VF Activist Engaged Capital Gets Surprise Support
Beware the activist investor is an old adage, but what if agitation could be exactly what a company needs?
Kelly Barbey wants to see VF Corp. directors Clarence Otis and Juliana Chugg replaced, and he thinks activist hedge fund Engaged Capital can help him accomplish that goal, according to a Reuters report, which said that Barbey’s view is his only and does not reflect those of his family who collectively hold a 15 percent stake in VF. Barbey is the great-grandson of John Barbey, who founded VF in 1899.
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VF did not respond to a request for comment. Neither Barbey nor other family members could be reached for comment.
Activist investors are often viewed by corporate boards as distractions because of tactics used to agitate for change. Corporate boards have a fiduciary obligation to listen to suggestions by an activist as they would any other shareholder. But sometimes things can get really nasty between the activist and the boards of the companies they target.
One example is the tit-for-tat squabble at Gildan Activewear between the Gildan board and institutional investor Browning West as each side jockeyed for position to gain the support of shareholders. But those trading of jabs also polarize the parties further when they really should be focused on reaching an agreement on a common goal, which is what’s best for the company.
So who is Engaged Capital?
The firm, based in Newport Beach, Calif., was founded in 2012 by Glenn Welling, who serves as principal and chief investment officer. It focuses its activist efforts on small and mid-cap public companies that are deemed undervalued. Investments often have a two- to five-year time horizon. Unlike activists who seem pushier, Welling’s constructive engagement approach appears somewhat low-key in comparison. But it’s one that’s just as effective, if not more so, than Engaged’s more boisterous activist counterparts.
And while the company over the years has had investments across multiple sectors, one of Engaged’s successful activist plays in retail was its ability to influence specialty apparel retailer Abercrombie & Fitch. Co. to improve its corporate governance. One move was to bring in Arthur Martinez in early 2014 as non-executive chairman, which resulted in the stripping of then CEO Michael Jeffries’ chairmanship and pushing him off the board. Martinez is best known as the CEO who led a turnaround of the former Sears, Roebuck & Co. retail chain in the 1990s.
But Engaged also pushed to have Jeffries, who held the CEO post since 1992, removed. Jeffries, who began his CEO tenure in 1992, left the retailer when he retired in December 2014. Towards the end of his tenure, Jeffries came under fire both for his stewardship of the company and for a series or public relations gaffes, including a statement in 2013 that the Abercrombie brand was only intended to be worn by “cool kids.”
In the case of VF Corp., Engaged took a stake in the apparel giant last October. It said The North Face, Vans, and Timberland owner should sell some of its real estate and look at options for assets beyond its biggest powerhouse brands, as well as shake up the board. The hedge fund also has said that VF underinvested in Vans, while former CEO Steve Rendle “pursued a risky M&A strategy” when it acquired streetwear brand Supreme in 2020 for $2.1 billion.
Engaged’s constructive engagement approach seems to be working. VF in November disclosed its Reinvent strategy, a plan to cuts costs including the elimination of 500 jobs. And last week VF said it was conducting a strategic review of non-core assets so it could pay down a crippling $1.7 billion debt load, of which $1 billion is due Dec. 30, 2024 and $700 million due on April 23, 2025.
