4th Sep 2015 12:36
LONDON (Alliance News) - Two shareholders in The Hotel Corp PLC issued a letter to the board of the company on Friday outlining their reasons for requisitioning an extraordinary general meeting in order to push for the appointment of one of them to the board and the removal of a non-executive director.
Marcus Yeoman and Mark Jackson, who collectively own a stake of around 17% in the company through three investment vehicles, have requested an extraordinary general meeting, due to be held on September 16, claiming the investment strategy the board has recommended to shareholders is "not a well planned strategy".
Yeoman is the managing director of Springtime Consultants Ltd, through which he owns his stake in Hotel Corp. He sits on the board of a number of listed companies, including media and marketing company Reach4entertainment Enterprises PLC, 'big data' company 1Spatial PLC and investing company Guscio PLC. He currently owns a 7.1% stake in Hotel Corp through Springtime.
Jackson owns a 10% stake in the company through Venture Finance Ltd, Quetzal Securities Ltd and his self-invested personal pension account.
Hotel Corp, which invests in four-star hotel assets in the UK, said last week it had been approached by two groups of shareholders, with one, comprising Yeoman and Jackson, requisitioning the meeting and the other putting forward proposals to adopt a new investing policy for the company.
Yeoman and Jackson said this new investing policy would involve the company entering into a property investment advisory agreement with Puma Investment Management Ltd, a subsidiary of stockbroker Shore Capital Ltd, which owns a 22% stake in Hotel Corp.
Under the terms of the agreement, Puma would be paid a fee throughout the duration of the contract of 0.5% per year of the gross property asset value held by the company. It also would be entitled to receive a performance-related fee of 20% of the increase in the net asset value over each five-year period.
Hotel Corp used to own a 49.9% stake in UK Group of Hotels PLC, which collapsed into administration in 2014 and which has been wound up. That investment also was carried out through a Puma vehicle, and Yeoman and Jackson claimed that it resulted in a large loss for Hotel Corp investors but a large return for Puma. The company now has only cash assets and has been seeking ways to deploy its remaining cash or try to seal a reverse-takeover agreement.
Yeoman, who penned the letter with Jackson's support, said he has put forward several suggestions via the board on possible investment avenues the company could take and has approached Shore Capital for its support.
Yeoman and Jackson said shareholders need to consider whether there is any conflict of interest in Hotel Corp entering into an agreement with Puma, whether the proposed Puma fees are fair and reasonable and whether Shore should be voting on the deal at all.
The resolutions they have tabled include appointing Yeoman as a director of the company and removing Derek Short, currently a non-executive director.
Yeoman and Jackson said they have received "a number of supportive emails" from other shareholders which, in addition to their existing holdings, represent a total of 25% of the company's share capital. The pair are urging shareholders to vote against Hotel Corp's proposed agreement with Puma and to vote in favour of appointing Yeoman in place of Short.
The Hotel Corp addressed the points raised by Yeoman and Jackson in a circular issued last week, in which it advised shareholders to vote against the resolution the two shareholders had tabled.
Hotel Corp said Yeoman first contacted the board around a year ago saying he would be able to "bring certain expertise to the board and that he would look to bring propositions for the board to consider." The company said he had sought to become a board member at the time, but it had told him to come back with more concrete proposals before it would give him due consideration on granting him a board position. It also noted Yeoman had proposed another resolution at the meeting for him to be appointed chairman of the company, but this was rejected.
Since then, the company said it has not received any proposal from Yeoman that it could consider, nor had any correspondence from him until the requisition letter was published. Hotel Corp said Yeoman has still to present any "material proposition" to the company, and it therefore questions what benefit there would be to changing its board structure.
Hotel Corp added is aware that Yeoman has been a director of other quoted cash shell companies which have yet to undertake transactions. It said its first issue is that Yeoman's other quoted shell companies could receive "preferential treatment in being offered any deal which might come Mr Yeoman's way or which he might introduce" should he become a Hotel Corp director.
In addition, Hotel Corp said that, should the resolution to appoint Yeoman to the board and oust Short be passed, it would leave the company with one UK resident director and one Isle of Man resident director in David Craine, the other director on its board. The company said it has received advice that this could mean the UK's tax authorities could consider the company to be under UK control and therefore may jeopardise its offshore status.
The only way to remedy that problem, Hotel Corp said, would be to appoint a new Isle of Man-based director who would need to be paid from the limited cash resources the company has on its books.
The company said that the loss of its offshore status would make it a less attractive investment proposition and could therefore decrease its value.
Hotel Corp also said that holding an EGM will inevitably involve it having to spend money, which will again erode its limited cash resources. As such, it may become a less attractive option for any potential reverse-takeover targets, making the meeting "potentially self-defeating as well as a distraction".
Shares in Hotel Corp were up 6.2% to 1.54 pence on Friday.
By Sam Unsted; [email protected]; @SamUAtAlliance
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