November 8, 2014 — An interesting legal decision this past week in California affecting the pharmaceutical industry may have a bearing on the future of CDK Global, Autobytel and other automotive retail vendors that are dealing with activist investors.
A judge ruled on Tuesday that activist investor Bill Ackman can vote all of his shares at a shareholder meeting in December for botox maker Allergen. An article on Fortune.com, Did Bill Ackman Just Kill the Poison Pill? details Ackman’s hostile takeover attempt of Allergen with Valeant, another pharmaceutical company.
The decision apparently nullifies Allergen’s poison pill, a tactic used by companies to prevent hostile takeovers and could affect the poison pill strategies of other companies. The article also addresses the waning effectiveness of the poison pill strategy.
Meanwhile, Autobytel, which turned in strong third quarter results earlier this week, is dealing with its own activist investor, Ancora Advisors who is trying to force the board to sell the company. Autobytel has a poison pill in place — its Tax Benefit Preservation Plan — that limits the amount of stock investors such as Ancora can acquire.
The newly publicly traded CDK Global, formerly ADP’s Dealer Services Group, is also tied loosely to Ackman. Sachem Capital, an investment firm, last month acquired 9.7% of CDK shares while sending a letter to its board offering to help management improve operations. It’s not clear whether CDK has a poison pill in place. For now, Sachem’s overtures appear to be “friendly” with no indications the firm has designs on a hostile takeover. But….
Sachem Capital was founded by Scott Ferguson in late 2012, who then raised more than $800 million in less than four months in 2013. Today, the fund manages a portfolio of $2 billion. Prior to starting Sachem (named for his boyhood Connecticut home) Ferguson spent nine years with Bill Ackman at Pershing Square Capital Management. Ferguson and Ackman are still close and work together on various investments.