Important highlights from upcoming meetings, provided by Glass Lewis’ global research team
PJSC Gazprom
Moscow Exchange – June 29
With the world’s attention focused on Russia, there’s another ongoing international competition besides the football: the battle over Gazprom’s assets in Europe. And like many of the goals scored so far, the initial outcome may be subject to further review (if not video-assisted). An ongoing $80 billion dispute with Ukraine’s Naftogaz was, in theory, resolved (in favour of Naftogaz) by a Stockholm arbitration tribunal in May 2017, however the Russian state-controlled conglomerate subsequently petitioned the initial decision, and both sides ultimately claimed victory when it was reviewed in December. The ensuing months have only brought more disagreements over the Swedish court’s ruling, and in May Gazprom announced that it was appealing to reverse the decision. As things stand, Ukraine’s Naftogaz is shopping around to get help in enforcing its $2.6 billion award, with Swiss and Dutch courts obliging by seizing Gazprom’s local assets, and Gazprom filing an appeal in each jurisdiction.
Both further afield and more immediately relevant, shareholders may need to think twice about voting at Gazprom’s upcoming annual meeting. As a result of the recent extension of economic sanctions by the United States, proposals regarding director fees and re-elections got slightly more complicated. Some custodians may not process votes on these proposals, as the re-election and/or payment of Messrs. Aleksey Miller and Andrey Akimov may violate the terms of the sanctions.
With all that said, Gazprom does have something to celebrate: last month the European Commission issued a press release announcing that it had reached a settlement with the company over an antitrust probe and alleged breaches of EU legislation, with no financial penalties levied.
Petropavlovsk plc
London Stock Exchange – June 29
It’s been nearly a decade since Peter Hambro and the Petropavlovsk plc board asked shareholders for an increase in the group’s debt limit, intended to fund a massive boost in production just as gold prices were reaching new heights. Then the gold price fell, and the increase in extraction wasn’t enough to make up the difference. Hambro is long gone, and long-standing shareholders have seen their holdings diluted away through refinancing. Now, in what is becoming routine, Petropavlovsk faces its second annual contested election. Last year, Renova, M&G and Sothic proposed a total of four nominees, resulting in a completely revamped board. However dissidents CABS Platform Limited and Slevin Ltd., holding roughly 9.1% of the share capital, didn’t like the new look, and have submitted proposals seeking the removal of all incumbent (and any interim) directors along with a group of replacements. They appear to have some support from the company’s largest shareholder, Fincraft, which has announced its intention to support most of the dissident proposals (except for the removal of their own representative director, Bektas Mukazhanov, who was appointed earlier this year) due to a lack of confidence in the current board’s ‘closed’ approach. Sothic has pushed back, warning that the dissident campaign could undermine Petropavlovsk’s turnaround potentail and create the possibility for the company to be sold at a discount.
Allahabad Bank
Bombay Stock Exchange – June 27
Indian proxy season is underway, and the balance sheets of state-owned banks are dripping in red ink as non-performing assets (NPAs) impact asset quality. Allahabad Bank is no exception as it posted a net loss of INR 46.74 billion as at March 31, 2018, down (up?) from a net loss of INR 3.14 billion for the previous year. The Bank is operating under the Reserve Bank India’s (“RBI”) Prompt Corrective Action Framework, likely as a Risk Threshold 2 company, due to its loss and high NPAs. Yet, this company saw the Finance Ministry order the removal of its Managing Director and CEO, Ms. Usha Ananthasubramanian, for her role in a suspected major fraud at her former employer, Punjab National Bank. Moreover, the RBI recently placed restrictions on Allahabad’s lending practices, while borrowers have been told to switch banks in order to access credit. Unfortunately, the situation is not unique to Allahabad. This year’s Indian proxy season looks to be a rough one for state-owned banks, several of which have already disclosed significant losses and a need for Government recapitalization to meet Basel III capital adequacy ratios.
Nissan Motor Co Ltd
Tokyo Stock Exchange – June 26
Perhaps Nissan Motor’s ongoing struggles with meeting safety standards shouldn’t come as a surprise — over the past year alone, the company has conducted (non-Takata-related) recalls of over 79,000 cars because of curtain and airbag issues, and 56,000 more due to power steering problems. Another 415 cars have been recalled due to issues inside the master brake cylinders, and U.S. regulators are investigating further brake problems on over 100,000 vehicles currently on the road. As such, the Ministry of Land, Infrastructure and Transport’s September 2017 finding that the company’s final vehicle inspections were being conducted by unqualified workers may not have raised eyebrows. However, the scale of the problem, which prompted a recall of 1.21 million cars and could lead to fines of up to ¥32.1 million, was still something of a shock. Since then, internal investigations have shown that the improper inspections had taken place at one factory since at least 1979, and more recently across all factory plants, as well as at other group subsidiaries, such as Nissan Shatai.
Also of interest to shareholders is the company’s strategic alliance with Renault SA, and now Mitsubishi Motors. Comments from Carlos Ghosn suggesting that deeper ties would soon be necessary prompted speculation that a merger might be underfoot; however more recently CEO Hiroto Saikawa denied any transaction, indicating that the current system of cross-shareholdings could instead be maintained.
Mylan N.V.
NASDAQ – June 29
Mylan N.V. was plagued by controversy going into its 2017 annual meeting, specifically regarding drug pricing and executive compensation practices. Shareholders sent a clear message of dissatisfaction, as the non-binding advisory resolution on executive compensation received support from only approximately 16.4% of the votes cast. Additionally, directors Wendy Cameron, Neil Dimick and Mark Parrish, each of whom served on the compensation committee, received approximately 55.7%, 49.7% and 47.9% against votes, respectively. In response to last year’s voting, the company made several changes and undertook an extensive shareholder outreach initiative. The compensation committee was largely refreshed, and following Ms. Cameron’s departure at the 2018 meeting, will consist entirely of new directors. Mylan has also refreshed the board, adding two new directors in 2018. Additionally, the company improved disclosure regarding its approach to Corporate Social Responsibility and took actions relating to the design and oversight of the executive pay program. At this year’s annual meeting, shareholders will have to decide if the company has done enough to address these significant concerns.
Takeda Pharmaceutical Company
Tokyo Stock Exchange – June 28
After a long negotiation, Takeda Pharmaceuticals is ready to enjoy its new toy. Following a year long negotiation, in May 2018 Takeda agreed to acquire Ireland-based Shire plc for $61.5 billion, in a deal that the board believes will create a global, values-based, R&D-driven biopharmaceutical leader with an attractive geographic footprint and the scale to drive future development — along with complementary positions in gastenterology. However not everyone is pleased with the purchase, which did not require shareholder approval. A group comprising roughly 130 shareholders and representing about 1% of the company’s voting rights opposes the transaction, citing dilution, impact on earnings per share, and the associated debt-load. The deal itself did not require shareholder approval, but the company will still need two-thirds shareholder approval for the issuance of new shares that will be used to fund the acquisition at a special meeting that is expected to take place at the end of the year or beginning of next year. A group of twelve shareholders is so concerned by the purchase that they want to take away the board’s credit card, proposing an amendment to the company’s articles that would require shareholder approval of any future acquisition whose total consideration exceeds 1 trillion yen.
Rizal Commercial Banking Corp.
Philippine Stock Exchange – June 25
Rizal may face tough questions about how its internal systems failed to stop employees from being intrinsically involved in the world’s greatest cyber heist. In this case, employees are accused of being involved in the laundering and distribution of funds following the hacking of the SWIFT network that saw an attempted US$1 billion theft from the Bank Bangladesh. While only $81 million was ultimately stolen, those funds went through one of Rizal’s branches, where the funds were routed and dispersed into the Philippines secretive casino world. While the company received the largest fine from the Philippines government for its lack of internal controls, it denies responsibility for having to repay Bank Bangladesh what was stolen. However the threat of litigation against Rizal is very real, likely taking place in the United States. With the potential penalty sought by Bank Bangladesh representing roughly a year of Rizal’s net profits, longer-serving members of the board have an obligation to determine what must be done to avoid further damage and loss of shareholder value.
RELX plc & RELX NV
London Stock Exchange – June 27 (plc); Euronext Amsterdam – June 28 (NV)
This one’s for the analysts, the custodians, and the data collators. To be clear, the merger of RELX plc and RELX NV isn’t really all that exciting. The change in corporate structure is intended to remove complexity and increase transparency while remaining entirely profit neutral (before and after tax), and has been designed to have no impact on the economic interest of any shareholders in either the current UK or Dutch vehicle. If not particularly interesting to shareholders, it is nonetheless notable to anyone who has had to reconcile the financial statements, meeting agenda and other disclosures of two distinct entities that have long been, in their business if not in their reporting, the same. Huzzah.
OTHER NOTABLE MEETINGS:
- Activision Blizzard (NASDAQ — June 26)
- Mastercard Incorporated (New York Stock Exchange – June 26)
- Federal Hydrogenerating Company – RusHydro (Moscow Exchange – June 27)
- Whitbread plc (London Stock Exchange — June 27)
- Mining and Metallurgical Co Norilsk Nickel (Moscow Exchange – June 28)
- The Kroger Co. (New York Stock Exchange – June 28)
- Delta Air Lines, Inc. (New York Stock Exchange – June 29)