| Richard (Mick) McGuire III, Marcato Capital Management (Bloomberg) |
Richard (Mick) McGuire III has been a busy man of late.
Earlier this week the founder of San Francisco–based activist hedge fund firm Marcato Capital Management took a victory lap, unloading his entire stake of more than 3.1 million shares in Life Time Fitness after the high-end health club chain agreed to be taken private by Leonard Green & Partners and TPG in a buyout deal worth more than $4 billion. This week McGuire applied further pressure to Sotheby’s in a bid to legally force the auction house to publicly disclose certain documents from earlier legal proceedings involving another activist hedge fund firm, Daniel Loeb’s New York–based Third Point. And last week Marcato turned up the heat on BNY Mellon, publishing a 153-slide presentation and a letter calling for the ouster of the banking giant’s chief executive officer and laying out a comprehensive restructuring plan.
While the boards and executives of Sotheby’s and BNY Mellon — as well as many on Wall Street — await McGuire’s next move, Marcato investors are being rewarded. In February the firm’s Marcato International fund posted a hefty 8.8 percent gain, putting it back in positive territory by about 2.4 percent for the year. Last month’s performance beat Marcato’s gain of 5.3 percent or so for all of 2014.
McGuire founded Marcato in 2010 after working at William Ackman’s Pershing Square Capital Management, where he was a partner from 2005 to 2009. While at Pershing Square, McGuire served as the nonexecutive chairman of Borders Group from January 2009 to May 2010. In 2011, Borders filed for bankruptcy and liquidated.
Marcato began buying shares of Life Time nearly a year ago and continued to load up on the stock until May 20. However, the firm did not disclose its stake until a week or so after its first-quarter 13F filing was due.
In September, McGuire fired off a letter to Life Time calling on it to spin off its real estate into a real estate investment trust, asserting that the stock could be worth $70 per share. Sure enough, the investor group buying Life Time is paying $72.10 per share.
Marcato unloaded its stake at $70.57. It now has $220 million to invest, or 7 percent of its $3 billion U.S. equity portfolio at year-end.
Sotheby’s is a longer project. McGuire was stirring things up as a Sotheby’s investor before Loeb launched his proxy fight last year. On May 4, 2014, Sotheby’s expanded the number of directors on its board by three, adding Loeb and two others to the board.
In November, Sotheby’s disclosed that it reimbursed Third Point $10 million for its activist campaign.
Investors are now wondering what company Marcato will target next. Will it be one of its nine remaining disclosed holdings at year-end? A currently undisclosed holding? A new target?
One thing is for sure: We probably won’t have to wait long to learn what it is.
