TURKCELL
Istanbul Stock Exchange TCELL Meeting Date: 3/26/2015
Minority shareholders in Turkcell have endured a state of extended suspense since 2010 due to a protracted, complicated three-way battle between the Company’s majority shareholders leaving everyone wondering who controlled the Company. While Turkish firm Cukurova and Russian Alfa Group fought over a significant package of shares conditionally awarded to Alfa through a debt default, Swedish Teliasonera pushed for a board overhaul and ownership restructuring, ultimately filing lawsuits against both Cukurova and the now former independent chairman of the board. Finally, some resolution was reached in 2014 when Cukurova won the right to repurchase the shares held by Alfa Group, giving it de facto control over the Company. Closing another chapter of the dispute, Cukurova was also ordered to pay Teliasonera nearly $1 billion in damages stemming from its failure to uphold a share purchase agreement.
Despite this reprieve, many questions remain unanswered. Since 2011, Turkcell has been unable to convene a general meeting due to lack of quorum as the majority shareholders refrained from attending during their legal disputes. As a result, the Company has been unable to approve the accounts, dividends or auditor appointments for several years. In fact, since the dividend proposal was rejected by the 2011 meeting, the board has failed to even reach a consensus on dividend proposals for subsequent years, leaving shareholders with nothing more than speculation about the potential dividend payments that could be unlocked once the disputes are resolved. The board’s apparent inability to govern Turkcell led to the extreme measure of the Turkish Capital Markets Board replacing the entire board in 2013 with avowedly independent candidates.
While it may seem that such a dramatic board overhaul and the resolution of legal disputes over company ownership would have resulted in increasing certainty and transparency for shareholders, unfortunately, this has not proven to be the case. In the 2015 annual meeting, shareholders will be asked to approve each of the necessary items that could not be approved since 2010. The dividend proposals for fiscal years 2012 through 2014 remain glaringly blank, as does the proposal to elect directors, showing that even the entirely new board appointed by regulatory authorities has been unable to resolve these pressing concerns. Absent clarification, one might conclude that lingering disputes between the significant shareholders and/or other stakeholders appear to create ongoing gridlock.
Unfortunately, shareholders may now be faced with more troubling questions about Turkcell’s governance as the 2015 annual meeting approaches: to what extent, if any, is the Turkish government planning to intervene in the Company’s business? Two of the three directors appointed by the Capital Markets Board (CMB) as independent arbiters have a long history of government service; all three are reported to be strong supporters of the ruling AKP party with political connections. The Turkish press has recently reported speculation by company employees and industry insiders of a possibility of stronger government intervention, even possibly including the sale of certain parts of Turkcell’s business. While we do not believe these reports to be substantiated, we recognize that shareholders may be rightfully concerned, particularly in light of the unexplained resignation of Turkcell’s CEO in January 2015 and the absence of a long-term successor. Equally, shareholders are not likely to be reassured by the president of the CMB’s recent vague public assertion that it expects the CMB to invoke the heretofor unused Investor Compensation Center (ICC) to intervene on behalf of shareholders if Turkcell’s March 26, 2015 annual meeting fails to meet quorum again. The unprecedented use of the ICC would allow the CMB to make any and all decisions on behalf of shareholders that were not validly decided. While such measures could actually resolve some shareholder concerns, given the abundant uncertainty surrounding recent and planned actions by the company, shareholders may be advised to keep a careful eye on the upcoming meeting and subsequent actions of the CMB.
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