Highlights from the world of Proxy Papers you can’t afford to miss!
Cabela’s Incorporated
New York Stock Exchange – July 11
Outdoor and sporting goods retailer Cabela’s looks to obtain shareholder approval for its sale to rival Bass Pro Shops after federal antitrust regulators recently signed off on the merger. The terms of the $5 billion all-cash deal were modified in April 2017 following regulatory scrutiny — not only of the competition aspects of the merger, but also of the related sale of Cabela’s bank subsidiary to Capital One. The bank subsidiary, named World’s Foremost Bank, runs Cabela’s credit card and loyalty reward program. When Capital One expressed concern that it might not obtain regulatory approval for that part of the transaction in time for the deal to complete, the parties turned to a regional bank in Georgia named Synovus Financial Corp., which acted as a “white knight” enabling the parties to salvage the deal.
Under the revised terms of the transaction, a chunk of the cash that would have gone to Cabela’s shareholders instead will find its way to other parties involved in the deal, resulting in a reduced purchase price of $61.50 per share, $4.00 lower than originally planned. The revised price is a modest premium of 12% over Cabela’s undisturbed stock price in September 2016 prior to any deal announcement. On the other hand, the price is 33% higher than the company’s stock price in April 2017 once it had become clear that the deal would not likely be completed under the original terms. In further seeking to justify the lower purchase price, Cabela’s board and management has warned investors of a recent decline in the company’s business and financial performance amid a generally weak retail environment overall.
Pets at Home Group plc
London Stock Exchange – July 11
Last year, the Investment Association opened the door for the introduction of restricted share plans (“RSPs”) that met certain criteria: that the maximum opportunity would represent at least a 50% discount to the opportunity previously available under, say, a performance share plan; and that the RSP would deliver enhanced transparency and simplicity. Despite this guidance, to date shareholders have generally been minded to reject RSPs at UK companies, performance share plans being the currently accepted standard, and Aggreko and Johnston Press both experienced RSP-related revolts this year.
The search for an acceptable alternative to traditional LTIPs goes on however, and Pets At Home will be proposing an RSP at their forthcoming AGM – this plan, however, actually has a chance of being passed. Not only does the plan deliver a 50% discount versus existing arrangements, but awards are subject to a transparent financial underpin and five-year vesting period, as well as clawback and malus provisions. Given that the plan appears to be the first to genuinely satisfy the Investment Association’s suggested RSP model, Pets At Home’s AGM could well become a seminal test case for remuneration committees interested in, but perhaps currently too cautious to introduce, similar measures.
Burberry plc
London Stock Exchange – July 13
Burberry’s upcoming shareholder meeting may be haunted by the ghost of AGMs passed. Three years ago, the company saw its advisory remuneration report rejected by shareholders, primarily due to concerns over the terms of then-newly appointed CEO Christopher Bailey’s promotional package, which included generous benefits and a one-off award of 500,000 shares, worth £7.25 million at grant.
Now, with Mr. Bailey set to step down from the CEO position to focus solely on his role as the company’s chief creative officer, the first tranche of that one-off award has come due. Based on the committee’s assessment of performance in a number of areas, including strategic development, financial performance, personal contribution and shareholder value, it determined that 61.7% of the initial tranche, or 77,084 shares, will vest at the end of July. That’s not all for the CCO and soon-to-be former-CEO, who is set to shoot up the share register: he’s also due to receive another 600,000 shares in July, representing the first two tranches of a non-performance-based retention award he received in 2013, prior to becoming CEO (he had previously deferred receipt of the first tranche, which was originally due to vest in 2016).
Perhaps unsurprisingly, the company was forced to offer another generous award to appoint Bailey’s replacement as CEO, Marco Gobbetti. However in comparing the terms of the grant to Bailey’s, there are some mitigating circumstances: unlike Bailey, who was already a Burberry executive when appointed to CEO, there was a need to coax Mr. Gobbetti away from Céline, and his grant is intended to make him whole for awards he left on the table; moreover at €4.91 million it’s a bit more restrained than what Mr. Bailey received. Nonetheless, it will be interesting to see if shareholders are willing to pay full retail for another CEO, particularly given that the old one’s still around collecting awards.