DMI Meeting Monitor
As a new proxy season officially gets underway, Diligent Market Intelligence (DMI) is again rolling out its Meeting Monitor with a look ahead at some of the key votes due to be decided at annual meetings each week.
Before we delve into the first AGMs slated for February, below the team examines the outcomes of the contests that reached a conclusion in January:
At a January 21 special meeting, a motion put forward by Frasers Group to oust Boohoo Group co-founder Mahmud Kamani was rejected by almost two-thirds of votes cast. The U.K.-listed fashion brand had claimed the backing of proxy advisors Institutional Shareholder Services (ISS) and Glass Lewis, outlining that the latter had recommended retaining Kamani for his “institutional knowledge and expertise,” which in turn should help with “empowering new leadership to undertake initiatives that will likely be needed to improve the company's performance." Frasers, a 27% stakeholder, had blamed Kamani for Boohoo’s ‘‘dismal results, lack of transparency, terrible refinancing and further supply chain allegations.”
At a January 22 special meeting, Saba Capital Management failed in its attempt to sweep the board of Herald Investment Trust, with more than 65% of the votes cast rejecting the dissident's motions. Saba had sought to oust Herald’s entire board and install Paul Kazarian and Jassen Trenkow. The hedge fund, Herald’s biggest investor, had argued the overhaul would help narrow the discount affecting the company’s share price. Herald moved to note that without Saba's shares, just 0.15% of votes were cast in favor of the activist's proposals. The target had the backing of Glass Lewis and ISS.
Mantle Ridge secured three out of the four seats it had sought on the board of Air Products and Chemicals at the U.S. industrial gas supplier’s January 23 annual meeting. The firm's CEO Paul Hilal joined the board, with seats also secured for Andrew Evans, former CEO of gas distribution company AGL Resources; and Dennis Reilley, ex-CEO of industrial gases company Praxair. The reshuffle saw three incumbents, including CEO Seifollah Ghasemi, ejected from the board. Mantle Ridge, an investor with a $1.3-billion stake, had argued for a reduction in investments in risky projects, measures to boost margins and a clear succession plan for Ghasemi, whom the activist fund had helped put onto the company's board a decade ago. Glass Lewis had recommended a vote for Mantle Ridge’s entire slate while ISS issued an endorsement for three of its nominees, including Hilal and Reilley - the activist’s designee for chairman. The hedge fund had also received support from a number of large Air Products holders including Norwegian sovereign wealth fund Norges Bank Investment Management and the California State Teachers Retirement System (CalSTRS).
At a January 23 special meeting, Korea Zinc’s management managed to retain control surviving an attempted takeover of the board by an investor alliance made up of Young Poong and MBK Partners, which had sought to add 14 new directors to the zinc producer's 12-member board. Young Poong was blocked from voting its roughly-25% stake at the meeting after one of the company units announced that it had increased its shareholding in the activist. The MBKP-Young Poong alliance, which holds a 41% stake in the company, later announced that it would launch legal action to suspend the meeting's effects and to invalidate the restriction on mutual voting rights.
In Hong Kong, six directors were removed from the board of oil and gas equipment and services provider Strong Petrochemicals at a January 25 special meeting. Shareholders voted to remove outgoing CEO Yao Guoliang, Ma Yi, Tan Xiao, Deng Heng, Jiao Jie and Lai Wai Chi from the board at the meeting. In November, Hongkong Hengyuan Investment requested a special meeting to remove all of the company’s board members, except Wang Jian Sheng, who owns half of an entity that holds barely 50% of the proxy target’s shares.
At the January 29 annual meeting of Fat Prophets Global Property Fund (FPP), a majority of investors at the Australian real estate investment trust (REIT) voted in favor of a proposal to wind up the company. The proposal, which was put forward by Lanyon Asset Management, secured the backing of more than 52% of votes cast at the meeting. Lanyon, a 32.1% stakeholder, had argued that without a change in the way the REIT is managed, the company would still continue to deliver “substandard” results, stating that it has delivered poor investment return to shareholders “with the fund's returns being below the benchmark over one year, three years, four years, five years and since inception.”
Key votes next week
After kicking off campaigns at a total of seven U.K.-based investment trusts in November, Boaz Weinstein’s Saba Capital Management will see investors vote on five of the targeted funds next week. After Saba’s defeat at Herald in January, Baillie Gifford US Growth Trust (USA) is next in line for a vote at a February 3 special meeting. The London-listed investment firm has warned shareholders of “value destruction” and a loss of board independence should the activist prevail. The investment trust has also claimed the backing of Glass Lewis, ISS and British proxy advisor PIRC.
Keystone Positive Change Investment Trust will also face off against Saba on February 3 with the fund arguing that the 28% stakeholder has not offered a plan which benefits all shareholders, stating that its proposal “pays no heed to the company's specific circumstances, and is aimed at Saba being selected as the investment manager, and would likely come at significant expense to all shareholders.” Keystone has also claimed the backing of Glass Lewis and ISS with the latter cited to have stated that Saba has not presented "a compelling case for change, let alone a case for a majority position on the board and a strategy overhaul.”
On February 4, CQS Natural Resources Growth & Income PLC (CYN) will host its annual meeting where shareholders will vote on Saba’s motions. Christopher Casey, CQS’ non-executive chairman, has called on investors to vote against Saba’s attempt to take control of the company’s board and to “protect their investments” by voting down the activist’s “self-interested and misleading plan.” “If requisitioned resolutions are passed, you may no longer be invested in a highly specialised natural resources investment trust with good governance and a clear strategy,” Casey argued. The target has claimed the backing of Glass Lewis ahead of the vote.
Another Saba-targeted fund, Henderson Opportunities Trust, will also host its special meeting on February 4. Henderson has offered shareholders the option of cashing out as part of a winding-up of the company or of rolling over their investments into Janus Henderson UK Equity Income & Growth Fund. The fund warned shareholders that if the activists’ motions are passed it will give it “effective control” of the company without a guaranteed cash exit for shareholders.
On February 5, the European Smaller Companies Trust (ESCT) will hold its vote on Saba's motions, after it told shareholders that the dissident ‘‘intends to take effective control of your company and drastically alter your investment exposure,’’ by moving ‘‘away from European small-cap equities, at a time when the sector is attractively valued.’’ ESCT has claimed the backing of both ISS and Glass Lewis.
In other meetings, on February 5, shareholders at U.K. digital marketing company Jaywing will vote on a proposal filed by leading shareholder Michael Ashcroft to remove the company’s shares from the London AIM market. Jaywing has outlined its support for the proposal, stating that its board had concluded that taking its stock off the AIM and becoming a private company ‘‘is in the best interests’’ of the business and its shareholders, citing cost benefits amounting to at least 250,000 pounds per year. The privatization plan needs to be approved by 75% of the votes cast.
ESG
At its February 6 annual meeting, investors at U.S.-based Tyson Foods, which has a dual-class share structure, will vote on a shareholder proposal that calls for reporting on the disaggregation of shareholder voting results. The proposal was filed by the Investor Advocates for Social Justice and argues that such a measure would allow Class A shareholders to better monitor how responsive Tyson is to issues that a majority of non-insider shareholders raise. Tyson Foods has called on shareholders to reject the proposal, arguing that such disclosure is unnecessary.
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