Little Engine No. 1 beats Exxon with just $ 12.5 million – sources

BOSTON, June 29 (Reuters) – Activist investor Engine No. 1 spent about $ 12.5 million to win three seats on the board of Exxon Mobil Corp (XOM.N), less than half of its original budget, for the biggest and most watched corporate competition of the year, people familiar with the number said.

The No.1 engine in May shocked the oil and gas industry when Exxon shareholders, frustrated by the low yields and the US leader’s increasingly weak focus on climate concerns, elected three of its four directors appointed to the Exxon Board of Directors. Investors said the fund’s small budget could become a model for low-cost proxy contests.

The victory against one of America’s most iconic companies is even more impressive given Exxon’s market valuation of $ 265 billion, industry analysts say.

Exxon had said it planned to spend $ 35 million more than its usual proxy solicitation costs, but did not specify a figure. His campaign included a website, Twitter posts, employee blogs and forums, direct mail and television appearances. Industry experts have speculated that Exxon’s costs could have exceeded $ 100 million.

“Our costs for the proxy contest remain in line with our filed estimates. We reject any speculation of excessive costs,” an Exxon spokesperson said Tuesday.

The No.1 engine declined to comment.

The No.1 engine, which launched in December with around $ 250 million in assets, has focused heavily on electronic communications instead of more expensive mailings, people familiar with the costs said. Since the company disclosed its initial investment of $ 40 million on Dec. 7, it has made a 20% return net of fees through Tuesday on the Exxon bet, a person familiar with the figure said.

The investment firm also focused more on persuading large institutions to back its criticisms that Exxon lacked a convincing clean energy strategy and lagged behind financial returns and fell behind. focused on attracting retail investors, who are often inclined to support management.

COVID-19 has prevented the two sides from traveling around the world to advocate in person, helping to keep costs down, the people said. For the No.1 engine, the restrictions allowed its candidates to spend hours on video calls with big investors.

This strategy may not be replicable, investors said, if travel picks up and institutions insist on seeing executives and investment managers in person.

The No.1 engine pressed the credentials of its board candidates, including the former executive vice president of Marathon Petroleum Corp (MPC.N) and the head of renewable fuels at Finnish refiner Neste Oyj ( NESTE.HE). It also avoided turning negative, which institutional investors often dislike, experts said.

Reporting by Svea Herbst-Bayliss; Editing by Richard Chang

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