Proxy Advisors Back Hedge Funds . . . Or Not

Date: Thursday, May 21, 2009
Author: Paula Schaap, HedgeFund.net

With corporate annual meetings almost upon us, proxy advisory firms are busy issuing their support to one side or another in company proxy fights with activist hedge funds.

In the proxy fight between Amylin Pharmaceuticals Inc. (NASDAQ: AMLN) on one side, and activists Carl Icahn and Eastbourne Capital Management on the other, the hedge fund managers have won the day, at least when it comes to gaining the backing of proxy advisors. RiskMetrics Group, Glass Lewis & Co and PROXY Governance have all backed the hedge fund nominees, according to regulatory filings.

If Icahn and Eastbourne Capital are successful, they may be in a position to pressure Amylin into a sale of the company.

Over at the proxy fight between William Ackman’s Pershing Square Capital Management against Target Inc. (NYSE: TGT), however, the results have not been as clear-cut.

PROXY Governance gave the thumbs-up to Ackman’s slate. Although proxy advisor Egan-Jones said that it wasn’t persuaded by Ackman’s proposal that Target spin off its real estate into a real estate investment trust, it also said shareholders shouldn’t vote for two of Target’s nominees because of independence concerns.

On Tuesday, proxy advisor Glass Lewis threw its weight behind Target’s board nominees saying that investors should be concerned because Ackman had changed his strategy in instituting a proxy fight once Target had rejected his real estate proposal.