Leading proxy advisoronly provides "qualified support" for capital raising with no "urgent need"-reconstituted board including direct shareholder representation must "reevaluate its merits"
Consortium of concerned investors reiterates call to prevent a destructive rights issue toensure complete protection forall shareholders
LUXEMBOURG, Oct. 29, 2020 (GLOBE NEWSWIRE) -- The REFOCUS consortium of leading European investors, which now holds a combined five per cent stake in Unibail-Rodamco-Westfield SE ("URW"), welcomes the recommendations from Institutional Shareholder Services ("ISS") and continues its campaign to urge all investors to vote AGAINST the value destructive €3.5bn rights issue as well as FOR enhanced governance at a Supervisory Board level in order to provide maximum protection for all shareholders.
ISS, which acts as the primary proxy advisor for the vast majority of URW's institutional shareholders, called on shareholders to vote for the addition of all three of the consortium's nominees to the Supervisory Board, while only providing "qualified support" for the capital raising for which there is no "urgent need" with the intention of signalling "the need to hold off on the proposed capital raise and provide an opportunity for a reconstituted board that includes direct shareholder representation to reevaluate its merits with access to non-public information."
Commenting on the recommendations, Léon Bressler and Xavier Niel, said:"ISS's report clearly recognises the major issues that form the basis of our REFOCUS campaign: the self-inflicted damage of the disastrous Westfield transaction, the unnecessary nature of arights issue at the worst possible moment given substantial liquidity and relatively low cost of debt, a total absence of a long-term strategy and a clear lack of oversight from a supervisory board with little financial stake in the future of the company.
"Since the successful launch of our REFOCUS initiative we have heard from investors, ranging from institutions representing millions of savers and pensioners to the smallest retail and employee shareholders. There is strong support from investors who would be hurt by URW's RESET plan and who have been completely ignored by URW'smanagement team and Supervisory Board who cling on toa failed strategy.
"Given the total support for the RESET plan from the current Supervisory Board, and the fact that the rights issue with no defined price can be executed immediately after the EGM by a misguided leadership team,ISS's well-intentioned plea to allow a reconstituted board with direct shareholder representationto re-evaluate does not provide the absolute protection required by all shareholders at this stage. Shareholders must rely on their own judgement to protect their investment and vote againstthe rights issue."
We call on ALL shareholders to vote AGAINST the proposed rights issue, and FOR our nominations to the Supervisory Board. You can find out how to do this on our website - https://refocusnotreset.com/faqs
In its 28thOctober 2020report, ISS notes:
- "The central issue in this proxy contest is the substantial capital raising, which triggered public opposition from the dissidents. URW's current issues are largely self-inflicted and mostly related to its leverage, inherited from the Westfield deal, for which current management is responsible."
- "Considering the manageable impact that the COVID-19 crisis has had on the company so far and URW's substantial liquidity, our analysis does not lead to the conclusion that there is an urgent need for the proposed capital raising. Moreover, the dissidents have made a compelling case that there are sufficient reasons to question the company's strategy and the board's role in overseeing management, which has resulted in significant TSR underperformance since the Westfield deal was announced. This suggests that shareholders could benefit from additional oversight on the board, which is ultimately responsible for major strategic decisions."
- "Our recommendation of qualified support for the capital raise - in combination with our recommendation of support for the addition of the dissident nominees to the board - is intended to signal the need to hold off on the proposed capital raise and provide an opportunity for a reconstituted board that includes direct shareholder representation to re-evaluate its merits with access to non-public information. If, after reassessing available alternatives, the reconstituted board were to conclude that a capital raising is necessary, the company could proceed with the rights issue."
- "We note that none of the company's main competitors, particularly those in the US, where the sector has been hit harder by the current crisis, have thus far proposed to raise capital - except for Hammerson, the UK operator, which has the highest net debt/EBITDA in our peer group and operates exclusively in the worst hit European market."
- "The above analysis of the impact of a large, discounted capital raising on the future potential stock price recovery and possible upside would suggest that current shareholders, who invested in the company prior to COVID-19, would bear substantial losses in the value of their investment."
- "URW's current issues are largely self-inflicted and mostly related to its leverage, inherited from the Westfield deal, which saddled the company with a substantial debt pile. Despite over-delivering on the initially planned asset disposal plan, management was unable to bring down net debt to more reasonable levels before the COVID-19 pandemic started, as asset values were impaired in the interim. While leverage is relatively high, the company's ample liquidity and relatively low cost of debt (which management agrees is not an issue), as well as its high-quality asset portfolio and broad geographical diversification mitigate to a certain extent the leverage concerns."
- "The central issue in this proxy contest is the substantial capital raising, which triggered public opposition from the dissidents. The rights issue, which sent the shares 20 percent down over the two days following its unexpected announcement, comes at a steep price to shareholders in terms of diluting future potential upside once the current crisis passes. Shareholders are rightly questioning the proposed cure at a time when the stock is trading at its lowest level for the last 20 years. We note that the rights issue can be executed immediately after the EGM approval is obtained."
- "Overall, our analysis, which is based on publicly available information, does not lead to the conclusion that there is an urgent need for the proposed capital raising. The dissidents have also made a compelling case that there are sufficient reasons to question the company's strategy and the board's role in overseeing management, which has resulted in significant TSR underperformance since the Westfield deal was announced."
- "Our recommendation of qualified support for the capital raise - in combination with our recommended support for the addition of dissident nominees to the board - seeks to encourage the board to act with prudence and consider the results of the shareholder vote (and the views of the dissident nominees, if elected) before rushing to execute a capital raise immediately after this EGM."
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This document has been issued by Flagship Retail Investment S.à r.l. ("Flagship Retail Investment"), an investment vehicle of Aermont Capital Real Estate Fund IV SCSp managed by Aermont Capital Management S.à r.l., and by Rock Investment, a wholly-owned subsidiary of NJJ Holding, the personal investment vehicle of Xavier Niel ("Rock Investment" and, together with Flagship Retail Investment, the "Consortium").
The purpose of this document is to provide information about the Consortium's views on Unibail-Rodamco-Westfield ("URW"), its opposition to the €3.5 billion rights issue at the 10 November 2020 general meeting, the possible alternate strategy that could be implemented to deliver long-term shareholder value and its proposal to strengthen URW's Supervisory Board through the appointment of new members.
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