How Elliott's monthslong Starbucks campaign got it a better deal than it asked for

In May, it was a $2.5 billion stake in Texas Instruments and a $1 billion-plus position at Johnson Controls. In June came a $2 billion stake in Southwest Airlines and an equally large investment in Japanese conglomerate SoftBank.

For a $69.7 billion hedge fund — even by the standards it has set — Elliott Management has operated at a scale and frequency this summer that's given even the most seasoned activism defense advisors pause.

But its biggest win this year was at Starbucks, beginning with private discussions over Elliott's multibillion-dollar stake and ending with a CEO change that investors and activists cheered.

It wasn't just the replacement of a deeply unpopular CEO in favor of a food-industry legend, nor the nearly unprecedented stock price surge that drove Starbucks shares to their best day in more than 20 years. It was that Elliott's monthslong push at the company resulted in an outcome that thrilled shareholders and pleased chairman emeritus Howard Schultz and the board itself.

It set the company on a "transformational" path through a deal, said one advisor who has worked with both activists and companies, that pleased just about everyone involved at Starbucks except former CEO Laxman Narasimhan.

By June, Elliott had amassed a Starbucks position that was worth some $1.9 billion and had begun conversations with the company, according to people familiar with the matter, who requested anonymity to discuss private matters freely. The activist investor's green-and-white letterhead has come to command the attention of directors and the media, who expect that the firm's plans will likely include the firing of an underperforming CEO. Narasimhan, who until Tuesday was the coffee chain's chief, seemed to fit that bill.

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