Investment firm Chieftain Capital to split over Internal Rifts

By Shira Ovide & Gregory Zuckerman (WSJ)

Chieftain Capital Management Inc., an iconoclastic investment firm with a strong two-decade track record, is splitting up following personality conflicts among its leaders, according to people familiar with the matter.

Co-founder Glenn Greenberg, who came into the headlines nearly two years ago for his campaign against management at cable company Comcast Corp., plans to stay at the firm, according to a letter that he, co-founder John Shapiro and two partners sent to investors. Mr. Greenberg’s firm will be renamed Brave Warrior Advisors, according to a person familiar with the matter.

Mr. Shapiro and Chieftain partners Tom Stern and Joshua Slocum plan to launch a new investment firm that will retain the name Chieftain Capital Management, effective Jan. 1, according to the letter. Chieftain manages about $3 billion in assets. Messrs. Shapiro and Stern are cousins.

“Although Chieftain’s partners remain committed to the firm’s investment philosophy, differences on internal firm matters have led us to decide to separate,” said the letter, sent to investors earlier this month.

Mr. Greenberg, son of legendary baseball player Hank Greenberg and a former competitive squash player, founded Chieftain with Mr. Shapiro in 1984.

A person familiar with what Mr. Greenberg has told investors said Mr. Greenberg and Mr. Stern had personality conflicts, and Mr. Shapiro decided to leave with Mr. Stern. Another person said the personality conflicts were between Mr. Greenberg and the three other officials who are starting the new firm.

Through spokesmen, Messrs. Greenberg, Shapiro, Stern and Slocum declined to comment.

At one point, the firm considered retaining an executive-conflict-resolution specialist, according to people familiar with the matter, though it is unclear if it retained one.

The firm has generated annual gains averaging about 18% before fees focusing on “value” investing, or buying inexpensive, sometimes out-of-favor shares in which the firm has deep conviction. Chieftain’s returns are roughly in line with the market so far this year, according to people familiar with the matter. The firm counts among its clients Yale University’s endowment.

While many other investment managers spend much of their time courting new and existing clients, Mr. Greenberg told Wharton School students several years ago that his firm was built on keeping his communications with clients limited, ignoring ideas from Wall Street analysts and avoiding the marketing of his firm.

The firm disdained Wall Street’s mantra of diversification. Chieftain’s largest stock holdings as of Sept. 30 included Lockheed Martin Corp., U.S. Bancorp, and Comcast, three stocks that represented more than 40% of Chieftain’s stock holdings, according to FactSet Research Systems. By contrast, some funds often keep their top positions at less than 5% of their holdings.

Going against the firm’s typically quiet style, Mr. Greenberg in early 2008 launched a public campaign against Comcast management. He sought in part the ouster of Chief Executive Brian Roberts over complaints about the cable company’s strategy and uses of capital.

Comcast at the time said the company’s operating record, growth and stock returns were strong.

After Mr. Greenberg’s campaign went public, Comcast changed some compensation policies and started a dividend, and the Chieftain campaign died down. Mr. Roberts remains Comcast’s chairman and CEO.

More recently, Mr. Greenberg had been noncommittal about Comcast’s negotiations to buy a controlling stake in General Electric Co.’s NBC Universal. He told the Journal last month that Comcast has moved in the “right direction” since his campaign last year, but he said he would reserve judgment on the possible NBC Universal deal.

After the firm’s planned breakup, Bryan R. Lawrence, the founder of Oakcliff Capital, will work with Mr. Greenberg, as will Mary Mulholland, Chieftain’s vice president of administration, the Chieftain officials said in the letter to investors.

The letter said clients will be asked to select which of the new firms will manage their investment assets.

Paul Fribourg, chairman and chief executive of agribusiness-and-investment firm Continental Grain Co., a longtime investor with Chieftain, said the firm was a collection of “smart, strong-willed, opinionated” people but “I don’t think there’s any hidden mystery or blowup.” Mr. Fribourg, who added that he had no direct knowledge of why the firm was splitting up, said he hadn’t yet decided what he’d do with his Chieftain investments.