On Thursday, CenturyLink announced a succession plan that mirrors the one outlined by the activist investor less than a month ago, eventually putting the CEO of Level 3, the fiber-optic provider Century Link agreed to buy for $34 billion, in charge of the combined company. Investors are cheering the move, with shares of CenturyLink surging 95 cents, or $3.8%, to $25.90.
After the deal closes, which is still expected to happen by Sept. 30, Jeff Storey will become president and chief operating officer of CenturyLink, while current CenturyLink CEO Glen Post continues to lead the combined entity. Storey will succeed Post as CEO on Jan. 1, 2019, when Post will become executive chairman, CenturyLink said in a statement.
Importantly, the two will serve in executive roles side by side -- something that Meister insisted was crucial to a successful acquisition integration.
Meister had promised to advocate for Storey's promotion after taking a 5.5% stake in CenturyLink, making it the fund's largest position. It's a move the activist expects to cast the combined entity in the image of Level 3, whose performance he had praised, rather than CenturyLink, where investors have taken issue with missed earnings estimates and product missteps.
CenturyLink's move will likely obviate the need for more aggressive tactics from Meister, who's known for forcing management's hand. Corvex has launched 17 campaigns, including five proxy fights, at 14 companies since 2011, according to FactSet.
In each of the proxy campaigns, Corvex was successful in securing at least some concessions, and in two, it won by majorities of 85% and 81%.
Meister built a position in Century Link largely because of the purchase of Level 3, a high-growth company that has thrived in a hyper-competitive market for government and business clients. The deal lets CenturyLink reap the advantages of Level 3's $9 billion of tax losses that, combined with bolstered revenue from the merger, will help maintain an attractive 9% dividend yield Meister forecast could otherwise dwindle by next year.
Corvex is angling for Storey, as CEO, to deliver some of the gains he oversaw at his current company. Level 3's 179% share-price gain since Storey took over in April 2013 outpaced a 49% increase on the S&P 500 as well as a 34% decline at CenturyLink, Mesiter noted in a presentation at the Sohn conference last month. Revenue for Level 3 grew from $6.3 billion to $8.2 billion in the period.
Some investors had noted that Meister's aggressive style was exactly what was needed to shake up CenturyLink's cozy board, where directors have an average tenure of 19 years, according to relationship mapping service BoardEx, a business unit of TheStreet.
In the end, however, it may have been merely Meister's reputation -- and the size of his stake -- that did the trick.
Editors' pick: Originally published June 1.