Trian responds to shareholder claims of poor governance

Global Value Fund, Invesco, Janus Henderson Investors UK and Pelham Capital have called for an Extraordinary General Meeting of TI1 shareholders to vote on its proposals. Along with the removal of current board members Chris Sherwell, Simon Holden and Anita Rival, the group proposed two new directors, Robert Legget (independent) and Miles Staude (representing the committee) in their stead.

Legget is managing director at Progressive Value Management Limited and Staude is manager of the Global Value Fund.

Together, along with Aegon Asset Management UK, which allegedly “is supportive of the resolutions being proposed at the EGM”, the group makes up make up 43.6% of TI1 shareholders.

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In its official notice, the group said it that the “conduct of the TI1 board raises serious and concerning governance issues that cannot be ignored”.

The notice added the group does not feel that the board has “met the required standards of corporate governance and adequately discharged its fiduciary duties”, citing seven “shortcomings”.

These issues stem from proposals made at the 2021 AGM, which the independent group claim “materially changed” TI1’s investment case from what was laid out when it publicly listed in 2018.

The group said that when TI1 came to IPO, the “defining feature of its investment case was a clear aim to invest into a single publicly listed company”.

But this system was altered at the AGM, and instead of owning one investment at a time, TI1 would be able to own multiple investments simultaneously.

It had also set out to remain as a minority shareholder, however this was also changed, allowing TI1 to become a majority shareholder, or even total ownership of companies.

One of the other key changes was that instead of returning all profits generated after exiting an investment, the manager could now reinvest all of the company’s capital arising from a disposal, “transforming TI1 into a permanent capital vehicle”.

Shareholders claim that this was a large alteration to the initial investment case laid out when TI1 publicly listed and they opposed these changes at the time.

The group added that these measures were passed because “the votes in favour of the resolution included shares held by other funds managed by Trian and by Jefferies (financial adviser to the company), who together owned 28.6% of the company at the time of the meeting, and who stood to gain from the approval of Resolution 9.”

It added that Jefferies “may have had conflicting interests at the time of the vote” and that they, and Trian, should have abstained from voting on this resolution.

“If the votes of Trian and Jefferies had been excluded, the committee’s calculations are that Resolution 9 would have been overwhelmingly rejected by 70% to 30% of the votes cast.”

Regarding why they felt compelled to make this appeal, the group said that the “principal aim” of these motions is “achieving an acceptable standard of governance and to restore the trust and confidence of the independent shareholders”.

It said that the board’s response to its concerns since the aforementioned AGM have been “wholly inadequate” and that the recent appointment of Rival to the board “without a robust, transparent and independent search process and without any engagement with independent shareholders” had, according to them, “raises further concerns about the ability of the current board to exercise independent judgement”.

“Therefore, the situation requires a powerful shareholder response.”

TI1 initially declined to comment but have since posted a public statement, confirming receipt of the group’s EGM request.

The TI1 board stated: “That it has consistently acted responsibly, upholding the standards expected under the UK Code of Corporate Governance and has effectively discharged its fiduciary duties.

“The board is in the process of reviewing the content and legality of the request with its advisers and a further announcement will be made in due course. The board welcomes input and views from all stakeholders.”

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