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Is That You, Bobby Axelrod? Pop Culture Proxy Fights

John Jannarone

Damian Lewis Plays Bobby Axelrod in Showtime’s Billions

By Dan McDermott

In the 1987 film “Wall Street”, Michael Douglas’ character Gordon Gekko gave the famous “Greed is Good” speech during a hostile takeover of his target, Teldar Paper. This scene is arguably still the most well-known portrayal of an activist shareholder. Recently, however, shareholder activism has returned in dramatic fashion to Billions on ViacomCBS Inc.’s Showtime and Succession on AT&T Inc.’s HBO. Both hit shows depict hostile takeovers/proxy fights as central themes. Viewers might wonder: Does this kind of thing really happen? And, if so, how accurate are the shows’ respective depictions of events?

Starting with Billions, Bobby Axelrod (see Steve Cohen of S.A.C. Capital/Point 72 capital for the character’s inspiration), played by Damian Lewis, wages two proxy fights during the course of the series. In Season 1, Axelrod wages a proxy fight at Yumtime (see Hostess Brands for likeness). In Season 4, Axe wages another proxy fight at Saler’s (see Sears) with private equity investor/love interest Rebecca Cantu played by Nina Arianda. Let us focus on Axelrod’s engagement with Yumtime, which shares the most real-life similarities with an actual proxy contest.

Companies often become vulnerable to activist hedge funds through sustained underperformance. In particular, lower stock price returns versus a group of peer companies can invite an activist hedge fund – like Axe Capital – to make an argument that change is necessary at the company’s Board of Directors, C-level management or both to turn the company around. In the case of Yumtime, Axe demonstrates that the dessert-pastry company had delivered poor performance for shareholders and offers a solution to turn the company around:

Bobby Axelrod’s Criticisms of Yumtime

  • Yumtime’s profits declined over 8 years
  • Declining profits linked management’s decision to use cheaper synthetic sugar in pastries rather regular sugar as a key ingredient
  • The use of synthetic sugar hurts the quality of the product, impairing the taste, resulting in declining sales
  • During the period of declining sales, CEO’s compensation package ballooned over 300% including excessive perquisites like using company jet for personal travel
  • CEO tenure coincides with prolonged period of underperformance; therefore he is responsible and should be held accountable

Bobby Axelrod’s Solution to Improve Performance

  • Replace synthetic sugar with normal sugar and improve product quality/taste
  • Fire CEO and members of the Board of Directors responsible for poor performance
  • Eliminate excessive executive compensation and reinvest into the business

Similar to a tactic used by many real life activists, Axe Capital builds up a 4.9% stake in the company, staying below the SEC’s 13D 5% filing requirement. With that position, he gets a meeting with the Board where he tells the Board that management has tampered with its recipes to help profits but the changes hurt the product (see Darden Restaurants, Inc.’s Olive Garden/Starboard) and he talks about increasing his position during the meeting. Axe is accused of being short-term focused, trying to drive up the share price and sell without concern for long-term shareholders. As with most plotlines in Billions, Bobby Axelrod gets what he wants, obtaining a few board seats at Yumtime so he can deliver his turnaround plan.

Alternatively, in HBO’s Succession, Logan Roy, played by Brian Cox, demonstrates the length a company will go in order to fend off hostile takeovers and proxy fights.

Succession portrays Logan Roy (character inspired by the life of Rupert Murdoch) as the CEO of Waystar-Royco, a media and entertainment conglomerate, who is also the patriarch of the Roy family.  When Logan’s son and heir-apparent, Kendall Roy, played by Jeremy Strong, is turned down by his father to be promoted for the top job, Kendall goes behind his father’s back and decides to launch a hostile takeover for Waystar-Royco with a private-equity backed media competitor.

Like Axelrod in Billions, Kendall Roy also has an activist thesis: purchase Waystar-Royco, eliminate or divest Waystar-Royco’s underperforming businesses, reinvest cash into top-performing businesses and replace management (Kendall to replace his father Logan as CEO).

After the hostile takeover is launched, Logan Roy goes to great lengths to fend off the attack, mimicing many real-life scenarios. These measures include: engaging a PR firm, hiring a proxy solicitor, and an investment bank to form a defense team; attempting to purchase a competing media company, PGM, making the combined Waystar-Royco/PGM too expensive for a hostile takeover; persuading a “white knight” in the form of a middle-eastern trillionaire to buy Waystar-Royco, ending the dispute with a more friendly transaction; hitting the road to woo large shareholders; offering a settlement for board representation; and, of course, plenty of threats and drama.

Overall, both Billions and Succession accurately depict the tactics, strategies and personalities we see in real-life hostile takeovers and proxy fights. While there may be some expected dramatic effect, there are plenty of actual inspirations for a dramatic confrontation (for example, Elliott Management’s hostile attempts at Arconic and Athenahealth). It’s very sensible that both HBO and Showtime would use shareholder activism as major plotlines for their hit shows. It would be difficult to find a sexier inspiration in corporate finance.

Dan McDermott is a SVP at ICR Inc., a leading corporate communications firm. Dan provides shareholder activism defense advisory services for ICR’s corporate clients.

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