s fund is activist in nature, as he previously worked at Icahn Capital as the right-hand man of legendary activist and corporate raider, Carl Icahn. The fund has launched a number of campaigns and proxy fights in its brief history, including with another real estate investment trust (REIT) last year, CommonWealth REIT, in which it succeeded in ousting the company’s entire board.
We most recently reported on the situation one month ago, as Meister called for the elimination of the current board. The most recent filing reveals that on March 3, Meister, who has a 7.8% stake consisting of 70.64 million shares, requested to be added as a member of the board of American Realty Capital Properties Inc (NASDAQ:ARCP) following the company’s most recent financial results on March 2, with the goal of being involved in the process of choosing a new CEO and Chairman for the company. However, ARCP denied that request.
On March 7, Meister again reiterated his desire to be added to the board, expressing doubt that he could have any meaningful impact on the selection process of a new CEO without a board seat and access to all the information that directors of the company are privy to. Meister alternatively declared that he would be willing to accept a board seat at the same time as a new CEO is appointed, to help with the composition of the board, and that, if desired, he would be willing to limit the term to last only until the 2015 Annual Meeting. ARCP has thus far failed to accept the second proposal as well.
American Realty Capital Properties Inc (NASDAQ:ARCP) ran into a major accounting scandal last October, when it was revealed the company falsified second quarter 2014 results to cover up mistakes made in its first quarter results. The company was also found to have been making large, inappropriate payments to ARC Properties Advisors LLC, a company that is majority-owned by former chairman Nicholas Schorsch. Shares are down 24.4% since the scandal was uncovered on October 28.
An increase to its position in B/E Aerospace Inc (NASDAQ:BEAV) was Corvex Capital’s most bullish move during the fourth quarter. The fund added 5.76 million shares to its position during the quarter, a 758% increase, with the increased holding now valued at $398.13 million. B/E Aerospace Inc (NASDAQ:BEAV), which also represents the top pick of John Orrico’s Water Island Capital, completed the spin-off of KLX Inc (NASDAQ:KLXI) (in which Meister now has a small position of 70,900 shares) in the middle of December. KLX was the logistics and services side of B/E Aerospace Inc (NASDAQ:BEAV)’s business, and the move was expected to create more shareholder value. Shares of B/E Aerospace are up by 10.50% since the split, while the shares of the spun-off company have slid by 12.79% since its inception.
Corvex also has a large new stake in Level 3 Communications, Inc. (NYSE:LVLT), though the new position is not the result of purchases, but rather a conversion of TW Telecom Inc. (NASDAQ:TWTC) stock into Level 3 stock, after the merger of the two companies during the fourth quarter. The sale of TW Telecom paid shareholders of that company $10.00 in cash, and with 0.7 shares of Level 3 Communications, Inc. (NYSE:LVLT) stock per each share of TW Telecom owned at the closing of the deal, which occurred at the end of October.
Corvex held 7.66 million shares of TW Telecom at the end of the third quarter, which would have been converted into 5.36 million shares of Level 3 Communications, Inc. (NYSE:LVLT). At the end of 2014, Corvex reported ownership of 4.49 million shares of Level 3 valued at $221.69 million at the end of the year. Billionaire Mason Hawkins, who was a major shareholder of TW Telecom before the merger is now one of the top shareholders of Level 3, with ownership of 54.74 million shares as at the end of the 2014.
A new position in Platform Specialty Products Corp (NYSE:PAH) was another bullish move by Meister in the fourth quarter, with it consisting of 6.39 million shares valued at $148.30 million. Platform Specialty Products Corp (NYSE:PAH), a provider of specialty chemical products and related services, completed the purchase of Arysta LifeScience Limited for $3.51 billion in the middle of February. The purchase was the third deal in the crop protection segment made by Platform in less than half a year, as it also bought Agriphar on October 1 and Chemtura AgroSolutions on November 3. Famed activist investor Bill Ackman has been an investor of Platform Specialty Products Corp (NYSE:PAH) since the company’s IPO in early 2014, and owned 42.78 million shares at the end of last year. while the stock is up 80.14% since its IPO.
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