U.S. activist investors Land & Buildings, Engaged raise new capital: sources

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BOSTON (Reuters) – Several investors who push management to perform better are trying to raise hundreds of millions of dollars in new cash to buy stakes in companies beaten down by a historic market selloff, four people familiar with their plans said on Tuesday.

Glenn Welling, who runs the $1.1 billion Engaged Capital, wants to raise as much as $250 million in fresh money while Jonathan Litt’s $500 million Land & Buildings Investment Management is creating a new vehicle and will take however much money clients are ready to commit, the people said.

Litt, who specializes in real estate investments, wants to snap up companies with strong balance sheets that are trading at large discounts and own data centers, warehouses and lab space, for example.

He and his investment team will host a conference call on Wednesday to discuss the opportunities in public real estate being created by the COVID-19 sell-off.

Welling, who often wins board seats and calls for his target companies to sell themselves, has approached only existing investors, according to the sources, who said he told them that he wants to buy more stock in names he already owns. He may also go after new targets but he did not name them, according to the sources.

Panic selling, sparked by fear about the spreading coronavirus, has driven the S&P 500 index (SPX) down some 30% since January. For activists it is creating a buying opportunity, said fund managers and lawyers.

Companies that were too expensive might now be attractive. “For activists the dinosaur targets are no longer insurmountable,” said Lawrence Elbaum, who co-heads law firm Vinson & Elkins’ shareholder activism practice.

Engaged’s three largest investments at the end of 2019 were Hain Celestial Group Inc (O:HAIN), Rent-A-Center Inc (O:RCII) and Medifast Inc (N:MED) Medifast’s stock has tumbled 42% since January while Rent-A-Center’s stock is down 51%.

Other activists, including William Ackman’s Pershing Square (NYSE:SQ) Capital Management and Carl Icahn, have also bought more stock in companies they owned. They did raise new capital from investors, however.

As some activist managers approach potential investors for new money, it may not be a hard sell.

“Putting new capital to work today where one could influence the outcome by being on the board or an active large shareholder is an ideal way to invest during this dislocation,” said Gregg Hymowitz, chief executive of EnTrust Global, a big investor with activists. “We are actively looking at multiple situations although the underwriting is fluid, to say the least.”