Cabela's graphic

Just over three months into Cabela’s relationship with an activist investor that is pressing for big change at the Nebraska retailer, there’s an overwhelming sound of — well, nothing.

The public silence suggests Cabela’s is acquiescing to at least some of the activist’s demands, say people who keep track of activist investors and their tussles with public companies.

That could be bad news for employees of the Sidney-based company because the activist investor — Elliott Management of New York — has called for changes that could include the sale of the entire company.

A sale to a competitor, such as another outdoors-focused retailer, would likely spell the end of Cabela’s headquarters and its 2,000 jobs. A sale to a private-equity firm, which would take Cabela’s off the public markets, still would likely lead to job cuts.

So why the silence?

“There’s no point in making noise just for the sake of it,” said Damien Park, a managing partner at Hedge Fund Solutions in Philadelphia, which helps companies work with activists. Elliott has “a good reputation of engaging proactively and constructively with the purpose of increasing value,” he said.

But if companies don’t do what it says, Elliott’s past dealings suggest a confrontation may still be coming. Investments by the sometimes belligerent activist investor show the hedge fund isn’t afraid to fight.

Just look at Hess Corp. — like Cabela’s, a company with a heavy influence from its founding family. Elliott took about a 4 percent stake in Hess in early 2013.

Executives at Hess, including John Hess, the founder’s son, said it wouldn’t go along with Elliott’s demands. Elliott wanted Hess to carve up parts of its business — unbundling the company that held gas stations, refineries, oil exploration operations and a trucking company.

That’s much like Elliott’s call for Cabela’s to explore carving up its business, separating the profitable credit card business, the real estate portfolio and the actual bread-and-butter of retail stores.

When Hess dug in its heels, Elliott fought back — something that hasn’t happened so far with Cabela’s. The Sidney retailer has said only that it is exploring “strategic options” for its business — Wall Street speak that means a big change, like a sale of the company.

So far, that — and whatever might be going on behind closed doors — has kept Elliott quiet. Neither commented for this story.

That wasn’t the case with Hess: Just four days after Elliott made its presence in Hess known to the public, it began nominating directors to the Hess board, according to a report by Lazard, a New York asset manager and financial advisory firm.

“Hess’ dreadful long-term performance speaks for itself,” Elliott wrote in a letter that it distributed widely and shopped to the national press.

Like Cabela’s, Hess’ stock had been a laggard. The stock fell about 10 percent in 2012 in a year when the stock market as a whole was up nearly 6 percent. (When Elliott announced its Cabela’s stake in October, the retailer’s stock had fallen 37 percent in 2015 to that point.)

When Hess refused to play ball, a lengthy proxy fight ensued in which Elliott rounded up Hess shareholders and asked them to vote its way — not Hess management’s way.

Even the threat of a fight for shareholder votes led to a detente just hours before the vote was to take place: Hess agreed to split apart some of its business, carving off the Hess gas stations that helped make the company a household name on the East Coast. It agreed to add three of five of Elliott’s nominated directors. It also proposed a slate of its own. Combined, nine out of 14 directors were replaced, according to “Hess: The Last Oil Baron,” a book about the company by Bloomberg News writers.

But proxy contests are expensive for both sides, and Elliott is known for heading down a path of engagement with company management, if the company is willing, before jumping to a confrontation, those in the industry say.

In Cabela’s case, Elliott may have doubts about whether it can win a proxy contest — a fight to replace Cabela’s board members. The Cabela family owned about 24 percent of the company as of last April.

“That’s significant when you’re going to run a proxy contest, if indeed you are,” said Park, the hedge fund consultant.

Insider ownership — meaning a founder or founder’s family that owns a large stake in a company — is typically a deterrent for activist investors, Park said.

“It makes it more difficult to exert your power or your control by winning board representation,” Park said.

Jim Cabela remains chairman of the Cabela’s board. His brother, Dick Cabela, and Dick’s wife, Mary, founded the company in 1961, selling fishing flies by mail from their kitchen table in Chappell, Nebraska. As the business grew, they moved it to Sidney in 1969, later opening its flagship “catalog showroom” there in 1991 along Interstate 80. The company now operates more than 75 stores in the United States and Canada.

Activists might not target family-owned or influenced companies, but companies with a founder or founding families still in control may be more likely to have company governance problems, said Nick Gantchev, a finance professor at the University of North Carolina at Chapel Hill who researches activist investing.

“Being a family business certainly kind of sits in the category of possibly having some governance issues, and potentially some other investors might be concerned about that,” he said. “That might help Elliott get more support.”

Sometimes family businesses are seen as slow to make changes, clinging instead to tradition and having a personal affinity for employees. Cabela’s employs 2,000 in Sidney, a city of about 6,800 people about five hours west of Omaha.

Meanwhile, Nebraska Gov. Pete Ricketts said Friday that he has not spoken with Elliott Management. Elliott’s founder and head, Paul Singer, donated a total of $35,000 to the governor’s campaign in 2013 and 2014. Singer also is a major donor to the political action committee of Ricketts’ father, Ameritrade founder J. Joe Ricketts.

Ricketts said in October he had offered any assistance to Cabela’s in talking to the investor and would support the retailer with anything it needed to become more competitive. His spokesman said Ricketts reiterated that commitment last week, when he spoke to Cabela’s Chief Executive Tommy Millner a third time since Elliott’s stake.

The Cabelas and Hesses aren’t the only family businesses that now trade on public markets that Elliott has targeted.

The fund also went after the Lee family of South Korea, which owns the Samsung conglomerate.

Elliott stepped in when it opposed a merger deal for Samsung’s construction unit. While it wasn’t able to persuade enough shareholders to join the activist cause, Elliott didn’t give up quietly.

The company’s 2015 annual meeting was interrupted by jeering, shouting and a parade of shareholders who opposed the merger, according to the Wall Street Journal.

As one of the most active hedge funds, Elliott has a track record of success — not only in proxy contests, but in getting companies it invests in sold, Gantchev said.

A company with an activist involved is five to eight times more likely to be acquired than one without an activist, Gantchev said.

Of Elliott’s 60 campaigns, “about 20 percent of them have been involved to some extent with a merger or acquisition,” he said, citing his own research. About 25 percent of the activist targets in general are acquired, according to Gantchev’s data.

That could be on the horizon for Cabela’s. In early November, Reuters reported that competitor Bass Pro Shops was looking at a bid for the company. Bass Pro wouldn’t comment. Bloomberg News also reported Cabela’s was shopping itself around to private-equity firms. Both cited unnamed sources.

But the relationship between Elliott and Cabela’s is just beginning. Gantchev’s research found activists typically stay involved in their targets for 18 to 24 months, which leaves plenty of time for things to heat up.

On average, Elliott files four to five documents with the Securities and Exchange Commission per campaign. Those documents can outline calls for change.

So far, with Cabela’s, Elliott has filed only one document, outlining possible demands, including selling the company outright or breaking off its real estate and credit card businesses.

“Even though they might start slow on average, they would, later on, make additional demands or report certain conversations they’ve had with management,” Gantchev said.

Elliott is known for issuing scathing letters about management and even revealing the contents of private conversations it has had with them, said those who follow the company. In many cases the hedge fund has proposed an entire new slate on a company’s board, often settling for less once the company folds under pressure.

In the case of Hess, Elliott didn’t hold back in pressing to get its way, saying at the time that Hess was “focused more on maintaining a family dynasty than instilling accountability and addressing chronic underperformance,” according to the “Oil Baron” book.

Earlier this month Cabela’s made a change to its bylaws for 2016 that delayed the 30-day window during which shareholders can nominate people to its board of directors. That was seen by some hedge fund watchers as a concession to Elliott.

The change leaves Elliott with the opportunity to nominate directors at a later date — 30 days from when Cabela’s announces its annual meeting, which last year was held in June. The company has not announced this year’s meeting.

That could mean that Elliott is keeping its powder dry to take aim at Cabela’s if the retailer doesn’t do what it’s asking.

One way or another, something should pierce the silence soon. Cabela’s reports its fourth-quarter earnings Feb. 18.

Contact the writer: 402-444-1414,

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