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Manulife Financial headquarters in Toronto in August, 2012.Galit Rodan/The Globe and Mail

On Monday, the chief financial officer of Manulife Financial Corp. was asked point blank whether he dreaded "getting the call?" No, not a call from a telemarketer at dinner time. This kind of call: "Oh, hi there. This is Bill Ackman with Pershing Square Capital Management. Here's the deal. We're about to declare publicly that we own five per cent of your company. We have some new ideas about how Manulife should be run from now on. If you don't give these ideas serious consideration, we'll get a proxy fight going and things might get, um, how should I put this… messy."

Steve Roder said he wasn't afraid of getting such a call, because it's unlikely such a call would be made in the first place. The Manulife CFO's rationale: There is nothing ground breaking that an activist could bring to the table, that hasn't already been considered at Manulife. He was participating in a panel discussion called "Competing for Capital: Redefining Strategies for Growth" as part of the The International Economic Forum of the Americas held Monday in Toronto.

Mr. Roder says he speaks to 300 different shareholders a year, and hears many different perspectives. When a key shareholder proposes a change in strategy – an acquisition, or what have you – if the move makes sense, he takes it into consideration. With such a deluge in information available, it's unlikely that an activist will propose something revolutionary. He added that the strength of Manulife's "independent, smart" board of directors ensures that management isn't likely to miss anything.

Michael Dolan, chief executive of Bacardi Ltd. also answered the "what if you got the dreaded call" question? He agreed that "getting out and engaging with shareholders" is a great defense mechanism against activists. He argued that the ultimate shield (think Braveheart stuff here) though is being a well managed company. i.e. if you are run well enough, the activist will have nothing to fix, and won't show up.

But Trevor Norwitz, partner at Wall Street law firm Wachtell, Lipton, Rosen & Katz, wasn't convinced by this argument. He argued that a company could be firing on all cylinders, and still be the target of unwanted advances by an activist, or as he terms them, "bomb throwers." He and his firm have decades of experience defending companies against hostile takeovers. His colleague, Martin Lipton, pioneered the "poison pill" shareholder rights plan mechanism in 1982. Mr. Norwitz pointed out that even the best run companies are potential targets. e.g. Apple Inc. being targeted by Carl Icahn.

Mr. Norwitz says we are likely to see an uptick in activism over the coming years. The record-low levels of debt that American companies are carrying, and the huge amounts of cash many firms are hoarding on their balance sheets, means the "bomb throwers" have myriad potential targets in their sights. And don't think for a second that Canada will be immune. Just last week, Agrium Inc. revealed it had been targeted by an activist investor for the second time in four years. This time it was ValueAct Capital, a San Francisco-based activist investment fund that revealed it has an $850-million stake in Agrium. The "dreaded calls" are likely to keep coming. But will companies be ready to pick up the phone?

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
AAPL-Q
Apple Inc
-1.06%171.48
C-N
Citigroup Inc
+0.78%63.24
FC-N
Franklin Covey Company
+2.51%39.26
MFC-N
Manulife Financial Corp
+1.34%24.99
MFC-T
Manulife Fin
+1.2%33.83

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