Elliott Management Corporation is a hedge fund founded by Paul Singer in 1977. The fund initially focused on convertible arbitrage strategies, but has since expanded its investments. Elliott has also engaged in activist strategies and invested significantly in sovereign wealth debt. The fund has around $27 billion in assets under management, as of 2015. Singer's net worth is approximately $2.1 billion.
Elliott Management Background
Paul Singer was born in New Jersey. He received his J.D. from Harvard Law School and began his career as a real estate attorney. He started Elliott Management with $1.3 million in 1977, initially handling convertible arbitrage strategies. The fund refocused on distressed debt investing after the stock market crash of 1987. It was involved with restructuring companies such as TWA, MCI and Enron.
Elliott took on more active investment strategies in 2003. The fund was involved with an activist campaign for German company Wella AG that year. In 2005, the fund opposed an offer to buy Shopko along with other hedge funds, though Elliott Management later bought Shopko.
Elliott Management has also been aggressive in collecting distressed debt. Singer has taken debtors to court to obtain payment on debt he purchased from third parties. For example, the fund bought the distressed debt of Vinashin, a Vietnamese ship builder, which Elliott took to court demanding full repayment. Elliott has also sought out debt owed by the governments of Peru, Congo and Argentina.
Activist Campaign Against Hess
Elliott’s largest position as of third-quarter 2015 is in Hess Corp. (NYSE: HES). The fund's portfolio weighting is 6.2% and it owns 17.8 million shares with an $891 million market value. Hess is a producer of natural gas and crude oil. Its market cap is $9.84 billion with a 2.64% dividend yield, as of late January 2016.
The fund initially announced the position in late 2012. Elliott said publicly that Hess lacked discipline and board accountability, which caused the company to overextend itself in the international market and lose out on the shale drilling revolution in North America. Elliott put forward its own board candidates and demanded the company divide into international oil exploration and domestic drilling companies.
Hess also took direct action to turn the business around. It sold assets, raised the dividend payment and started a stock buyback program. Despite Elliott's additional changes to board election provisions, the two parties were engaged in a proxy fight over board representation heading into the 2013 annual shareholder meeting. They ultimately agreed to elect three board members from Elliott and five directors from Hess' candidates. The deal was reached in the early morning, only hours before the annual meeting.
After the election, Hess began to follow Elliott’s recommendations. It sold off its gas stations and exited its refining business. However, shares have not performed well. The company’s stock has dropped close to 50% between April 2015 and January 2016. Hess has been hurt by lower prices for crude oil along with many other companies in the sector.
Position in Citrix
Elliott substantially increased its position in Citrix Systems, Inc. (NASDAQ: CTXS) during the third quarter of 2015. It bought an additional 4.3 million shares, bringing its total to 5.8 million shares with a $406 million market value. This represents a 1.96% ownership interest in the company.
Citrix is a market technology solutions designer and marketer. The company has two operating segments. The enterprise and services segment provides workspace services and mobile and delivery networking products. The mobility apps division provides communication cloud, documents cloud and workflow cloud computing products. The company has a $10.49 billion market cap with a 37.54 P/E ratio as of January 2016.
In June 2015, Elliott proposed changes to support Citrix's stock price. It recommended selling off noncore business segments, reducing product offerings, buying back shares and cutting costs. Elliott had employed significant resources when doing its due diligence on Citrix. It hired two investment banks, former tech executives and consultants to devise a restructuring plan for the company.
Citrix and Elliott agreed to work together in late July of 2015. Elliott got a seat on the board along with an agreement for another joint-elected independent director. Citrix also announced an operations committee to improve the company’s profitability.
Bid to Take CDK Global Private
Elliott has amassed a large position in CDK Global Inc. (NASDAQ: CDK), an automotive sales software provider. The fund owns 7.9 million shares with a $379 million market value, as of the third quarter of 2015. CDK Global's market cap is $6.9 billion with a 1.24% dividend yield, as of January 2016. The company listed $2.06 billion in revenues for 2015.
Elliott is looking to partner up with a private equity firm to take CDK Global private, according to news announced in September 2015. Sources state Elliott will invest new money in a potential leveraged buyout of the company. A leveraged buyout uses borrowed money to acquire a company. The acquired company's assets are often used as collateral for the borrowed money.
Elliott has sought leveraged company buyouts before. It made an offer to purchase Riverbed Technology in 2014, after which a private equity company bought Riverbed for $3.5 billion at an auction. Elliott may be hoping for another private equity firm to buy CDK Global in 2016.