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-   -   "One of United Continentalís Largest Shareholders Declares Activist Position" (https://www.flyertalk.com/forum/united-airlines-mileageplus/1742120-one-united-continental-s-largest-shareholders-declares-activist-position.html)

nunusguy Jan 27, 16 7:48 am

"One of United Continentalís Largest Shareholders Declares Activist Position"
 
One of the largest investors in United Continental Holdings Inc. formally declared an activist position in the airline and said it has held discussions with another hedge fund about the carrier.

Altimeter Capital LLC said earlier this month that it was seeking to take a more active role with its investment in United. That statement came amid concern from some investors about Unitedís handling of a heart attack suffered by new Chief Executive Oscar Munoz soon he assumed the position last October, and a heart transplant that followed this monthóboth of which fueled uncertainty as the carrier pursued an operational turnaround and multiple new labor deals.

In a regulatory filing Tuesday, Altimeter disclosed a 3.1% stake in United and said it has engaged in discussions with fellow United shareholders about various aspects of Unitedís strategic direction. Altimeter said specifically that it talked to PAR Investment Partners about that fundís ďstrategies to enhance shareholder valueĒ at United.
http://www.wsj.com/articles/two-unit...kes-1453847880

mkr Jan 27, 16 7:55 am

I was just about to start a thread on this. I wonder how much clout they will have with the Board, and will they have enough influence to change the new direction under Oscar?

This article is pay walled. Can someone post another link?

fly18725 Jan 27, 16 8:01 am


Originally Posted by mkr (Post 26088751)
I was just about to start a thread on this. I wonder how much clout they will have with the Board, and will they have enough influence to change the new direction under Oscar?

This article is pay walled. Can someone post another link?

Try googling the title. There's not much more substance to the article.

mkr Jan 27, 16 8:10 am

While Googling for the WSJ article, I found an article in Morningstar that goes into more discussion. I do not have time to add the link.

Would someone else kindly do so?

ndhapple Jan 27, 16 8:11 am

Why now?!? These guys apparently didn't have much a problem with $MI/J underperforming the industry massively for half a decade.

And "strategic alternatives" is usually Wall Street language for mergers and acquisitions, but with who? Delta, American and Southwest would have no interest. Virgin America, JetBlue and Alaska would all result in anti-trust lawsuits.

nunusguy Jan 27, 16 8:30 am


Originally Posted by ndhapple (Post 26088839)
Why now?!? These guys apparently didn't have much a problem with $MI/J underperforming the industry massively for half a decade.

And "strategic alternatives" is usually Wall Street language for mergers and acquisitions, but with who? Delta, American and Southwest would have no interest. Virgin America, JetBlue and Alaska would all result in anti-trust lawsuits.

If the gigantic UAL/CAL and AA/United-Airways combos didn't provoke an anti-trust response from the Feds, why would it if it involved much smaller carriers like JB or Alaskan ?

USHPNWDLUA Jan 27, 16 9:15 am


Originally Posted by ndhapple (Post 26088839)
Why now?!? These guys apparently didn't have much a problem with $MI/J underperforming the industry massively for half a decade.

And "strategic alternatives" is usually Wall Street language for mergers and acquisitions, but with who? Delta, American and Southwest would have no interest. Virgin America, JetBlue and Alaska would all result in anti-trust lawsuits.

Exactly. This is just what the airline needs. /s

In addition to all the so-far positive changes, another team of short-term-profits-first for the hedge, claiming to make it better, but only in stock price for the hedge, jump in to armchair quarterback. Great.

Would be interesting to know when the stake was acquired. Post Smi/J or pre?

EWR764 Jan 27, 16 9:26 am

An activist investor movement at UAL would not be a good thing for frequent flyers. I suspect this has less to do with the fact that the company is underperforming DL in operational and revenue metrics and more to do with the sentiment that United appears to be pulling back from its stance on returning capital to its investors through stock buybacks and a long-term dividend ... though all these factors are tangentially related, to be sure.

I think Hunter Keay's exchange with Oscar offers a great deal of insight into the position the activist investors likely hold:


Okay. Yes. I know, Oscar, I am glad you are here because you do have a bit of a reputation of being a capital deployer, so I think it would be helpful for everybody, including your owners, who have been sweating out a pretty difficult year. It’s very hard to buy an airline stock. It is very hard to do that I mean as an investor. And a lot of your owners feel like it’s kind of been sort of hung out to dry a little bit. So I think you would go a long way Oscar if you would commit that barring any sort of major change in the environment, which is I think an easy enough for you to make right here on this call to come out and say barring no major changes in the economy or anything like that exogenous that we will spend more buying back stock than we will on capital spending this year, I think that would go a long way if you would be willing to make that commitment here today?
During the call, Oscar did not take the bait, which I think raised a few eyebrows -- and the ire -- of investors who now feel threatened by the prospect of UAL dialing back its momentum of returning capital to shareholders and instead (possibly) deploying more back into the enterprise.

It will be an interesting fight to watch.

entropy Jan 27, 16 9:27 am

I don't think Strategic Alternatives means M&A at this point in time for UA... but it could (and should) mean a shakeup of the audacious, unmitigated incompetence and disengagement on the part of the board. This is the board that let $misek ruin the most golden merger opportunity of the last 20 years: 2 airlines with revenue premiums, loyal customers and complementary far-reaching networks. They should have ditched him long before the NJ scandal. They clearly had nobody lined up to lead, and apparently are still short on permanent hires on a huge chunk of the C-suite.

I don't think anyone on the board appreciated how bad United had become, they were just there to collect their check, warm a seat and rubber stamp the continued ongoing mismanagement plan

walkerci Jan 27, 16 10:13 am

Robert Crandall quote...
 
"I've never invested in any airline. I'm an airline manager. I don't invest in airlines. And I always said to the employees of American, 'This is not an appropriate investment. It's a great place to work and it's a great company that does important work. But airlines are not an investment.'"

Robert Crandall

kop84 Jan 27, 16 11:48 am


Originally Posted by EWR764 (Post 26089262)
An activist investor movement at UAL would not be a good thing for frequent flyers.

Oh come one. "Hedge funds always make the pro-consumer, long term strategic moves that help strengthen brands and the economy as a whole even if the current stock price takes a small dip." -- Nobody Ever

milepig Jan 27, 16 11:57 am


Originally Posted by mkr (Post 26088827)
While Googling for the WSJ article, I found an article in Morningstar that goes into more discussion. I do not have time to add the link.

Would someone else kindly do so?

8 seconds:

http://www.morningstar.com/news/dow-...ist-stake.html

channa Jan 27, 16 12:11 pm


Originally Posted by ndhapple (Post 26088839)
Why now?!? These guys apparently didn't have much a problem with $MI/J underperforming the industry massively for half a decade.

Remember that Oscar represents a significant change to what United Continental's investors were told for the past several years.

While many of us believe that Smisek's strategies were doomed, it's not clear that the United Continental shareholders believed the same. It's very likely, as evidenced by this, that there is some discontent among them, and they do not agree with the new direction that Oscar is going down.

Especially after Hunter Keay's comment the other day, it's clear that many of them want cash out from United Continental Holdings rather than long-term growth and performance of UAL.

EWR764 Jan 27, 16 12:13 pm


Originally Posted by kop84 (Post 26090116)
Oh come one. "Hedge funds always make the pro-consumer, long term strategic moves that help strengthen brands and the economy as a whole even if the current stock price takes a small dip." -- Nobody Ever

Yep... Carl Icahn, Frank Lorenzo and their ilk have done such wonderful things for their respective target companies...


Originally Posted by channa (Post 26090265)
Especially after Hunter Keay's comment the other day, it's clear that many of them want cash out from United Continental Holdings rather than long-term growth and performance of UAL.

Wall Street is not in airlines for the long term, and rightfully so, because the industry has been, historically, a giant incinerator of capital.

Now, for the first time, airlines like DAL are paying dividends or returning capital to investors by way of share buybacks (like UAL). In order to make UAL an attractive investment vs. DAL (or at least comparably so), the analyst community wants to see United divert more cash to shareholders to reward them for their investment, instead of putting more cash back into the operation by way of increased capital expenditure.

Wall Street today doesn't care about United of 2020, 2025 or beyond, and while United wants to be a viable entity going forward, it needs Wall Street in 2016. This is the "balance" Oscar is talking about.

worldwidedreamer Jan 27, 16 12:17 pm

I'm always upset as a stockholder when my investment falls, especially by 20 percent. At the same time CEO transitions are difficult, especially when the outgoing CEO had a shallow bench. Let's continue cutting Oscar some slack---at least until he turns to work.

In terms of strategic alternatives, DL bought and oil refinery and much of Virgin. LATAM has consolidated South America. Europe is now split between IAG/AFKLM/LH. ANA even bought a stake in Vietnam Airlines. United bought a stake in Azul, and I'd be surprised if Aeromar or Copa were not on the shortlist.

In a consolidating industry more corporate development activity will take place. For such a large player, it probably means buying more acreage rather than selling the farm. At the same time airlines have become so driven by selling credit cards that perhaps a PE deal or LBO might offer more opportunities to maximize alpha.


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