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U.S. companies are settling with activist investors faster than ever, at a time when board director deals are under heightened scrutiny.

Why it matters: Shareholders have raised concerns that these truces are too favorable to activists.

How it works: Companies that don't want to fight usually forge a legal settlement with an activist fund rather than take it to a shareholder vote.

These so-called cooperation agreements typically place a hedge fund-backed director or two on the board and force the fund to be supportive of the company and stay quiet for a year. Press releases spell out the deal.

Between the lines: Part of what is pushing more companies to settle is the proxy voting rule change that puts all board coordinates on a single ballot — a change from when an activist needed their own, separate ballot to get directors elected.

Zoom in: Barclays data shows that the average time between an activist approaching a company and the two sides signing a settlement has fallen to around two months. That's a nearly 30% drop from the settlement lag that existed before the new proxy rules.

That kind of speed is what led Ted Miller to sue Crown Castle when the telecoms company signed a truce with Elliott Management last year.

Miller, a company co-founder and major shareholder, said the cooperation agreement was too favorable to Elliott and forced Crown Castle to change its board before it even took nominations ahead of its annual meeting.

The case went to a Delaware Court of Chancery judge and forced Crown Castle and Elliott to change their agreement, a move that has now put board directors on watch when it comes to inking a settlement too soon.

The intrigue: Some companies making nice with activists have taken the extraordinary step of signing no settlement at all.

Case in point: On Feb. 13, Phillips 66 said it appointed Robert Pease to its board, touting his 38 years in the energy industry.

The press release announcing the move included support for Pease from two senior members of Elliott Management, which was waging a campaign against the company. The statement also said Elliott and Phillips would coordinate appointing another director in the coming months.

Unmentioned in the release was any sign of a cooperation agreement.

That same day, VF Corp. said — also without mention of a cooperation agreement — it appointed industry veteran Caroline Brown to the board, in an announcement that highlighted the support of Engaged Capital, the activist fighting the company, and noted that the company and hedge fund would agree on another director.

Zoom out: Activist peace deals that come without a legal settlement signify that, in the end, these truces can be pointless, as hedge funds have shown that staying quiet for a year is hardly a deterrent.

More to the point, they show that the company and hedge fund are actually cooperating, and engaging, and showing support right out front.

Reality check: Fights like Disney and Trian are becoming rarer, and most companies and their activist agitators look to settle before it gets ugly, and costly.

Barclays' global head of shareholder advisory, Jim Rossman, said that boards are moving faster in assessing their vulnerability.

"And I think the conclusion has been, for many companies, that I'd rather collaborate than fight," he said.

Barclays data shows that the usual two-thirds of activist nominees who manage to get on corporate boards during the average proxy season jumped to 79% this year.

What we're watching: Based on the Crown Castle case, activist investors and companies may wait until after the director nomination period to strike a board deal, with or without a cooperation agreement.

Data: Barclays; Note: Includes companies with more than $500 million in market cap at time of campaign announcement or in prior 12 months; Chart: Axios Visuals

1 big thing: Activists settle for less

an illustration of a waving white flag surrounded by textured circles and signatures 

Data: Barclays; Note: Includes companies with more than $500 million in market cap at time of campaign announcement or in prior 12 months. Excludes campaigns without a public number of board seats demanded; Chart: Axios Visuals

U.S. shareholder activism notched its busiest two-quarter stretch since 2022, according to Barclays.

Why it matters: Changes in the proxy voting process and other factors have activist investors adjusting their strategies.

The big picture:  Global activism was down during the quarter, while U.S. activists focused on the tech and consumer sectors for board and strategy shakeups.

The main driver of the falloff has been a drop in M&A. For years, the main demand of activist hedge funds was to push a company into a sales process.

With M&A down globally, activist campaigns have followed suit, with investors now forced to sharpen their focus.

Zoom in: Activism across the globe fell 19% in the first quarter to 63 campaigns, Barclays data show.

Director seats were activists' top demand in Q1, with nearly half of the global campaigns focused on board change.

Activists launched 29 U.S. campaigns in Q1, nearly equal to the same period a year ago.

Yes, but: Combining Q4 2023 and Q1 2024 (the period when most campaigns are launched), U.S. activism rose 7% to 73 campaigns total, compared to the same two quarters a year earlier.

During Q1, 45% of the U.S. activist campaigns were aimed at companies with a market value larger than $5 billion, a higher percentage than the trailing three-year period in a sign that hedge funds are going after bigger targets.

More than half of the campaigns launched in the U.S. focused on companies in the tech, industrial, and consumer sectors.

Between the lines: Forcing a company into a sale process is usually easier for an activist than getting one of its nominees appointed to a company's board.

With M&A continuing to lag (despite a recent spike), activists are being "surgical" in their approach to getting nominees onto boards to push changes, says Rossman.

The data shows that activists during Q1 demanded fewer board seats during their campaigns but won a greater percentage compared to prior years.

Previously, activists typically won around two-thirds of the seats demanded. This quarter, that jumped to 79%, according to Barclays.

What's next: The biggest proxy fight of the year goes to a vote on April 3, with two seats on Disney's board being contested by Trian and its co-founder, Nelson Peltz.

2: U.S. activist campaigns make a comeback

Liberty Media Corporation has agreed to acquire MotoGP rights-holder Dorna Sports from Bridgepoint and Canada Pension Plan Investment Board for €3.5 billion, the companies announced today.

Why it's the BFD: New ownership by John Malone's media company will likely bring more global attention to the sport, like it did with Formula One, Kerry writes.

Zoom in: Liberty Media will acquire 86% of the company, it said in Monday's press release. MotoGP management will keep around 14%.

Liberty will pay about 65% in cash and 21% in shares of Liberty Formula One common stock, priced a 20-day volume weighted average price prior to close. The deal's equity value is about €3.5 billion with the existing debt balance remaining in place.

Dorna CEO Carmelo Ezpeleta will remain in the position he has served since 1994. The company will stay headquartered in Madrid.

What to watch: The deal is expected to close by year-end. But it could face regulatory scrutiny. As the FT noted, CVC Capital Partners was forced to sell ownership of MotoGP in 2006 when it owned both that and F1.

F1 owner Liberty Media to acquire MotoGP for €3.5B

3. The BFD: Liberty rides global sports boom

Jose Antonio Rueda (99) of Spain and Red Bull KTM Ajo KTM during the race day of the Grande Premio Tissot de Portugal at Autodromo do Algarve on March 24, 2024 in Lagoa, Algarve, Portugal.

Jose Antonio Rueda of Spain during the Grande Premio Tissot de Portugal on March 24. Photo: Jose Breton/Pics Action/NurPhoto via Getty Images

Go deeper in our full database in the Axios Pro Deals Tracker.

• Steve Cohen, the hedge fund billionaire and owner of the New York Mets, disclosed a 5% stake in Fox Corp. https://axios.link/3TGWg7o 

• Cadent, a New York-based ad tech firm, agreed to acquire AdTheorent (Nasdaq: ADTH), a buy-side programmatic platform, for about $324m. https://axios.link/3POjMyb

• Aerkomm, a Fremont, Calif-based provider of satellite-based broadband connectivity solutions, agreed to be acquired at an implied $200m enterprise value via IX Acquisition (Nasdaq: IXAQW). https://axios.link/3xshQF6

• Live Nation (NYSE: LVY) acquired a majority stake in First Fleet Concerts, an Iowa concert promotions firm, Axios Des Moines' Linh Ta scoops. https://axios.link/3xqktY1

• Alamo Drafthouse Cinema, an Austin-based theater chain, is up for sale, per Deadline. It emerged from Chapter 11 bankruptcy in 2021 after an asset sale to Altamont Capital Partners, Fortress Investment Group and Drafthouse founder Tim League. https://axios.link/3IYJaxl

4. Deal flow

• Ned McNeilage, formerly of VML, was named chief creative officer of Sphere Entertainment (NYSE: SPHR). https://axios.link/4aF1MOZ

• Kyle Kuzma, an NBA player for the Washington Wizards, joined Scrum Ventures as an adviser. https://axios.link/4ahUHUx

5. Movin' on up (or out)

 🐭 For Disney, small shareholders loom large in boardroom fight (NYT)

"Up to 40 percent of Disney shares are held by individuals — retail investors, as Wall Street sometimes refers to them, with a hint of derision. On average among public companies, individuals represent closer to 15 percent of the ownership," Brooks Barnes and Lauren Hirsch write.

👾 Hollywood's new source of fresh characters and worlds (WSJ)

"Studios are increasingly mining videogames for characters and stories to bring to life in TV shows and films, particularly as audiences grow tired of story lines based on comic books," Sarah Krouse and Sarah E. Needleman 
write.

🤝 How Bowser and Leonsis came together to keep the Capitals and Wizards in D.C. (Axios)

"To hear Ted Leonsis tell it, Mayor Muriel Bowser never stopped talking with him, even after the heartstopping news late last year that his Washington Capitals and Wizards would ditch downtown for Alexandria," Cuneyt Dil writes. 

6. Channel surfing

an illustration of a poster that has a remote control in front of a sunset and says "channel surfing" on a dorm room wall

Situational awareness: We've got a special package of stories for you today on the state of shareholder activism.

With the Disney-Trian vote coming up this week, editor Michael Flaherty peers into activist data and trends.

@tim_bays: LSU vs. Iowa on ESPN. One could argue the Clark-Reese rematch is one of the most anticipated games in women's sports history. 

@kerrymflynn: "The NeverEnding Story." Today's my dog's 4th birthday, so celebrating by watching her namesake.

✏️ Thanks to George Moriarty for editing and Katie Lewis for copy editing this newsletter.

Thank you for reading Axios Pro Media Deals! Please ask your friends, colleagues and MotoGP fans to sign up.

April 01, 2024

1 big thing: Activists settle for less