Highlights from the world of Proxy 
Papers you can’t afford to miss: Dalian Wanda, Hill International, Xura, and an update on InterOil’s cancelled meeting.
Dalian Wanda Commercial Properties Co., Ltd.
Hong Kong Exchange and Clearing – August 15
Recently, dozens of Chinese companies trading on foreign stock exchanges under fairly common dual-share structures, consisting of domestic shares and foreign-listed shares, have decided to go private. When the foreign shares are listed in Hong Kong and represent non-controlling stakes, such deals typically take the form of tender offers which, if accepted, result in the effective buyout of public investors. One such pending offer, valued at US$4.4 billion, would become the biggest privatization of a Hong Kong-listed entity. It involves the largest real estate enterprise in the world, Dalian Wanda Commercial Properties Co. Ltd., and its controlling shareholder, Dalian Wanda Group Co. Ltd., which in turn is controlled by billionaire Wang Jianlin, the second-richest person in China. However, minority shareholders of the Company may balk at the offer price because it’s just 10% higher than the price at which many of them bought in during Wanda Commercial’s IPO in December 2014. Other top holders who invested after the IPO stand to lose money on the deal. Considering that votes against the buyout by holders of just 10% of the foreign-listed shares would scuttle the deal, the outcome of the buyout offer appears to be in doubt.
Hill International, Inc.
NYSE – August 11
After a failed activist campaign last year, Bulldog Investors has launched a second attempt to replace several incumbent directors at Hill International. The move comes amid lingering concerns regarding the board’s history of shareholder unresponsiveness and outsized executive compensation practices. Over the past year, Hill has tried to address some of these concerns by engaging more with shareholders and implementing various governance initiatives. However, certain shareholders, including Bulldog, believe that those initiatives simply do not go far enough to address the core problems at the Company. Additionally, with Hill’s share price trading well below the $5.50 per share unsolicited takeover offer that private equity firm DC Capital had publicly made 15 months ago (an offer that Hill’s board swiftly rejected), discontent among public shareholders could run high at the upcoming meeting.
Xura, Inc.
NASDAQ – August 16
Xura has agreed to a $628.5 million buy-out by Siris Capital Group — a tech-focused private equity firm — on the basis of $25.00 per share, to be paid entirely in cash. We would readily argue the Siris offer followed a fairly thorough evaluation of strategic alternatives by management and the board, which evaluation included, among other things, a focused solicitation of alternative buyers and public disclosure of then-ongoing negotiations with Siris in April 2016. Given extant challenges and uncertainties associated with Xura’s business, management and the board ultimately elected to accept the Siris bid, which, it should be noted, remains unchallenged since announcement of the current agreement on May 23, 2016. Notwithstanding the thoroughness of the board’s review, however, we believe the Siris transaction – which coincides with periodic lows in Xura’s trading value, implies a modest valuation for the Company and relies on the rather tenuous and marginally disclosed support of the board’s external financial adviser – raises reasonable question as to whether the Xura board simply ran a strong process during a weak opportunity to realize the greatest possible value for unaffiliated shareholders.
InterOil Corporation
NYSE – July 28 (cancelled)
InterOil shareholders had been set to vote on July 28, 2016 regarding an acquisition proposal from Oil Search Limited when Exxon Mobil Corporation stepped in with a competing offer.
Exxon’s 11th hour bid values InterOil at around US$2.2 billion, or more than 10% higher than the implied value of Oil Search’s proposal. Exxon and Oil Search both have significant interests in natural gas assets in Papua New Guinea, including as joint venture partners in the PNG LNG project, where Exxon serves as operator. InterOil holds a significant interest in the nearby Papua LNG project, along with Oil Search, and would appear a natural acquisition target for both Exxon and Oil Search, given potential infrastructure cost savings from integrating the two projects.
While Oil Search was entitled under its merger agreement with InterOil to submit a revised offer, it declined to do so, apparently unwilling to enter into a bidding war with the larger and vastly better capitalized oil giant. Exxon’s offer provides US$45.00 in the form of Exxon stock per InterOil share relative to the implied value of US$40.09 per share in Oil Search’s cash and stock offer. Exxon and Oil Search both also offered contingent consideration tied to future resource certification at InterOil’s gas fields, offering US$7.07 per share and US$6.05 per share, respectively, for each 1.0 trillion cubic feet equivalent (tcfe) of natural gas 2C resource certified above a baseline amount.
Following further review, the InterOil board determined that Exxon’s offer constituted a superior proposal and the parties entered into a definitive agreement on July 21, 2016, with InterOil terminating its deal with Oil Search that same day. In light of these events, the InterOil shareholder meeting scheduled for July 28, 2016 has been cancelled. A new meeting to consider and approve the transaction with Exxon is expected to be held in September 2016.