AGM problems? Just call Sheryl
Need to know. Your 5-minute digest
A week on Wednesday a vote will take place in Dublin on whether to boot Brian O’Cathain off the board of Petroceltic International.
The oil and gas company’s biggest investor, Worldview Capital a Swiss-based hedge fund run by Angelo Moskov, a former Deutsche Bank trader, with 28.8 per cent has been having a public ding-dong with senior management for a year or more over everything from the terms of a $100 million share sale to the collapse of a potential takeover and the subsequent collapse of Petroceltic’s share price.
Then, a little more than a month ago, Worldview piped up to call an extraordinary general meeting at which it wants to clip Mr O’Cathain and install Mr Moskov and one of his guys in the Petroceltic boardroom.
Time to call in the proxy solicitation specialists. These are firms that help companies (or activist investors) to win shareholder votes.
They have been operating quietly behind the scenes since Wall Street crashed in 1929, helping corporations to win takeover battles.
Sheryl Cuisia has been in the game getting on 15 years, first for Georgeson, the New York-based big beast on proxy’s street (acting for Petroceltic in its dust-up with Worldview), then, for the past three years, for Boudicca, the firm that she set up and runs.
A Canadian former dance student with a penchant for Martinis, Ms Cuisia is a veteran of more than a hundred corporate battles. A week after establishing Boudicca, she landed the gig with Xstrata, working for Mick “The Miner” Davis during its merger with Glencore. She was there helping the Ruia brothers to take Essar Energy private again, and Bumi (now Asia Resource Minerals) to see off Nat Rothschild.
She says that proxy solicitation has a bad rep green kids ringing round shareholders with loads of dumb questions. Boudicca, she says, does it smarter. Something like this: it’s AGM season and post-crisis fund managers are less supine than they were. More comfortable at saying “no”. Squeaky-bum time for plenty of chief execs facing a shareholder vote on pay. Or maybe a nasty American activist fund has just turned up on the register.
Referrals for proxy work tend to come through the investment banks or lawyers advising a company, or a savvy senior independent director or a switched-on company secretary, who phones Ms Cuisia for help.
Proxy solicitation is working out where support is likely to come from. First up, understand who owns what. Analyse the register. A company probably knows its top ten shareholders, maybe even the top twenty. Which fund are the shares held in? Are they spread across several within the same institution? Who decides how to vote? The manager? Or, in the case of a passive fund, compliance? Dull, technical but important. Get votes cast properly and make them count. The UK share register for any quoted company is a blunt tool names of institutions alongside the overall size of their positions, individuals with more than 3 per cent and nominees holding shares on behalf of someone else.
Visibility is limited. Names of nominees, or “custodians”, don’t tend to offer much clue to who stands behind them. Lynchwood? BNP Paribas? Vidacos (which holds Worldview’s stake in Petroceltic)? Citi? Google won’t help, so proxy firms peel the onion, layer by layer. Hit the holder of the nominee account with a “793”, named after the section of the Companies Act 2006 requiring disclosure of who holds beneficial interest in shares.
793 Bank A in Switzerland and it may turn out to be holding a (hefty) stake for Bank A somewhere else. 793 the somewhere else and it may be holding it for Bank B, which insists that it doesn’t have to disclose. A nasty legal letter later and the stake gets tracked back to the Middle East. And so on.
Once the true register is analysed, the proxy firm helps its client to tailor a message most likely to chime with each investor. Hit the phones.
Institutional investors tend to vote. Private client brokers don’t. Get them to, if you need them. Awaken a slumbering retail shareholder base. Look at trading positions. Persuade hedge funds to press their prime brokers to vote their holdings. All the while, run the numbers, anticipate problems and head them off.
Worldview doesn’t look to have the numbers it needs, but you never know. That’s why you pay a proxy firm.