Activist investor Bell Rock has effectively admitted it was in control of more Whitehaven shares than publicly disclosed heading into Whitehaven Coal’s annual shareholder meeting last week – but the hedge fund has dumped the majority of its direct holding.
In a disclosure to the ASX on Monday, Bell Rock said it had sold 35 million Whitehaven shares under its control, selling down about $260m worth of Whitehaven stock and reducing its direct interest to 0.6 per cent of the company’s shares.
But the disclosure also includes an admission it controlled another 39.4 million Whitehaven shares through derivative swaps – taking its total holding ahead of Thursday’s AGM to about 10 per cent.
Whitehaven sought Takeovers Panel intervention into Bell Rock’s shareholding ahead of the annual meeting, seeking orders to exclude votes on the basis that Bell Rock had a far larger position than publicly disclosed – which Whitehaven put at about 12 per cent.
The panel declined to intervene last week. Its decision became largely irrelevant, however, when Bell Rock won support of more than 40 per cent of shares voted at the meeting for its push to reject Whitehaven’s remuneration report – well above the 25 per cent threshold needed to trigger a first strike.
Bell Rock said on Monday it effectively now controlled about 5.3 per cent of Whitehaven shares – the overwhelming majority through derivative holdings likely to wind down in time.
The sell-off comes within days of Bell Rock delivering a major blow at Whitehaven’s annual shareholder meeting, rounding up enough support in its campaign against the company’s board to deliver a first strike on remuneration and yielding a significant backlash against the issue of about 534,000 shares to managing director Paul Flynn, as part of its new executive incentive plan.
Following the shareholder meeting, Bell Rock chief investment officer Mike O’Mara signalled an intention to stick around and keep up the pressure on both Mr Flynn and Whitehaven chairman Mark Vaile.
“Paul Flynn and Mark Vaile have both been on the board for 11 years each and, as the recent Qantas issues have shown, renewal is vital to protect both the company and the interests of shareholders,” he said.
Bell Rock launched its campaign against the company’s remuneration report after failing to pressure Whitehaven to return its $2.65bn cash pile to shareholders rather than close a $US3.2bn coal mine acquisition from BHP.
Ahead of last Thursday’s shareholder meeting Bell Rock had argued changes made to Whitehaven’s management incentive scheme incentivised risky acquisitions rather than shareholder returns.
At last week’s shareholder meeting Mr Vaile defended the company, noting the company returned $1.6bn in dividends and share buybacks last financial year.
“In the event of M&A, such as the Daunia and Blackwater acquisition, our board assesses outcomes pre and post M&A against the company’s forward plan, meaning there is no incentive to ‘buy’ production or EBITDA, or acquire a company with a lower cost structure to achieve cost targets, as these would not be included in a like-for-like assessment,” he said. Shares closed down 5.6 per cent at $7.29 on Monday.
