John Pike had his goal in his sights. The Elliott Administration accomplice was going through off towards the chief government of Phillips 66, the oil and fuel large during which he had constructed a $2.5bn stake, throughout a Manhattan assembly room.
Over the course of an hour, the Texan firm and its legion of defence advisers had a remaining probability to barter a truce with the world’s most feared activist hedge fund and avert the kind of costly proxy battle for which Pike was turning into recognized. They failed.
Inside 24 hours Elliott had launched one of the aggressive activist campaigns the vitality sector had seen in years with a full-blown proxy battle for 4 seats on Phillips 66’s board, nominating a slate of latest administrators.
The battle underlines how at the same time as rivals have switched to behind-the- scenes lobbying and Elliott itself has softened its model, Pike embodies the hedge fund’s “previous aggressive model”, in response to former colleagues.
The agency’s campaigns had develop into more and more “corporatised and mature”, mentioned one other one that has come up towards Elliott a number of occasions. However despite the fact that it emphasised its collegial nature, Pike’s method stood out, they mentioned, calling him “a lone wolf within Elliott who desires to do issues a special approach”.
Underneath Pike, Elliott has taken a collection of high-profile vitality positions in current months, searching for to information the course of blue-chip firms from BP within the UK to RWE in Germany — in addition to at Phillips 66 within the US.
“Should you take a look at essentially the most fascinating campaigns Elliott is working proper now, they’re all his,” mentioned one other one that has handled Pike in plenty of conditions.
To those that have labored with him, Pike is taken into account considered one of Elliott’s shrewdest traders.
A 22-year Elliott veteran, Pike oversees “world situational groups” with particular experience in vitality — in addition to utilities, transportation, mining and insurance coverage — and have become an fairness accomplice in 2022. Final yr, he ascended to its highly effective 12-person administration committee.
A university basketball participant who grew up in southern California and later graduated from Yale Legislation Faculty, Pike’s manner is calm and deliberate. He retains a low profile: the one picture of him on-line is from his nomination to the Phillips 66 board.
“It’s not onerous to alter John’s thoughts, you simply should be proper,” mentioned Quentin Koffey, who labored with Pike for seven years earlier than leaving Elliott and later organising his personal activist fund, Politan Capital Administration. “He responds to well-reasoned evaluation, and is neither provoked nor swayed by shallow marketing campaign rhetoric or advert hominem assaults.”
His funding report factors to a extra ruthless model.
Since Pike first picked a battle with US oil and fuel group Hess in 2013, Elliott has invested at the least $21.6bn in publicly traded vitality firms, in response to evaluation by the Monetary Occasions and information supplier Def 14 Inc.
Three of the 4 campaigns focusing on main US companies during which Elliott has gone as far as to mail proxy supplies to shareholders have been led by Pike. Since his battle with Hess, Pike has received 13 board seats throughout 5 firms within the vitality sector alone.
Elliott’s vitality campaigns are linked by a standard thread: the break-up of huge vitality conglomerates to refocus them on their core competencies. It routinely requires asset divestments, because it did at Hess, Suncor Vitality and Marathon Petroleum.
However one other hyperlink is the agency’s opposition to conventional vitality firms proudly owning renewable companies.
Elliott has run one marketing campaign the place it supported larger renewables deployment, at an organization referred to as Evergy in 2020. The development has been within the different course, nonetheless.
At NRG Vitality and BP, the activist has pushed for the offloading of renewable companies — strikes that align with the political leanings of Elliott’s founder, Paul Singer, in response to individuals who know him. Others insist the campaigns don’t have anything to do with private politics.
One former Elliott worker mentioned: “They consider the vitality transition . . . is dear and time-consuming.” A current letter to traders mentioned the “internet zero” agenda imposed “huge prices” and acted as a “drag on progress”.
Till lately, this view went towards the prevailing wind, the place huge fund managers inspired oil majors to push additional into renewables and cut back carbon emissions.
However since Elliott’s massive stake in BP turned public in February, the UK oil main has already modified course. Its chair Helge Lund has introduced plans to step down, the corporate has pledged to hurry up its pivot away from renewables, and it has fast-tracked $20bn of asset divestments. It has additionally promised to extend funding in oil and fuel by 25 per cent.
Elliott desires extra. Earlier this week, the hedge fund upped its stake previous 5 per cent, and has advised the UK vitality firm that it desires it to spice up free money circulate to $20bn by 2027 by extra aggressively controlling prices and capital expenditure, in response to folks accustomed to discussions.
Altering the course of the roughly £57bn oil main might be no imply feat.
“In Europe, board modifications are far more tough,” mentioned Christopher Kuplent, an analyst at Financial institution of America. “And when you take a look at the campaigns the place [Elliott] haven’t been capable of impact board modifications, they’ve failed.”
“BP is the lowest-quality supermajor oil firm . . . there is no such thing as a fast repair,” mentioned Per Lekander, managing accomplice at hedge fund Clear Vitality Transition.
Again at Phillips 66, Elliott’s 17-month marketing campaign is reaching a denouement.
Until one facet blinks, shareholders will subsequent month select between the 4 administrators proposed by Elliott and those put up by Phillips 66 in a full-blown proxy vote: a Rubicon that Elliott has by no means crossed towards a significant US company. Phillips 66 this week raised the stakes with a letter to shareholders accusing Elliott of being conflicted as a consequence of its pursuit of a rival, Citgo.
Success for Elliott will increase the probability of asset gross sales, together with the corporate’s midstream enterprise and its chemical compounds three way partnership with Chevron, in addition to a shake-up of the administration staff.
Phillips 66 has been Pike’s most flamable marketing campaign since he took on Hess, his maiden marketing campaign within the vitality sector that settled simply hours earlier than a shareholder vote.
Though Elliott went quiet on Hess after only a yr, the investor held on to its place there for one of the best a part of a decade earlier than lastly cashing out.
Taking the battle to Phillips 66 and BP might require the identical persistence.
Wealthy Kruger, who was put in as Suncor Vitality’s chief government in 2023, a yr after Elliott took a stake, mentioned the activist generally gave voice to what different traders had been pondering.
Suncor’s shares gained as a lot as 41 per cent from when the activist first unveiled its calls for in April 2022 and their excessive in November final yr.
“I’ve had a variety of hallelujahs from my long-term shareholders about Elliott’s technique,” he mentioned. “Possibly they’re a bit bit extra affected person and fewer aggressive than Elliott, however I feel they appear for a similar outcomes.”
Extra reporting by Tom Wilson. Knowledge visualisation by Louis Ashworth.
