SAN FRANCISCO, Dec. 20, 2017 /PRNewswire/ -- The Committee
for Aegean Accountability (the "Committee"), a group of
shareholders led by Tyler Baron, and
collectively owning more than 12% of the outstanding
shares of Aegean Marine Petroleum Network, Inc. ("Aegean" or, the
"Company") (NYSE: ANW), delivered a letter to the Chairman of the
Company's Board of Directors (the "Board") today identifying
concerns with the Board's ongoing conflicts of interest, poor
financial management and inadequate corporate governance
practices.
The Committee seeks to engage in constructive dialogue with the
Company's Board to unlock value for all shareholders through Board
refreshment and enhanced corporate governance controls. To this
end, the Committee noted its intent to nominate a slate of four
highly qualified independent director candidates for election at
the Company's 2018 annual meeting of shareholders.
The full text of the letter follows:
December 20,
2017
Aegean Marine Petroleum Network Inc.
Akti Kondyli 10
185 45, Piraeus, Greece
Attention: Mr. Yiannis
Papanicolaou, Chairman of the Board
Dear Mr. Papanicolaou:
We are writing to inform you that a group of concerned and
long-term shareholders representing more than 12% of the
outstanding shares of Aegean Marine Petroleum Network Inc. ("Aegean
Marine" or the "Company") have formed The Committee for Aegean
Accountability (the "Committee"). We have made every effort
in numerous private communications spanning the past eight months
to engage in a productive dialogue with the board of directors (the
"Board") to remedy the chronic failures in corporate governance,
financial management and operations that have impaired shareholder
value for far too long. It has unfortunately become clear that the
Board is more concerned with entrenching itself and management
rather than working with us in good faith regarding the changes
required to improve the Company's governance and
performance. We were both surprised and disappointed by your
recent statement that you are considering reducing the Board to
four members from its existing size of seven, which would severely
disenfranchise shareholders and suppress their ability to seek due
representation on the Board. We are therefore left with little
choice but to publicly express our concerns and intention to
nominate four highly qualified director candidates for election at
the Company's 2018 annual meeting of shareholders (the "2018 Annual
Meeting").
IMPAIRMENT OF SHAREHOLDER VALUE
We have been shareholders in Aegean Marine for several years,
over which time the share price has dramatically underperformed any
relevant comparison. In addition, since becoming public in 2006
shares have declined by 75%, underperforming the Russel 2000 Index
by more than 200%. The valuation of the Company has also reached an
all-time low in relation to its net assets, trading at less than
0.3x tangible book value and well below a conservative estimate of
liquidation value. Aegean Marine has chronically traded at steeply
discounted multiples of cash flow and net asset value since at
least 2010, driven by persistent concerns about corporate
governance and management competence due to extensive related party
transactions and value destructive capital expenditure
projects.
CORPORATE GOVERNANCE: FROM BAD TO WORSE
Since its origins as a public company, Aegean Marine's corporate
governance has been troubling. The Company was majority owned and
controlled by its founder Mr. Melissanidis who, according to the
Company's October 25, 2007
registration statement, "has been subject to a number of
proceedings, including criminal cases," some of which involved
"sham bunkering transactions intended to avoid customs duties and
taxes" for which he was indicted but later acquitted. In
addition, the Company engaged in various related party transactions
with entities controlled by the founder. In acknowledgement of
these potential conflicts, the Company sought to mitigate them at
the time of the IPO by limiting the founder's influence per the
"Framework Agreement" (F-1/A ex. 10.30 filed 11/3/06). This
had the effect of precluding the founder from either joining the
seven member Board or naming directors that would serve as Board
Chairman or Chairman of the Audit and Nominating Committees. In
addition, the Company's principal executive offices responsible for
all financial and control functions were to be maintained in the
U.S.
Given this provenance of already weak corporate governance, it
is stunning that shareholders today find themselves with even less
aligned representation on the Board. The present shareholder
base is comprised nearly entirely of U.S. holders and the founder
no longer retains any ownership stake whatsoever (more on this
below), yet shareholders are represented by only four seated
directors, three of whom were appointed by the founder at the time
of the IPO and shortly thereafter. Mr. Fokas is one of these
original board members, as well as the Company's General Counsel,
and continues to have close ties to the founder, recently acting as
the deputy chairman of the Greek gambling monopoly (OPAP) which is
partly owned by Mr. Melissanidis. Furthermore, you rightly
pointed out in your recent correspondence with us that the majority
of current Board members have been with the Company since the IPO,
and no new board members have been added since
2009. Considering the value destruction shareholders have
endured over the past decade, we hardly view this as a
positive.
Notwithstanding the complete turnover of Aegean Marine's
shareholder base, the related party transactions persist as the
Company still conducts significant business with entities
controlled by the founder such as Aegean Oil. In addition, not only
are the Company's executive functions, including financial and
control, no longer based in the U.S., they are actually housed in
the very same offices in Piraeus as the founder's other
entities. Incredibly, our review of the Aegean Oil website and
corporate magazine revealed that even today Aegean Marine is very
much considered to be a subsidiary or sister company despite zero
common ownership. But most concerning is the fact pattern
related to the transaction last year in which the Company purchased
the remaining stake owned by Mr. Melissanidis for $100MM at
$8.81 per share. Aegean Marine's
use of cash for this transaction caused the company to violate its
borrowing base certificate only a few months later, and the
subsequent liquidity crunch was cured by a dilutive convertible
bond offering which drove the share price down 16%. Within nine
months of the transaction the share price had declined by 48%, and
today it sits 54% lower.
Finally, per the most recent proxy voting guidelines on director
accountability provided by Institutional Shareholder Services
("ISS"), Aegean Marine's governance structure includes seven out of
the eight listed "problematic provisions" that inform voting
recommendations.
The Company's governance structure and Board composition are
artifacts of its origins, when its founder exerted control and
influence due to his majority economic stake. While even
maintaining that status quo would have been entirely inappropriate
given the Company's present ownership, in fact shareholder
representation on the Board has degraded and inherent conflicts of
interest have grown.
CHANGE IS NEEDED NOW
We have already identified and proposed the addition of highly
qualified Board candidates with expertise spanning global physical
bunkering markets, strategic management, fuel distribution
operations, financing and capital markets. Not only will these
candidates restore accountability at the Company, their skillsets
are particularly well-suited to the challenges and opportunities
the Company faces. This includes improving the financing
structure and reducing costs of capital, rationalizing the fixed
asset base, instilling capital discipline, and effectively
positioning for the significant industry changes prompted by IMO
2020 regulations expected to take effect only two years from
now.
The financing structure and financial management of Aegean
Marine desperately require change. The Company's inefficiency
in accessing its cheapest sources of funds, the borrowing base
facilities, has led to a reliance on sources of capital that are
much higher cost and are now effectively inaccessible.
Harmonizing commercial and financing decisions will enable
qualifying borrowing base collateral at closer to stated advance
rates of 80-95 cents on the dollar
compared to the 50-55 currently achieved. This could generate
potentially hundreds of millions of dollars of low cost liquidity
that can be used to retire high cost convertible bonds and shares,
or to expand volumes and successfully manage the higher fuel prices
expected with IMO 2020.
The Company's capital expenditure projects have destroyed an
immense amount of shareholder value. For example, had Aegean
Marine simply not constructed the Fujairah terminal, we believe the share price
would be well more than double its present level based on the
current enterprise value and cash flow valuation
multiples. Not only does capital discipline need to be
instilled to avoid such calamities, but the current sprawling fixed
asset base should be opportunistically rationalized. Creating
an internal entity to manage the Company's logistics assets and
charge market rates within the organization will inform "own vs.
lease" decisions. Members of management have even described ports
in which the cost of operating the Company's owned vessels is
millions of dollars higher than that of chartering third party
barges. In the context of the Company's $570MM of fixed assets
and exceedingly high cost of capital, the opportunity for accretive
asset sales is significant.
Finally, we expect IMO 2020 will dramatically increase the
complexity of the marine fuel logistics industry and provide
opportunities to leverage Aegean Marine's extensive network into
improved financial returns. Accordingly, repositioning the
asset base ahead of this change is of critical importance. As
you know, one of our recommended director candidates is arguably
more qualified than anyone in the world to guide these efforts.
The Committee's Schedule 13D filing and notice to nominate four
director candidates for election to the Board at the 2018 Annual
Meeting will be forthcoming, in accordance with applicable
securities laws and the Company's Bylaws. As always, we remain
willing to discuss these issues with you at any time. Rest assured,
however, we will take whatever actions we may deem necessary to
ensure that the best interests of all shareholders remain
paramount.
Sincerely,
The Committee for Aegean Accountability
About the Committee for Aegean Accountability
The Committee for Aegean Accountability is a group of five
long-term shareholders collectively owning more than 12%
of the outstanding shares of the Company and seeking to unlock
value on behalf of all shareholders through enhanced corporate
governance practices and Board refreshment.
The Committee, led by Tyler
Baron, has retained Olshan Frome Wolosky LLP as its legal
advisor in connection with its engagement and discussions with the
Company.
Investor Contact:
Tyler
Baron
The Committee for Aegean Accountability
tbaron@sentinelrockcapital.com
Legal Contact:
Andrew M.
Freedman
Olshan Frome Wolosky LLP
afreedman@olshanlaw.com
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SOURCE The Committee for Aegean Accountability