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10/11/2024

Korea Zinc Sweetens Buyback Bid in Escalating Takeover Fight

Bloomberg (10/11/24) Lee, Heesu; Shinhye, Kang

Korea Zinc Co. (010130) has raised an offer to buy back its own shares, as the battle for control of the world’s top zinc smelter intensifies. A special purpose company led by Korea Zinc Chairman Choi Yun-beom said on Friday it had increased its bid by 7.2% to 890,000 won ($659). That’s higher than a rival offer for the shares at 830,000 won from MBK Partners and Young Poong Corp. (000670), Korea Zinc’s top shareholder, which ends on Monday. They have said their offer will not be increased. Korea Zinc shares swung between gains and losses after the announcement, but are trading well below both offer prices, suggesting the market is skeptical a deal will be completed on the current terms. As of 12:09 p.m. in Seoul, the stock was up 0.3% at 791,000 won. Friday’s move is the latest twist in a long-running saga at Korea Zinc, an influential player in the global metals market founded over 50 years ago. Chairman Choi, the grandson of one of the founders, and Young Poong, which is controlled by a rival family faction, disagree over the direction of the company and its role in the energy transition, and have been at loggerheads for many months. MBK said on Friday that Choi’s tender price hike would have a negative impact on the firm and its debt pile, adding that it was looking at “every option to stop irreversible damage at Korea Zinc,” including pursuing its ongoing legal action. South Korean conglomerates often grapple with succession feuds, but rarely do they include private equity. MBK, one of North Asia’s biggest buyout firms, lobbed its surprise offer with Young Poong in mid-September, saying that it wants to improve corporate governance at Korea Zinc. Then, earlier this month, Chairman Choi roped in Bain Capital to support its buyback. Korea Zinc and Bain said on Friday that they would increase the amount of shares they are seeking — to 20% from 18% — in the offer that runs until Oct. 23. The takeover battle has attracted the attention of South Korea’s financial watchdog, who said it had become “overheated.” Financial Supervisory Service Governor Lee Bokhyun warned earlier this week that any unfair trading practices would be investigated and punished. Korea Zinc also raised its bid for Young Poong Precision Corp. (036560) by 17% to 35,000 won on Friday. Young Poong Precision has a 1.85% stake in Korea Zinc, making it important in the fight for the larger company. MBK also has an offer in for the unit, which expires on Monday.

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10/11/2024

Shareholder Proposals Quiet Down in Australia AGM Season

Minerva Analytics (10/11/24) Bolger, Thomas

As the Australian AGM season commences, this article examines recent trends in shareholder engagement. In recent years, one notable development in the Australian market has been an increased focus on environmental and social issues, with Australian shareholders focusing particularly on climate change. However, while there had been a clear upward trend in the number of shareholder proposals being filed at ASX200 companies, with 2020 presenting the peak, since then, the number has been steadily falling — with only eight proposals in 2024 at the time of analysis. The decline in shareholder proposals in Australia appears to align with what has been observed in other markets, such as declining shareholder support on environmental and social shareholder proposals in the United States. Australian shareholders are faced with a unique situation regarding shareholder proposals which impacts the use of filing resolutions as an engagement mechanism. Section 249N of the Commercial Act governs the mechanism for shareholders to file resolutions at a general meeting. Shareholders may file a resolution if they hold at least 5% of the voting rights, or if the resolution is filed by 100 or more shareholders entitled to vote at the meeting. While there is perhaps a low bar for the filing of shareholder resolutions, shareholders do not have the ability to file advisory non-binding resolutions in the market. Shareholder resolutions are considered a "decision" of the company and are therefore binding and subject to a supermajority requirement of 75% votes in favor. A company’s constitution governs decision-making rights for shareholders. Therefore, it is common for shareholders to file a binding resolution seeking an amendment to the constitution to grant shareholders the right to propose advisory resolutions or to express an opinion. Filing this request gives shareholders the platform to propose advisory resolutions on other matters, such as climate change, at the same meeting. As the constitutional amendment resolutions are classified as special resolutions, shareholders struggle to find the required majority, and no such proposal has been successful. If the constitution amendment fails, then any advisory resolution also filed at the meeting cannot pass as they are conditional on the amendment. The current system makes it difficult for shareholders to hold public companies to account on issues they would like to express an opinion on. The difficulty in gaining successful outcomes on shareholder proposals due to the Australian filing rules is one factor in the reduced number of climate-related shareholder proposals. Since say on climate votes first started appearing on meeting ballots, Australia is the only market to see a company face a defeat. Woodside Energy’s (WDS) climate plan was voted down by shareholders in 2024. The level of dissent received by Woodside broke the previous dissent record on say on climate, which was also set by Woodside indicating concerns with board responsiveness to shareholder concerns. In Australia, the vast majority of shareholder proposals have been filed by just two organizations: Market Forces and the Australasian Centre for Corporate Responsibility (ACCR). A contributing factor to the declining number of shareholder proposals in Australia is in part due to a shift in focus with the firms becoming more active in Asia (such as the filing of climate proposals at Japan-listed companies) and advocating for votes against director elections and/or the remuneration report as a way to raise concerns over climate strategy without filing a resolution. Pursuant to section 249P of the Corporations Act, a group of shareholders holding at least 5% of the voting rights or numbering at least 100 shareholders may request a company to give all its shareholders a statement as provided by the group of shareholders. This tactic has been used by the ACCR during 2024 to include a statement against the re-election of directors in the notice of meetings of Santos Ltd (SSLZY) and Woodside Energy while Market Forces filed member statements against the approval of the remuneration report at Santos Ltd, Whitehaven Coal Ltd (WHITF), and Woodside Energy.

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10/11/2024

Mike Ashley’s Frasers Group Takes £10m Stake in THG Spin-off

The Times (London) (10/11/24) Fish, Isabella

THG Plc (THG) has raised almost £100 million from new and existing shareholders, including Mike Ashley’s Frasers Group (SDIPF), to fund the spin-off of its loss-making technology arm Ingenuity. Frasers, which owns Flannels, House of Fraser, and Sports Direct, made a strategic investment of £10 million in the Manchester-based online retail group as part of the fundraising. It builds on an existing relationship between the two companies, with THG and Frasers having signed a strategic partnership deal in June that included a multi-year Ingenuity agreement, and the deployment of the group’s credit and loyalty platform Frasers Plus. Matthew Moulding, founder and chief executive of THG, also invested £10 million in the equity raise, with existing long-term and institutional shareholders contributing about £50 million. THG, previously known as The Hut Group, said on Thursday that it planned to raise £75 million through a share placing and subscription. On Friday it revealed that it had overshot that target, raising £95.4 million. The shares were offered at a price of 49p, a 5.2% discount to Thursday’s closing share price. THG said the fresh capital would provide Ingenuity with medium-term funding to develop into a standalone, private company. However, the fundraising did little to alleviate market concerns. Shares in THG closed down 7.7% to 47.75p. Ingenuity, which has 3,500 employees and 13 distribution centers globally, provides technology to support the online operations of third-party retailers including Holland & Barrett, The Range, and L’Oréal. The demerger would leave THG holding the beauty and nutrition business that is behind the brands MyProtein and Cult Beauty, in what it called a “simpler, cash-generative business capable of paying future dividends.” Ingenuity, once considered the crown jewel of THG, has yet to turn a profit. THG believes the demerger will simplify its structure and boost its balance sheet. John Goold, chief executive of the activist investor Kelso, which has a stake in THG and has previously called for the firm to be broken up, said that THG had “strategically done the right thing.” He suggested that a buyer could now “come in and bid for the company.”

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10/11/2024

Thunderbird’s Fiscal Results Promise a Bright Future in 2025

Kidscreen (10/11/24) Townsend, Kelly

Thunderbird Entertainment’s (THBRF) future is in its own hands, now that its board of directors is no longer actively seeking a sale of the company. That key message was delivered earlier this week at the presentation of the company’s year-end financial results. “After a thorough strategic review process…the board determined that remaining a standalone public company and executing on our strategic business plan is in the best interests of our stakeholders,” said Thunderbird CEO Jennifer Twiner McCarron in a statement. She noted, however, that the company was looking at listing itself on the Toronto Stock Exchange as a way to drive new investment. Conversations around Thunderbird’s position as an acquisitions target first began in November 2022 in connection with a proxy battle between the company and minority shareholder Voss Capital. As part of an agreement with Voss, Thunderbird brought in ACF Investment Bank to conduct a strategic review of the company. ACF concluded that while Thunderbird was a premium acquisitions asset, it was in the best interest of shareholders to wait on a sale. At the time, Twiner McCarron told investors that a potential sale was on the table for the 2024 calendar year. “The board of directors is aligned in the decision to maintain Thunderbird as an independent, publicly traded company after considering all available strategic options,” said Taylor Henderson, a Thunderbird board member and investment analyst at Voss Capital. “We believe remaining a standalone public company will lead to the best opportunity for significant mid- to long-term value creation.” Henderson added that the board believes Thunderbird is “significantly undervalued,” and the company has “navigated challenging industry dynamics better than most.” In December 2023, it embarked on a plan to buy back shares and shore up its own holdings. As of June 30, 2024, Thunderbird had repurchased 591,400 common shares worth roughly CA$1.2 million at a price of CA$2.08 per share. In presenting its fiscal 2024 results, Thunderbird reported a very slight 1% year-over-year revenue decline, and a 30% increase in adjusted EBITDA. The company credited cost-saving measures that reduced spending by more than CA$3 million, and also noted that it has zero corporate debt. For fiscal 2025, Thunderbird is forecasting more growth — 20% in revenue and more than 10% in adjusted EBITDA — targets that are “supported by a strong content pipeline, strategic investments, and signs of a stabilizing market environment.”

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10/10/2024

Proxy Adviser Tells Shareholders to Rebuke Qantas on Executive Pay

Australian Financial Review (10/10/24) de Kretser, Ayesha

Qantas (QABSY) shareholders are being advised to deliver the airline a second strike by rejecting its remuneration report, despite the board slashing former chief executive Alan Joyce’s bonuses by more than $9 million this year. ISS diverged from its proxy advice competitors Ownership Matters and Glass Lewis, recommending that shareholders vote against Qantas’ executive pay scheme at its annual meeting in Hobart this month, and against chairman-elect John Mullen’s elevation to the top board role. ISS head of Australia and New Zealand research Vas Kolesnikoff said the firm had recommended voting against the last four Qantas remuneration reports and that withholding bonuses — including from the broader management team for customer failings — had not swayed the firm. “Shareholders may question whether the total 33% downward discretion [in FY23 short-term executive bonuses] exercised by the board was sufficient given the impact of the ACCC Federal Court legal action and the High Court ruling, which has now crystallized into significant fines and penalties for the company,” the ISS report said. “An ongoing corporate governance concern is the award of annual travel entitlements to all non-executive directors and eligible beneficiaries.” ISS was referring to the Qantas practice of free flights for the board and their dependents. These are also available as a post-employment benefit for each year of service. The airline has agreed to pay $120 million to settle a case brought by the Australian Competition and Consumer Commission over failing to notify customers that flights had been cancelled, as well as continuing to raise revenue by selling tickets on canceled flights. “There’s also $3.5 billion that needs to be spent on aircraft that [former CEO Alan Joyce] never bought and increased costs now that they’ve got to fix everything,” Kolesnikoff said. Qantas said its capital expenditure bill would increase to between $3.5 billion and $3.7 billion in the 2025 financial year. New chief executive Vanessa Hudson has also pledged to spend $230 million to fix customer service issues. Almost 83% of Qantas shareholders voted against the airline’s remuneration report last year, delivering one of the biggest strikes against a major listed company. ISS told investors to vote against Mullen’s election because of his existing chairmanships at Treasury Wine Estates and Brambles, his place on the board of an NYSE-listed gas pipeline provider, and chairmanship of government consulting business Scyne. Ownership Matters agreed Mullen had a “significant workload,” leaving him “minimal capacity to respond to higher than usual demands for his time and attention,” but it supported his appointment because he was reducing his commitments.

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10/10/2024

Japan's Seven & i to Separate Some Assets

Reuters (10/10/24) Bridge, Anton

Japan's Seven & i Holdings (3382) will set up a holding company for its non-core assets to bring in outside investment and is planning to change its name, the retailer said on Thursday. The announcements mark an acceleration in its plans to boost corporate value and focus on its core convenience store business in part to resist a takeover bid by Canada's Alimentation Couche-Tard (ATD). The operator of 7-Eleven stores - numbering over 80,000 worldwide - has been under pressure from investors to divest from its large portfolio of peripheral businesses. The parent company's tentative new name is "7-Eleven Corp" to emphasize the focus on convenience stores and Seven & i said the change will be "addressed" at its annual shareholders' meeting in May 2025. Despite sales of some non-core holdings, such as department store unit Sogo & Seibu last year, Seven & i's operations remain diverse. The new company would contain a total of 31 subsidiaries, including the group's superstores business, general goods store Loft, baby goods store Akachan Honpo and the operating company of Denny's restaurants in Japan, Seven & i's presentation said. Seven & i is aiming for the new structure, to be named York Holdings, to become an equity method affiliate by February 2026 with an initial public offering planned for some point thereafter. ATD has upped the ante following its initial bid in August with a revised offer that values Seven & i at $47 billion, or 22% above its initial offer, two sources said on Wednesday. It remains to be seen whether Seven & i's latest moves will satisfy foreign investors who have been calling for several years for the sale of under-performing assets.

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10/10/2024

Pfizer Threatened Ex-CEO Over Work With Activist, Starboard Says

Bloomberg (10/10/24) Langreth, Robert

Pfizer Inc. (PFE) company officials threatened legal action against two former top executives who had been working with Starboard Value to push for changes at the drugmaker, the activist investor alleged Thursday in a letter to the company’s board. Pfizer officials or their representatives threatened former Chief Executive Officer Ian Read and former Chief Financial Officer Frank D’Amelio with “costly litigation” for working with the activist, the letter alleged, saying Pfizer had warned it would claw back their prior compensation and cancel some unvested stock unless they publicly released a statement supporting Pfizer Chief Executive Officer Albert Bourla. The executives had been in talks with Starboard about the future of Pfizer but abruptly pulled out of the effort Wednesday night, saying in a statement they had decided “not to be involved” with the effort and were “fully supportive” of Bourla, his senior management and the board of directors. Starboard’s letter Thursday escalates a campaign that began Sunday night when its $1 billion stake in Pfizer became public. The activist is seeking to spur a turnaround of the struggling pharmaceuticals giant, Bloomberg has reported, citing a person familiar with the matter. Starboard’s letter said that it had approached Read and D’Amelio during its due diligence process, and that in meetings with Starboard both had expressed concerns about the trajectory of Pfizer’s business and offered to help out. It called for Pfizer’s board to form a special committee to investigate what it alleged was “coercive conduct” by Pfizer or its representatives. The two former officials were also involved in calling four Pfizer board members in recent days to inform them of Starboard’s interest the company, according to a person familiar with the situation. Shares of Pfizer fell 1.4% in New York on Thursday. They had gained 5% since the start of the year through Wednesday’s close. Starboard is scheduled to meet with Bourla and Pfizer’s lead independent director, Adobe Inc. CEO Shantanu Narayen, on Oct. 16 to present views on the company, according to the letter on Thursday. Pfizer declined to comment. Pfizer has had numerous setbacks as it tries to come up with new growth products to replace fading sales of its Covid-19 shot and therapy. The company’s efforts to come up with an obesity pill have mostly fallen flat so far. It brought a new RSV vaccine to market, but a rival shot from GSK plc has gained more market share. Earlier this year, a gene therapy for Duchenne muscular dystrophy failed in trials. In September, it withdrew a sickle cell anemia drug from the market after studies found increased deaths in people on the drug. It had paid more than $5 billion to acquire the drug’s maker in 2022.

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10/10/2024

Hedge Fund D.E. Shaw Nominates Three Directors at Air Products, Has $1 Billion Stake

CNBC (10/10/24) Goswami, Rohan; Faber, David

Multi-strategy hedge fund D.E. Shaw revealed on Thursday it had amassed a roughly $1 billion stake in industrial gas giant Air Products and Chemicals (APD), the second activist stake at the $71 billion company. D.E. Shaw, one of the largest hedge funds in the world by assets, said in letters made public Thursday that its efforts to engage privately with the company had been largely rebuffed and marked by “an apparent lack of urgency.” The investor plans to nominate three directors to the company’s board, people familiar with the matter said. The potential challenge would come alongside another activist fund, Paul Hilal’s Mantle Ridge. Mantle Ridge has a similarly sized stake and, like D.E. Shaw, is seeking a clear succession plan for Air Product’s CEO, 80-year-old Seifi Ghasemi. Scott Sutton, the former CEO of Olin, is one of D.E. Shaw’s nominees and is seen as a potential CEO candidate, those people said. D.E. Shaw also took aim at how Air Products has structured some of its largest deals. Large-scale infrastructure projects typically include “offtake agreements,” which effectively guarantee a certain amount of cash flow from an investment. D.E. Shaw said in its presentation to Air Products’ board that the company has begun significant hydrogen projects costing many billions of dollars, without any guaranteed cash flow. D.E. Shaw believes this departure from the norm for both the business and the industry is one of the factors driving Air Products’ underperformance compared to its historic average and peers. While D.E. Shaw is presently only seeking to install three directors, Hilal’s Mantle Ridge intends to mount a proxy fight for control of the board, the people said. It is a strategy that CEO Ghasemi has defended, despite the success that competitors like Linde have had pursuing less-riskier projects with offtake agreements. D.E. Shaw, like Mantle Ridge and many analysts, has also identified the lack of succession planning and generous contract given to CEO Ghasemi. The activist in its letters and presentation raised questions about whether the company’s board was adequately managing the succession process. Air Products declined to comment on either activist engagement.

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10/10/2024

Thunderbird Entertainment Group Reports Fiscal 2024 Results

Business Wire (10/10/24)

Thunderbird Entertainment Group Inc. (THBRF) today announced its financial results for its fourth quarter and fiscal 2024, which ended June 30, 2024, and provided a corporate update. Revenue for the fourth quarter increased 37% year-over-year from $37.7 million to $51.8 million. Revenue declined by 1% year-over-year, from $166.7 million to $165.3 million, for the fiscal year ended June 30, 2024. A Special Committee of the board of directors of Thunderbird comprised of three directors of Thunderbird (including two independent directors and a Voss Capital-nominee) was created to assess Thunderbird’s capital allocation strategy and strategic alternatives and opportunities to maximize shareholder value. After conducting a thorough review process, and obtaining financial and legal advice, the Special Committee recommended to the Board that the formal strategic review process be concluded, and the Company focus on the execution of its strategic business plan. The Board, following the recommendation of the Special Committee determined that it was in the best interests of the Company’s stakeholders to terminate the formal strategic review process and have the Company’s management focus on executing the Company’s current business plan, which includes the pursuit of strategic growth opportunities. Taylor Henderson, Company Director and Investment Analyst at Voss Capital noted, “The Board of Directors is aligned in the decision to maintain Thunderbird as an independent, publicly traded company after considering all available strategic options. We believe remaining a standalone public company will lead to the best opportunity for significant mid- to long-term value creation. We believe that Thunderbird is significantly undervalued and the work to close this valuation gap will continue through a combination of ongoing operational execution and strategic actions to increase visibility and liquidity for the stock, such as the potential uplisting to the TSX. Thunderbird has navigated challenging industry dynamics better than most. We believe the troughs for earnings and margins are behind us and we have a line of sight to accelerate revenue growth and margin expansion. The management team and Board are confident in Thunderbird's ability to execute on its targets.”

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