ValueAct Capital Adds to Alliance Data Systems, 21st Century Fox Stakes

Jeff Ubben's activist firm ValueAct Capital has submitted a few filings to the SEC recently regarding his positions.

ValueAct Adds To Alliance Data Systems

First, Ubben's firm has filed an amended 13D regarding their newer position in Alliance Data Systems (ADS).  Per the filing, ValueAct now owns 8.5% of the company with 5 million shares.

This is an increase over the 3.28 million shares they owned at the end of the second quarter.  They've been buying as recently as late August at prices of $199.13 - $204.07.

The 13D also notes that ValueAct intends to have conversations with management and the board on ways to enhance shareholder value.

We recently detailed the rest of ValueAct's portfolio (and 24 other hedge funds) in the brand new issue of our newsletter.

Per Google Finance, Alliance Data Systems is "is a provider of data-driven marketing and loyalty solutions serving consumer-based businesses in a range of industries. The Company offers a portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, end-to-end marketing services, analytics and creative services, direct marketing services, and private label and co-brand retail credit card programs. The Company operates through three segments: LoyaltyOne, which provides coalition and short-term loyalty programs through the Company's Canadian AIR MILES Reward Program and BrandLoyalty; Epsilon, which provides end-to-end, integrated marketing solutions, and Card Services, which provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services for the Company's private label and co-brand retail credit card programs."


Jeff Ubben Buys More 21st Century Fox

Second, ValueAct Capital has filed a Form 4 with the SEC regarding its stake in 21st Century Fox (FOX / FOXA).  Per the filing, ValueAct was out buying FOX shares on August 16th - 18th.

Ubben purchased 3 million shares in total at prices ranging from $25.86 - $26.13.  After these buys, they now own over $47.3 million shares.  Ubben is on FOX's board and it seems they want the company to go more direct to consumer with their media offerings.

You can view the rest of Jeff Ubben's portfolio here.

Per Google Finance, 21st Century Fox is "a media and entertainment company. The Company operates through segments: Cable Network Programming, Television, Filmed Entertainment, and Other, Corporate and Eliminations. The Company produces and licenses news, business news, sports, general entertainment, factual entertainment and movie programming for distribution primarily through cable television systems, direct broadcast satellite operators, telecommunications companies and online video distributors in the United States and internationally. The Company is engaged in the operation of broadcast television stations and the broadcasting of network programming in the United States. The Company is engaged in the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media, and the production and licensing of television programming around the world."

Jeff Ubben's Interview with CNBC

CNBC's Kelly Evans sat down with activist investment manager Jeff Ubben of ValueAct Capital recently.  Here's a summary of his latest thoughts:


On his recent portfolio activity: "We have been selling a number of our companies where we have been there, done all we could, the stocks are fairly valued... and it's been hard to redeploy that."  They sold some Adobe, MSCI, Microsoft, and Motorola Solutions.

He notes the only compelling investment they've found value in has been Rolls Royce (RR.L).

On valuations:  He notes that last valuation cycle the bubble was largely public and this time around, more and more companies are private so the bubble could burst slower he guessed.

On TwentyFirst Century Fox (FOX/FOXA): He likes the transition from old media to new media and wants to 'get rid of the middleman' by going direct to consumer.  He thinks James Murdoch is terrific and can lead the change.

On his stakes in Halliburton (HAL) / Baker Hughes (BHI):  If the deal closes, he thinks ValueAct will do really well there.  If it doesn't close, he says people have kind of forgotten what happens to Baker's balance sheet with receiving a break-up fee.

On Valeant (VRX):  This interview was shown yesterday and today VRX is down 47% on guidance cut and default worries.  But Ubben's comments at the time were that CEO Michael Pearson is "incredibly driven."  ValueAct spearheaded the effort to place him as CEO many years ago.  Ubben also said that "we're solving problems (at the company) as we speak" but also noted that "we haven't been able to control the narrative at all."  ValueAct has owned VRX for years and at one point it was a hugely successful play for them, but with shares plummeting this year, they've basically come close to round-tripping their gains.

Embedded below is the video of Ubben's interview:

What We're Reading ~ 11/4/15

Evaluating sustainable competitive advantages [Symantaka]

99% of long-term investing is doing nothing; it's the other 1% [Morgan Housel]

The third emotion of investing [Insecurity Analyst]

Daniel Kahneman on intuition and the outside view [Compounding My Interests]

Software is the new oil [AVC]

China's money exodus [Bloomberg]

The unbelievable power of Amazon Web Services [The Atlantic]

How to maximize value of using Finance Twitter [BarbarianCap]

Michael Wolf's predictions on tech and media [Business Insider]

Comcast's weapon to take on wireless giants: Wifi hotspots [Bloomberg]

Interview with Fox's James & Lachlan Murdoch [Hollywood Reporter]

Death rates rising for middle-aged white Americans [NYTimes]

ValueAct Capital Gets Board Nomination at 21st Century Fox, Increases Stake

Jeff Ubben's ValueAct Capital has filed an amended 13D regarding their stake in 21st Century Fox (FOX / FOXA).  Per the filing, ValueAct now owns 5.9% of the company with over 47.3 million FOX shares.

Increases FOX Stake

This is up from the 44.5 million shares they owned at the end of the second quarter.  ValueAct owns voting shares (FOX) and has utilized this to help earn themselves a seat at the table.  Their shares are held in a vehicle called Volpe Velox, which is Latin for swift fox.

Ubben Gets Board Nomination

The filing notes that Jeff Ubben has been nominated to Fox's board.  In exchange for the nomination, Ubben has agreed with the company to enter a standstill agreement.  His firm has agreed to not solicit any proxies and won't acquire 7% or more of the company's stock.

ValueAct seemingly acquired the majority of their position around $32 per share and FOX currently trades under $27.

For more on ValueAct, we also highlighted their recent investment in Rolls Royce.

Per Google Finance, 21st Century Fox is "a global media and entertainment company. The Company’s Cable Network Programming segment consists of the production and licensing of programming distributed primarily through cable television systems, direct broadcast satellite operators, telecommunication companies and online video distributors. The Television segment consists of the broadcasting of network programming in the United States and the operation of 28 full power broadcast television stations, including 10 duopolies, in the United States. The Filmed Entertainment segment consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide, and the production and licensing of television programming worldwide. The Direct Broadcast Satellite Television consists of the distribution of programming services via satellite, cable, and broadband directly to subscribers in Italy, Germany and Austria."

Be sure to also check out Mason Morfit on ValueAct's approach.

ValueAct Capital Reduces Valeant Pharmaceuticals Stake

Jeff Ubben's activist investment firm ValueAct Capital today released a statement indicating that they've reduced their Valeant Pharmaceuticals (VRX) position:

"ValueAct Capital Management, L.P. announced today that it has sold 4.2 million shares of Valeant Pharmaceuticals International, Inc. (NYSE: VRX; TSX: VRX) in brokers' transactions on the NYSE.  ValueAct Capital's CEO Jeffrey W. Ubben said: "Mike Pearson and the Valeant team's exceptional performance have once again caused our investment in Valeant to grow in value to well above 20% of our funds' assets, and we are again compelled to reduce our position to rebalance our overall portfolio.  We have owned Valeant shares for over nine years and have sold shares on three previous occasions for the same portfolio management purposes. After this sale, our investment in Valeant will continue to be well in excess of $3.0bn and will be one of the largest investments in our funds. I look forward to continuing to work with Mike and my fellow members of the Board of Directors."

After the sale, ValueAct should still own over 15.1 million shares.  ValueAct was instrumental in bringing Pearson on board as CEO and has benefited greatly.  This has been a consensus hedge fund favorite stock for some time, with Bill Ackman acquiring a VRX stake recently as well.

Valeant also announced a new CFO, Robert Rosiello.  He's a former McKinsey M&A executive and should fit right in given Valeant's acquisitive strategy (Pearson also used to previously work at McKinsey).


Where Does ValueAct Allocate The Proceeds?

The question now becomes: where does ValueAct put this freed up capital to work?  While they could always initiate a new position, or keep it in cash for the time being, it also wouldn't be surprising to see it allocated to some of their existing stakes given where shares of some of these companies currently trade.

The first option is 21st Century Fox (FOX).  They've previously purchased shares numerous times when trading at $32.50 or below and FOX is currently hovering close to those levels.  ValueAct just added to their FOX position in late May and could look to make it even larger after accumulating their position over numerous quarters.  They also just filed an amended 13D on Fox today which shows that their ownership stake is in an LP named Volpe Velox, which is Latin for 'quick fox.'  ValueAct currently owns over 43.5 million shares of FOX, or 5.5% of the company.

CNBC's David Faber today reported that Rupert Murdoch is set to step down as CEO (but retain his role as Executive Chairman) and son James Murdoch will take the helm, with brother Lachlan Murdoch assisting.  It's unclear if this reorganization would occur this year or next and the company's board is set to review succession plans soon.

Faber also notes that COO Chase Carey is supposedly stepping down from his role as well.  There seems to be some uncertainty as to the timing though it's possible Carey will remain with the company in an advisory role.  Some investors will be dismayed by Carey's potential departure or reduction in role.  Others could view it as a potential opportunity for FOX to bid for Time Warner (TWX) again in the future.  With ValueAct's activist involvement behind the scenes here, it will be interesting to see what's next for the company.

Another place ValueAct could allocate their VRX proceeds is to Halliburton (HAL) / Baker Hughes (BHI).  They were out accumulating shares of both during the first quarter and their exposure to both combined was almost $3 billion as of the end of Q1.  Both shares are trading higher than levels in Q1 though, as ValueAct looks for the companies to combine.

A third option for Ubben's firm is Precision Castparts (PCP).  As our Hedge Fund Wisdom newsletter highlighted, ValueAct initiated a brand new stake in the company during the first quarter.  While this position is much smaller than their others, PCP shares are still currently trading around levels where Ubben's firm could have been buying in Q1.  So they could easily ratchet up their stake around similar prices now.  Not to mention, numerous other prominent investors were buying PCP in Q1, including Berkshire Hathaway, Third Point, Farallon Capital and more.

Another potential option is shares of WESCO (WCC).  ValueAct initiated a small position in the company during the first quarter.  However, shares are trading slightly higher than Q1 levels now.

While the above seem like the most likely to garner incremental capital, ValueAct also owned stakes in the following companies as of the end of Q1 (in descending order of position size): Microsoft (MSFT), CBRE (CBG), Adobe (ADBE), Motorola Solutions (MSI), Willis Group (WSH), Agrium (AGU), Allison Transmission (ALSN), MSCI (MSCI), and Armstrong Worldwide (AWI).

For more on ValueAct, be sure to check out partner Mason Morfit on ValueAct's approach and Microsoft.

ValueAct Capital Increases 21st Century Fox Stake

Jeff Ubben's activist investment firm ValueAct Capital has filed a 13D with the SEC regarding its stake in 21st Century Fox (FOX).  Per the filing, ValueAct now owns 5.5% of the company with over 43.5 million shares.

The filing indicates that ValueAct were out buying the voting share class of FOX on a few days in April and throughout early May.  In total, they purchased over 12.1 additional shares since the end of the first quarter.  The common theme among the purchases is the price: around $32.xx. 

This is notable because this is the second time ValueAct has purchased around these levels, after originally starting their stake in the second quarter of 2014 and then ramping up their stake the following quarter.

Fox shares have largely traded sideways, with ValueAct stepping in to buy when shares have traded below $33 or so.

For more from this fund, check out partner Mason Morfit on their Microsoft position.

Per Google Finance, 21st Century Fox is "a global media and entertainment company. The Company’s Cable Network Programming segment consists of the production and licensing of programming distributed primarily through cable television systems, direct broadcast satellite operators, telecommunication companies and online video distributors. The Television segment consists of the broadcasting of network programming in the United States and the operation of 28 full power broadcast television stations, including 10 duopolies, in the United States."

ValueAct Capital Takes 21st Century Fox Stake

CNBC's David Faber this morning reported that Jeff Ubben's activist firm ValueAct Capital has taken a stake in 21st Century Fox (FOXA).

Faber reports they have a $1 billion stake in the company and built the position while FOX had submitted a bid for Time Warner (TWX).  During that time, FOX shares noticeably declined.

He also reports that Ubben likes the company's standalone plan as they decided to walk away from the deal, though sees the logical advantages of a tie-up should that happen in the future.  Ubben thinks FOX can earn $2.50 per share in 2016.

Embedded below is the video of Faber's report with the details:

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For more on this firm, head to some of ValueAct's recent portfolio activity here.