Thursday May 15, 01:34 PM
ASMI shareholders prepare for legal action over poison pill - source UPDATE
(adds background on stakeholdings)
LONDON (Thomson IM) - Investors in ASM International NV are preparing the ground for a legal challenge to a poison pill likely to scupper an AGM vote to dismiss chief executive Chuck del Prado and five members of the supervisory board, according to a key shareholder source.
ASMI has come under increasing pressure from a growing number of investors in recent months, culminating in a resolution added to the agenda for the May 21 meeting which called for the directors to be replaced.
But the ASM International Foundation said on Wednesday it has exercised an option to buy preference shares totaling 29.9 percent of the outstanding share capital of the company.
Coupled with the Del Prado family holdings, this is likely to ensure that management will survive the vote, analysts have noted.
The shareholder source argued the move will only have succeeded in angering more investors: 'It's obviously a last minute, desperate ploy by the management,' they said
The deadline for proxy votes ahead of the AGM vote was 9.00 a.m. on Wednesday, the same day that the foundation said it took its 29.9 percent stake in ASMI.
ASMI was not immediately available to comment, while the ASMI Foundation declined to comment on the threat of legal action.
But a spokesman for the foundation confirmed comments from the foundation chairman, Michiel van Galen, who said on Wednesday in a conference call that the ASMI situation is different to a case involving Dutch company Stork NV.
In that case, activist investors tried to split Stork (Berlin: VMSA.BE - news) up, but saw the Stork Fondation move to protect the company by buying new preference shares.
The poison pill was challenged in court and the investors won.
'There exists a process to legally challenge the poison pill, [and] based on the Stork precedent this could be done,' the shareholder source said.
And the process is already being followed.
'I think there will be action taken,' the source said.
'I can't tell you what we're going to do now, but we're reviewing the situation with our lawyers. I'm not saying [a legal challenge] is going to be the solution, but you have to think that's a high probability.
'That route was effective with Stork and ... the situations are very similar. The poison pill was used not to fend off a hostile bid, but was used against shareholders to entrench management,' the source added.
The campaign to change management and strategy at ASMI has been led by Fursa Alternative Strategies LLC and Hermes Focus Asset Management Ltd. Fursa cut its stake in ASMI on May 12 as part of a portfolio rebalancing, but still holds 5.9 percent; Hermes has a more than 15 percent stake.
Hermes was responsible for gathering together the proposed board replacements, including including Farhad Moghadam, a former top executive of Applied Materials Inc (NASDAQ: AMAT - news) .
Other investors have since indicated their support for Fursa and Hermes, including UK hedge fund Centaurus - which holds a more than 7 percent stake - Sandell Asset Management and Pequot Ventures. The proposal to oust del Prado and the other directors has also been supported by shareholder advisory firm Institutional Shareholder Services.
Shares in ASMI were lower in afternoon trading, falling 7.57 percent at 16.35 euros, while the AEX (Amsterdam: news) was up 0.34 percent at 490.04 points.
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