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Latest retail activism wave sets stage for M&A

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Illustration: Tiffany Herring/Axios

Shareholder activists at several retailers are calling for spinoffs, spurring what could be a flood of corporate divests if campaigns are successful.

The big picture: "It's all part of a broader trend of simplifying and sharpening businesses," says FTI Consulting managing director Tanner Kaufman.

Driving the news: Spurred by pressure from activists Engaged Capital and Legion Partners, VF Corp. said this week it will review its brand portfolio for divests. (The company is already selling brands Jansport and Eastpak).

  • Mattel is under scrutiny by activist Barington Capital, which is asking the toymaker to consider selling Fisher-Price and American Girl brands.
  • Macy's rejected a $5.8 billion takeover bid from activists Arkhouse Management and Brigade Capital, which have said they're prepared to take their offer to shareholders.
  • The legacy department store could be split, with value seen in its real estate, e-commerce operations, and Bloomingdale's and Bluemercury.

Meanwhile, Starbucks is in the midst of a proxy fight with its labor unions, setting the stage as the first single-issue campaign centered around ESG.

  • "If they won, I'm pretty sure that would be probably high up on your radar of things to discuss at the management level and board level," says Patrick Gadson, a partner at Vinson & Elkins.
  • This particularly holds true for companies experiencing tension with their labor force (like Amazon), Gadson says.
  • This will only be exacerbated by companies recording record profits and allocating that to shareholders rather than labor wages on top of a tighter employment market.

What we're watching: More activists may push for direct fund representation rather than having independent directors, Kaufman says.

  • "If the activist is in the boardroom, they may feel like they have more control, and a much greater voice," he adds.
  • Etsy welcomed Marc Steinberg of activist Elliott Investment Management to its board last week.
  • Steinberg also joined Pinterest's board in December in a deal with the activist.

Yes, but: "Universal proxy has encouraged more settlements, because it has made directors a bit more concerned about their individual board seats," Kaufman says.

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