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A major proxy voting agency that advises institutional investors whether to support activist hedge fund managers and their proxy contests may soon be sold to a Canadian pension fund that employs insurgency tactics on its own. The Ontario Teachers’ Pension Plan’s Private Capital unit is reportedly leading the bidding for Glass, Lewis & Co. LLC, the troubled proxy advisory firm controlled by China-based Xinhua Finance Ltd. OTPP is no stranger to activism. The Toronto-based pension fund’s Relationship Investing division manages roughly C$5 billion ($5 billion) in equity investments, buys large minority stakes and actively engages companies typically in a collaborative, behind-the-scenes manner. Trouble for Glass Lewis began earlier this year after defections of key employees and two shareholder lawsuits sent its stock diving. Some employees and institutional investors complained privately that the proxy advisory company did not disclose in a timely manner that Shanghai-based Xinhua had bought a stake in the company last year.
Ontario Teachers' is not the only bidder. RiskMetrics Group, the parent of rival proxy advisory firm Institutional Shareholder Services Inc., is also in the bidding, sources say. However, an acquisition by RiskMetrics could raise antitrust problems in Washington because a combined ISS-Glass Lewis would control a significant portion of the proxy advisory services industry. Other proxy advisory firms include Proxy Governance Inc., Egan-Jones Proxy Services and Taft-Hartley Advisory Services. Glass Lewis and other advisory firms provide recommendations to institutional investors about a number of issues related to insurgents, including whether to support an activist hedge fund manager’s dissident slate of directors or whether to back a shareholder’s campaign to seek a greater bid for a transaction or not. —Ron Orol See related story from Financial Week (subscription may be required) Ron Orol is a reporter for The Deal and author of Extreme Value Investing: How Activist Hedge Fund Managers Are Taking on the World. Tags: deals, m&a, mergers, hedge funds Categories Deal Video
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