American Capital Ltd. (NASDAQ:ACAS), the asset management firm targeted by activist Elliott Management Corp., intends to commence a full strategic review of all optionsincluding a sale. The company has established a committee of 4 board members and is functioningtogether with advisers at Credit Suisse Group AG and Goldman Sachs & Co. to evaluate options for enhancing shareholder value, including the sale of firm or its many business lines.
American Capital Ltd. (NASDAQ:ACAS) increased its share buyback program to $1 billion, up from initially announced share buyback plan of $600 million. Elliott on November 16, 2015 announced a new 8.4% stake in American Capital and commenced a proxy campaign requesting shareholders to oppose the strategy to spin out BDC assets including an online site. The activist stated that the spin out of BDC assets would pose threat to valuable assets. He added that the move will serve to root management and considerably limit possibilities for any stockholder value creation in future.
Elliott criticized American Capital’s management for excessive overhead expenses, poor capital deployment, and the Board of Directors for compensating poor performance and lacking expertise.It called for cost cuts, an evaluation of portfolio and capital allocation, new directors and a strategic review. By November 19, 2015 American Capital Ltd. (NASDAQ:ACAS) included Director David G. Richards to its board, increasing board strength to 10 members.
Elliott, which manages nearly$27 billion, has concentrated most of the U.S. activist campaigns on hardware technology and enterprise software firms. The New York-based company has rarely expanded into other industries, including an investment in sporting-goods retailer Cabela’s Inc and metals group Alcoa Inc.Most investors tend to believe that asset managers and hedge funds are worthless, as they fail to outperform even simple index fund portfolios. However, the fact is that hedge funds are mostly partially hedged and aim at fetching impressive risk-adjusted returns.