Fitch: Shareholder Activism Yields Mixed Outcomes for US Ratings

CHICAGO & NEW YORK--(BUSINESS WIRE)-- Shareholder activism fueled by slow organic growth and cheap capital will remain elevated in the US but the credit impact on target companies will vary, according to Fitch Ratings.

Fitch expects the surge in activist activity seen over the past several years to continue, given an increase in assets managed and investors' desire for higher returns. Activist campaigns are intended to enhance shareholder value. However, activists' demands alone do not trigger rating actions and not all activist activities have weakened credit profiles as some have been neutral to mildly positive. Activists often emerge as a result of weak operating trends or corporate decisions already reflected in the targets' credit profiles.

The motivation of corporate actions - whether internal or a result of activist pressure - is often undeterminable. Fitch nonetheless believes activists have meaningfully influenced corporate decision-making as some shareholder-friendly activities, M&A transactions and spin-offs were likely contemplated to pre-empt activist threats. Moreover, the growing number of activists who have gained representation on US corporate boards and standstill agreements likely to expire in coming years create long-term uncertainty regarding future credit quality for many issuers.

In a new report, Fitch provides a multisector view of activism and evaluates factors that may help assess the risk that an activist could emerge or agitate for change. The report includes case studies of 14 large investment-grade firms that have faced activist campaigns since 2013 and profiles of ten prominent activists.

Case studies contain a synopsis of events, a snapshot of activists' proposals and outcomes, and a review of factors that Fitch views as increasing issuer vulnerability. Activist profiles discuss investment strategy, campaign history, investment returns and top holdings. The report also analyzes trends in activist activity across all nonfinancial US corporates.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

Activist Activities: Fall 2015 (Nonfinancial U.S. Corporate Campaign Case Studies and Profiles of Notable Activists)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=872464

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View source version on businesswire.com: http://www.businesswire.com/news/home/20151106005760/en/

Fitch Ratings
Carla Norfleet Taylor, CFA
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Fitch Ratings, Inc.
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Fitch Ratings, Inc.
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Source: Fitch Ratings

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