Media Center

5/2/2042

ISS Says Unions and Pension Funds Should Back Ancora

CNBC (05/02/42) Goswami, Rohan

Norfolk Southern (NSC)-invested unions and pension funds should back Ancora’s full seven-director slate at the railroad’s shareholder meeting later this month, two different Institutional Shareholder Services proxy advisory services said. ISS’ Taft-Hartley Advisory Services and Social Advisory Services, which focus their recommendations on regulated unions and socially responsible investors, respectively said in their reports, that an Ancora majority would help address “negligence” by the current board and address its “serious concerns with accountability.” “The proxy contest is centered on a debate over which management team is best suited” to lead the company forward,” both reports said. “It is therefore important to provide the dissident with a voice that is loud enough to have its case for management change appropriately considered.” The recommendations also voiced their support for Ancora’s CEO pick Jim Barber as a “credible” director and chief executive, undercutting criticisms that his lack of railway experience was a liability. The former UPS executive appears “to be a capable candidate with experience and skills that should be transferable to the railroad industry,” the reports said. ISS’ main advisory arm and Glass Lewis, the two proxy giants, had already said that shareholders should support most of Ancora’s nominees at Norfolk Southern’s May 9 meeting. Glass Lewis endorsed six of Ancora’s director picks, including Barber. ISS earlier endorsed five of Ancora’s nominees, withholding support for Ancora’s proposed CEO Barber, but noting that he would likely be a capable executive as well. Thursday’s news “represents an important message to union retirement plans and firms prioritizing both socially responsible investments and enhanced value,” a statement from Ancora said. The statement added that Ancora’s three-year precision-scheduled railroading strategy “differs greatly from Norfolk Southern’s resilience railroading model and has worked well at the other four publicly traded Class I railroads." ISS’ two more tailored recommendations carry particular weight in light of the derailment in Ohio, which caused more than 100,000 gallons of toxic chemicals to be released into the environment. The recommendations also carry heft because of the outsize influence that unions have in the railroad industry. Union support has been divided between management and Ancora. Two different Teamsters unions are backing Ancora, around 42% of NSC’s unionized workforce. Another coalition of unions is backing management.

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5/6/2024

BP Shareholders Expect It to Scale Back Climate Target

Financial Times (05/06/24) Agnew, Harriet; Wilson, Tom; Moore, Malcolm

Shareholders in BP Plc (BP) are preparing for the company to scale back its climate targets further after a shift in tone from the oil major’s new chief executive. BP is alone among its peers in committing to cut oil and gas production, setting a target in 2023 of producing 2 million barrels of oil equivalent by the end of the decade, a 25% reduction from 2019 levels. The target has already been pared back once, from a 40% cut announced in 2020, but the company’s shareholders believe that Murray Auchincloss, who took over from Bernard Looney as chief executive in January, is prepared to be more flexible as demand for oil and gas continues to grow. Meanwhile Bluebell Capital Partners wrote to BP’s board last month, alleging that its management had suggested to “multiple shareholders” that it might pump more oil and gas than planned. “If, as we understand correctly from our conversations with fellow shareholders, BP’s management is hinting to shareholders during meetings that they might increase their oil and gas production above the 2mn barrels of oil equivalent a day targeted by 2030, then this should be reflected in BP’s official communication and targets,” Bluebell wrote in a March letter. The letter did not identify which shareholders BP had allegedly briefed. BP disputed Bluebell’s account, saying it had “engaged extensively” with its shareholders and received “clear and widespread support” for its strategy. “Based on these engagements, we neither recognize Bluebell’s assertions nor have we heard support for their proposals,” it said. Last year, Bluebell called on BP to increase its production target to 2.5mn b/d of oil equivalent by 2030, arguing that it was destroying shareholder value by moving away from hydrocarbons faster than society. The top-10 investor said that while so far the market has not rewarded BP for its energy transition strategy, ultimately BP’s approach would lead to better financial results and be reflected in its share price.

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5/6/2024

Blackwell Engages with Ashford Hospitality CEO Monty Bennett

The Real Deal (05/06/24) Lovinger, Joe

Blackwells Capital is waging a proxy battle to oust Monty Bennett from the boards of two of his real estate firms. Blackwells alleges that shares of Ashford Hospitality Trust (AHT) and Braemar Hotels and Resorts (BHR) are performing poorly as a result of a “self-dealing external advisory agreement that makes Montgomery Bennett rich at the expense of stockholders.” Blackwells is asking shareholders of both Ashford Hospitality Trust and Braemar not to re-elect Bennett and the rest of the board later this month. The relationship between Ashford, Braemar, and Bennett is convoluted but central to Blackwells’ complaint. Braemar is a publicly traded investor in luxury hotels and resorts. As part of an agreement with Ashford Hospitality Advisors, Ashford advises Braemar for an annual fee. Last year, Braemar paid Ashford $48.9 million for its services, according to the trust’s most recent annual filing. Bennett is the chairman of both companies’ boards, and the CEO and Chairman of Ashford Inc, which advises both. Blackwells holds a little over 10,000 shares of Braemar and 1,000 shares of Ashford Hospitality Trust, less than $30,000 in present value. But Blackwells argues that Ashford’s fees to Braemar have risen 575% since 2013, while its share price has fallen by about 91%. Ashford recently delisted its stock, sold off several properties to pay down debts, and faced foreclosure at others. But the firm has its own side of the story, as it laid out in a lawsuit against Blackwells. Bennett’s firm argues that Blackwells violated company bylaws by failing to disclose that it had tried to buy Braemar before launching the campaign and offering its own nominees for the board. In March, it filed a lawsuit seeking to block Blackwells’ slate of board nominees and prevent the company from nominating any others. The conflict began in October, when Blackwells wrote a letter to Braemar alleging breaches of fiduciary duty. At the time, Blackwells owned 100 shares in Braemar. The board established a review committee of two independent directors, according to the suit, but the committee recommended not taking action. The next month, an article ran on Bennett’s news site, the Dallas Express, titled “Vinson & Elkins Helps New York Activist Investor Invade Texas.” The article attacks Blackwell’s takeover bid and Vinson & Elkins, the law firm hired by Blackwells. “[Blackwells’ founder Jason] Aintabi operates with family money almost exclusively. He hopes that by harassing other firms he can prove that he’s worthy of managing his parents’ money,” Bennett says in the article. “The risky move by V&E to represent Blackwells Capital in its activist strategy could raise serious questions from its Texas client base as to whether the firm, which posted revenue of nearly $1 billion in 2022, remains committed to the Texas corporate community that has sustained it since its founding in Houston in 1917.” Aintabi later sued Bennett over his use of the outlet, saying he used it to influence shareholders.

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5/6/2024

Nilesh Undavia Calls Out GrafTech Board for Continuing to Distort the Record and Mislead Shareholders

Globe Newswire (05/06/24)

Nilesh Undavia, one of the largest shareholders of GrafTech International Ltd. (EAF), on Monday issued an open letter to shareholders of the company in connection with the election of directors for the company’s board of directors to be held on May 9. The letter states that "For several months, I attempted to engage with GrafTech, seeking to add shareholder representation to a Board that has displayed an unwillingness to acknowledge egregious management mistakes or present a credible plan to turn around the Company.... The Board's abysmal track record of shareholder value destruction should seriously impugn its credibility and qualifications." Undavia asserts "the Board cannot be trusted because: It was not forthcoming about the true cause of the shutdown at Monterrey, a concern also echoed by Glass Lewis; It has not been forthcoming about market share losses since 2021 and it has failed to create a credible strategy to turnaround the business; and It is misrepresenting qualifications of incumbent nominees." He also says the Company is misrepresenting his engagement with it, as well as misleading investors about a credible strategy to help turnaround the business. "I believe that GrafTech's fortunes will only turn when the Company is able to regain market share. Over the last six months the Company's guidance of volumes in 2024 has not changed. As volumes and market share are not improving, it appears that the new CEO (who has been in the role for six-months as the interim-CEO) and the Board are unable or unwilling to improve performance. GrafTech's failure to send a single representative to the all-important American Iron and Steel Institute conference on electric arc furnace steel-making in February is incomprehensible and alarming." Undavia concludes by calling on shareholders "to vote the BLUE universal proxy card TODAY to elect me, Nilesh Undavia, to the Board."

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5/6/2024

GrafTech Urges Stockholders to Vote Today “FOR” the Board-Recommended Nominees Using the WHITE Proxy Card

Business Wire (05/06/24)

GrafTech International Ltd. (EAF) on Monday issued a statement with respect to its 2024 Annual Meeting of Stockholders to be held on May 9. The company reminded stockholders "that every vote is important and urges its stockholders to review the GrafTech proxy solicitation materials carefully and use the WHITE proxy card to vote today only “FOR” the nominees recommended by GrafTech’s Board of Directors, Ms. Debra Fine and Mr. Anthony Taccone." The statement asserts "the Board’s nomination of these two highly experienced, independent and qualified individuals is consistent with the Board’s objective to have a diversity of complementary skills and opinions. Ms. Fine brings over 30 years of deep knowledge of capital markets, including over two decades of investing in the steel industry, and has over 20 years of executive leadership experience as a chief executive officer. Mr. Taccone brings over 35 years of deep knowledge of the global steel industry, with an intimate understanding of our customers." It notes that the Board’s recommendation has been supported by leading proxy advisory firm Institutional Shareholder Services. ISS has recommended that GrafTech stockholders vote “FOR” the nominees recommended by GrafTech’s Board, Ms. Fine and Mr. Taccone, using the WHITE proxy card. ISS further recommended that GrafTech stockholders vote “WITHHOLD” on the dissident nominee, Mr. Nilesh Undavia, and should NOT vote using the blue proxy card sent by Mr. Undavia. "The recommendation of ISS is independent recognition that GrafTech’s newly refreshed Board is focused on delivering value for all stockholders. The Board is experienced, highly engaged and majority independent. Further, the Board and management team have taken decisive action in response to the industry-wide cyclical downturn, and GrafTech is successfully executing its strategic initiatives." In addition to voting “FOR” Ms. Fine and Mr. Taccone using the WHITE proxy card, the statement also urges GrafTech stockholders "to DISCARD all blue proxy cards and materials sent by Mr. Undavia. Further, stockholders should NOT sign, return, or vote any blue proxy card sent by Mr. Undavia. Only the latest validly executed proxy card will count at the Annual Meeting."

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5/6/2024

Novavax's Top Shareholder Shah Capital Ramps Up Efforts for Board Shakeup

Reuters (05/06/24) Satija, Bhanvi

Hedge fund Shah Capital on Monday urged Novavax (NVAX)shareholders to vote against the re-election of three directors and proposals related to executive compensation, ramping up its efforts for a board shakeup at the COVID-19 vaccine maker. Shah Capital, which currently owns a near 7.5% stake in Novavax and is its third-largest shareholder, reiterated that the company was "undervalued and continues to suffer from poor profitability." Novavax last year had raised doubts about its ability to remain in business, hurt by manufacturing snags and regulatory hurdles that delayed the entry of its protein-based vaccine to the market. Last month, the top shareholder expressed concerns over mismanagement at the Maryland-based biotech and nominated two of its own candidates for the board. It had also urged Novavax to adopt a marketing strategy to target consumers who are hesitant to receive mRNA vaccines. The hedge fund said in a regulatory filing on Monday that it plans to vote against directors Richard Douglas, Margaret McGlynn and David Mott at Novavax's shareholder meeting in June. "We believe that fresh perspectives are desperately needed in the boardroom to steer Novavax towards sustainable profitable growth," it said in a statement. Novavax said it welcomes the perspectives of its shareholders and values their input. "We believe we have the right board in place to oversee Novavax's strategy," the company said in its response. In April, Shah Capital nominated Suresh Katta, founder and CEO of biotech firm Saama, and Venkat Peri, CEO of Quantiva Health, to Novavax's eight-member board, saying the duo had the experience required to set the company's strategic direction. Shah Capital also plans to vote against three other proposals, including one related to the compensation of some of Novavax's executives.

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5/4/2024

Ping An Votes Against Reappointment of HSBC CEO as Director

Reuters (05/04/24) Mehar, Gursimrankaur

China's Ping An Insurance Group (601318), the biggest Asian investor in HSBC PLC (HSBA) did not support reappointing Chief Executive Noel Quinn as a director to the banks board at the its shareholder meeting, a source said. Quinn, who has announced he will step down as chief executive once a successor is appointed, last year defeated Ping An's long campaign to get HSBC to spin off its Asia business. Europe's biggest bank had faced proposals submitted by Hong Kong-based individual investor Ken Lui and backed by its biggest Asian shareholder Ping An to consider a radical restructuring and to boost its dividends. Quinn was reelected with 83.93% votes in favor, and 16.07% of votes against, according to the company's annual general meeting statement. Ping An lodged a protest vote against Quinn's leadership at the meeting on Friday, according to earlier reports. Quinn will remain CEO of the London-headquartered bank until his successor starts in the role, and has agreed to remain available through to the end of his 12-month notice period expiring on April 30, 2025.

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5/4/2024

Nihon Global Puts Forth Ideas to Build Shareholder Value at Noodle Giant Toyo Suisan

CNBC (05/04/24) Squire, Kenneth

Toyo Suisan Kaisha (TSUKY) and its subsidiaries produce and sell food products in Japan and internationally. Its stock market value is approximately trillion Japanese yen (10,070.00 yen per share). Nihon Global Growth Partners Management has a 3.8% stake in Toyo Suisan. Nihon Global has put forward four shareholder proposals to be voted on at the company's upcoming 2024 general shareholders' meeting: (i) increase the dividend payout ratio to 40%; (ii) repurchase 20 billion yen of the company's shares; (iii) implement a director stock compensation program; and (iv) disclose the company's cost of capital. Despite excellent performance, the company appears deeply discounted to its intrinsic value. Nihon Global attributes this to the company's (i) lack of strategic focus on its core assets; (ii) poor capital allocation, dedicating far too much capex on low ROA legacy businesses and being substantially overcapitalized; and (iii) a lack of attention to total shareholder return, which has underperformed peers in terms of total returns, as well as a lack of a formal shareholder return policy. 13D Monitor founder and president Kenneth Squire says the ideal plan for Toyo Suisan would be to divest its legacy and non-core businesses and focus its capital and resources on growing its core noodles business. Legacy businesses have generated just 17% of the company's 10-year cumulative earnings before interest, taxes, depreciation and amortization, yet they have been awarded 51% of the capex despite generating sub-5% return on assets. Assets like its valuable refrigerated warehouse segment, a very attractive business, would be better suited as a Japanese real estate investment trust or sold to a strategic acquirer. The same applies to its processed foods and seafood trading businesses, which would benefit from the scale and synergies provided by a strategic acquirer, yet they continue to languish in Toyo Suisan, hindering valuations and diverting attention from the company's core growth areas all while delivering poor ROAs. However, activism in Japan is more of a jog than a sprint. It generally starts with shareholder proposals that by regulation can only address specific issues, such as capital allocation and dividends. Accordingly, Nihon Global has put forward four shareholder proposals to be voted on at the company's annual meeting in June 2024: (i) increase the dividend payout ratio to 40%; (ii) repurchase 20 billion yen of the company's shares; (iii) implement a director share compensation program which would make 40% of total compensation performance-linked and half of which would be stock; and (iv) disclose the company's cost of capital. Squire says these are "incredibly reasonable proposals." The dividend raise is an incremental increase of only 1.9% of December 2023 cash. The repurchase is only 4.6% of shareholders equity as of December 2023. The compensation program is equal to market standard, and the disclosure of cost of capital is consistent with the existing recommendations of the Tokyo Stock Exchange. In this case, Nihon Global could potentially win here or receive upward of 40% of the vote, which is almost like a mandate in Japan, according to Squire. He concludes that this activist campaign shows the opportunities available to activists in Japan where reasonable shareholder proposals could lead to significant shareholder value creation, and that it shows the limitations of activism in Japan where ambitious plans, even if compelling and logical, such as divesting non-core businesses and focusing on the core business is a non-starter in the early stages of a campaign in Japan.

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5/3/2024

HSBC’s Green Credentials Come Under Fresh Scrutiny

Wall Street Journal (05/03/24) Ochoa, Fabiana Negrin

HSBC’s (HSBC) green credentials are under fresh scrutiny, with activist shareholders pressing the Asia-focused bank to clarify plans to spend up to $1 trillion on sustainable finance in the coming years. The investor group, which has $892 billion in assets under management, said Friday that it intends to ask the bank at its annual general meeting to explain how it will spend its green funds. It also wants the bank to set a funding target for renewable energy. ShareAction, a nonprofit focused on responsible investing that is coordinating the group, described HSBC’s target of spending between $750 billion and $1 trillion on sustainable finance by 2030 as too broad and vague. “It gives the impression the bank is scaling up its efforts on green finance without demonstrating the difference it will make, or whether it is financing the green activities that are most needed,” Jeanne Martin, head of the banking program at ShareAction, said in a statement. The shareholder coalition also includes U.K. nonprofits Epworth Investment Management and the Ethos Foundation, as well as investment company Royal London Asset Management, Paris-based hedge-fund manager Axiom Alternative Investments and asset manager La Francaise Asset Management, among others. HSBC said it will answer all of the group’s questions at its AGM. “We thank ShareAction for its engagement over a number of years on a range of topics relating to our climate strategy, and for recognizing the good progress that we have made,” it said in an emailed statement. HSBC said that since it set its sustainable finance target in 2020, it has reported on its progress yearly, giving a “detailed breakdown across green, sustainable (which combine green and social) and social products.” In 2021, a group of 15 institutional investors—coordinated by ShareAction—filed a climate-change resolution at HSBC alongside 117 individual shareholders urging the bank to set targets to cut exposure to fossil fuels. HSBC later that year committed to phasing out coal financing, and in 2022 pledged to stop financing new oil-and-gas fields. A ShareAction analysis of Europe’s largest 20 banks last year flagged what it said was a widespread lack of transparency around green finance and the related risk of “greenwashing.” The report said 35% of the banks measure the “real” impact of their financing, such as how much renewable-energy capacity their funding generates. Most targets set by lenders specify a sum of money but don’t provide crucial details, making it hard to determine if lenders are pulling their weight, ShareAction’s report said. HSBC said in its 2023 ESG report that it was tracking progress in its plan to allocate up to $1 trillion to sustainable finance and investment by 2030, and has taken steps to align financed emissions to net zero by 2050. HSBC doesn’t currently disclose a target for capital deployment. It said in the ESG report that since 2015, it has issued more than $2 billion in green bonds for renewable energy, clean transport and other projects.

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