Sherritt Sets Special Meeting Date After Clarke Proposals

Jan 10, 2014 5:36 pm ET

(Updates with comment from Armoyan in second paragraph.)

Jan. 10 (Bloomberg) -- Sherritt International Corp., whose assets include nickel and energy operations in Cuba, will hold a shareholders’ meeting on May 6 after receiving proposals by activist investor Clarke Inc. to revamp the board.

Clarke and affiliated groups want to remove five Sherritt directors, reduce the size of the board to seven from nine, and appoint three new directors, Clarke Chief Executive Officer George Armoyan said today by phone. Sherritt board members are paid too much, he said.

“Look at their stock performance and look at their compensation; it’s mindboggling,” Armoyan said. “What they are trying to do is just protect their golden goose egg.”

The two sides are “absolutely” headed for a proxy fight, Armoyan said. Clarke will consult its lawyers and other major shareholders to consider the next steps.

Armoyan also wants Sherritt to change a policy that compensates executives and directors for the effects of the U.S. Helms-Burton Act, which may prevent them from entering the U.S. because of the company’s business in Cuba.

Sherritt makes voluntary payments to directors “in recognition of the actual or potential hardship, loss of opportunity and emotional distress suffered by the directors and their respective families” as a result of the application of Helms-Burton, according to an April 19 filing.

Trade Embargo

The payments should only be made if directors are actually affected by the legislation by being banned from entering the U.S., according to a letter from Clarke made public by Sherritt today.

The 1996 Helms-Burton law hardened the U.S. trade embargo against Cuba. Certain individuals, in their capacity as executives and directors of Sherritt, have been barred from entering the U.S. because of allegations that its operations in Cuba include assets that were expropriated from U.S. citizens, according to the company’s most recent annual report.

It’s unclear how many current directors have been barred under the law.

Directors are being paid for the “possibility” that they might not be able to enter the U.S., Armoyan said.

“I’m not aware of any of them that are banned,” he said. “They use that as an excuse.”

A spokesman for Sherritt declined to comment when reached today by phone.

Helms-Burton Allowances

Sherritt’s non-executive directors received so-called Helms-Burton allowances of C$90,618 ($80,151) to C$150,000 for 2012, according to data disclosed by the company and compiled by Bloomberg. The allowance made up more than half of total disclosed compensation for some directors.

Clarke also is unsatisfied by progress at Sherritt’s mine under development in Madagascar, Armoyan said in a Dec. 24 interview.

Sherritt shares have declined 39 percent in the past 12 months, compared with a 28 percent drop in the Standard & Poor’s/TSX Materials Index.

The company announced Dec. 24 it agreed to sell assets, including all of its coal interests, for C$946 million, so that it can focus on nickel and oil.

Clarke is seeking to have R. Peter Gillin, Adrian Loader, John R. Moses and Lisa Pankratz removed as directors, according to the letter. The proposed new directors are Armoyan, Dustin Haw and Michael Rapps.

Canadian law allows holders of more than 5 percent of a company’s stock to call a special meeting. Clarke and the affiliated companies control 5.1 percent of Sherritt shares, according to the letter.

The special meeting will be held together with the company’s May 6 annual general meeting, Sherritt said today in a statement. A reduction in the number of directors below nine would require approval of a special resolution by at least two- thirds of shareholders voting, the company said.

--Editors: Steven Frank, Will Wade