U.S. shareholder activism up in 2007-research firm

By Megan Davies

NEW YORK, Jan 8 (Reuters) - U.S. shareholders increasingly bared their teeth last year, with a 17 percent jump in the number of campaigns launched for corporate change, according to data from research firm FactSet SharkWatch.

The number of activist campaigns rose to 501 in 2007 from 429 the previous year, the firm said.

Those campaigns were either pushing for control at companies, or asking firms to boost shareholder value by putting themselves or their subsidiaries up for sale or by returning cash to shareholders.

The rise was mainly due to an increasing number of hedge funds, said John Laide, product manager of FactSet SharkWatch, which provides research on corporate activism and proxy fights to financial and legal clients.

"There are so many out there ... and they have to be active in terms of manufacturing returns," Laide said. "There are a lot of funds out there chasing a limited amount of situations."

That could continue into 2008, he said, if share prices of targets get beaten down.

"Most of these activists are value investors," he said. "So if things start getting beaten down, there will be plenty of opportunity for them."

SharkWatch's research said activists were also more willing to escalate their tactics and wage formal proxy fights. More proxy fights were waged in 2007 then any other year since it began tracking proxy fights in 2001, it said.

More than half of campaigns announced during the year -- 54 percent -- included a publicly disclosed letter to the board/management, FactSet SharkWatch added.

It said that among industry sectors, finance and consumer services companies were the most targeted, with 13 percent and 10 percent of all campaigns announced against them, respectively.

SharkWatch added that in the fourth quarter of 2007 there were 135 new activist campaigns announced -- the busiest quarter in the last two years for which it has gathered full activism statistics, and "probably the busiest-ever" quarter.

That was surprising, the research firm said, as the credit crisis which began in summer 2007 raised speculation activism would drop.

The speculation was based on the theory that activists would be stripped of their most potent tactics -- requesting companies put all or parts of the company up for sale and taking on debt for buybacks and dividends.

"Apparently, they must believe there are enough strategic buyers out there to make up for the financial players being mostly sidelined," the report read. (Editing by Brian Moss)