Asserts its Six Highly-Qualified,
Independent Director Candidates Possess the Expertise, Experience,
and Vision Needed to Reverse the Perpetual Value Destruction at
HC2
Believes There is an Urgent Need to Remove
Philip Falcone and the Incumbent Board Given HC2’s Poor Governance,
Numerous Conflicts of Interest, Unjustifiable Waste, and
Ineffective Strategy
Files Preliminary Consent Statement and
Plans to Share Its Comprehensive Plan and Long-Term Vision with
Stockholders in the Coming Weeks
Sees Tremendous Opportunity to Restore
Stockholder Confidence, Narrow HC2’s Unacceptable Discount to Net
Asset Value, and Optimize the Company’s Portfolio
MG Capital Management, Ltd. (together with Percy Rockdale LLC,
the nominating stockholder, and its affiliates, “MG Capital” or
“we”), which collectively with the other participants in its
solicitation beneficially owns more than 5% of the outstanding
shares of HC2 Holdings, Inc. (NYSE: HCHC) (“HC2” or the “Company”),
today announced that it filed a preliminary consent statement with
the Securities and Exchange Commission (“SEC”) and delivered a
written consent to the Company. MG Capital is seeking to
reconstitute HC2’s Board of Directors (the “Board”) through the
removal of the Company’s current directors and the election of its
world-class slate of six highly-qualified, fully-independent
candidates.
We believe it is clear that Philip Falcone’s tenure as Chairman
and Chief Executive Officer of HC2 has been a prolonged disaster
for stockholders. As we documented in our February 18 letter, Mr.
Falcone’s hand-picked Board has fostered poor governance, permitted
rampant conflicts of interest, overlooked numerous regulatory
issues, and failed to develop and execute a viable strategy.1 It is
clear to us that this pattern of missteps and self-dealing has led
to long-term underperformance and significant value
destruction.
Although we have provided ample evidence and cited a
considerable amount of public information whenever articulating our
concerns, Mr. Falcone—apparently speaking on behalf of the
Board—has decided to accuse us of not understanding the Company and
its holdings. The reality is that MG Capital and its slate of
nominees have drawn on decades of investing experience, strong
cross-sector business expertise, and significant legal and
regulatory knowledge to form a well-rounded assessment of HC2. Mr.
Falcone and the Board can attempt to deflect attention away from
themselves by trying to undermine us, but they cannot outrun their
indefensible record of poor corporate stewardship.
In our view, the case for wholesale change atop HC2 is
encapsulated by an examination of the Company’s total stockholder
returns (“TSR”) over relevant periods.2 We believe the results
speak for themselves:
- 1-year TSR: -33.43% vs.
S&P 500 return of 29.68%, Russell 300 return of 28.72%, and
2019 proxy peer group3 average return of 12.57%.
- 3-year TSR: -65.56% vs.
S&P 500 return of 53.16%, Russell 3000 return of 50.34%, and
2019 proxy peer group average return of 13.77%.
- 5-year TSR: -71.97% vs.
S&P 500 return of 80.79%, Russell 3000 return of 77.09%, and
2019 proxy peer group average return of 31.29%.
- Falcone Tenure TSR: -35.14%
vs. S&P 500 return of 101.82%, Russell 3000 return of 95.92%,
and 2019 proxy peer group average return of 32.51%.
Given the risks posed by keeping HC2’s current leadership in
place, MG Capital feels compelled to act on behalf of all
stockholders by seeking to remove the incumbent Board and install a
superior slate of directors—one that will be committed to an
eradication of conflicts of interest, elimination of waste, and
direct oversight of the implementation of a value-enhancing
turnaround. Our world-class slate was assembled after comprehensive
due diligence that involved analyzing the Board’s deficiencies and
identifying HC2’s go-forward needs. Our nominees are:
Nominee
Select
Experience
Notable Expertise
and Skills
George R. Brokaw
- Private investor through several private and public investment
vehicles
- Director of DISH Network Corporation (NASDAQ: DISH), Alico,
Inc., and Consolidated Tomoka Inc.
- Former director at Highbridge Principal Strategies, LLC, Perry
Capital, LLC, and Lazard Frères & Co. LLC
- Telecommunications
- Corporate governance expert
- Cross-sector M&A execution/diligence
- JD and MBA
Kenneth S. Courtis
- Financial executive specializing in investment banking and
governance
- Chairman of Starfort Investment Holdings
- Previously director of Goldman Sachs and Deutsche Bank
Asia
- Corporate governance expert
- Investment strategist with 30-year track record
- MBA and Doctorate with honors
Michael Gorzynski
- Managing member of MG Capital Management, Ltd.
- Previously investment manager in special situations at Third
Point, LLC
- Manager of dozens of large-scale bank and insurance company
restructurings
- Insurance and banking
- Seasoned investment manager
- Debt restructuring expert
- MBA
Robin Greenwood
- George Gund Professor of Finance and Banking and Head of the
Finance Unit at Harvard Business School
- Member of Financial Advisory Roundtable of the Federal Reserve
Bank of New York
- Research at the National Bureau of Economics Research
- Insurance
- Financial industry expert
- Seasoned business advisor
- PhD in Economics, Harvard
Liesl Hickey
- Partner at Ascent Media
- Senior advisor at Guide Post Strategies, Blitz Canvassing and
Pathway Partners
- Previously executive director of the National Republican
Congressional Committee
- Regulatory insights
- Political strategist
- Policy advocacy
- Fellow at the University of Chicago’s Institute of
Politics
Jay Newman
- Managing member of Ginzan Management Ltd.
- Previously senior portfolio manager and member of the
Management Committee at Elliott Management Corporation
- 40 years of experience working in finance as a lawyer,
investment banker and principal investor
- Cross-sector investing experience
- Financial industry expert
- Corporate governance expertise
- Columbia Law School
In contrast to the incumbent Board, our slate possesses the
diverse expertise, skillsets, and independent perspectives that a
publicly-listed holding company needs. Our nominees can ensure that
HC2’s success or failure is no longer tied to one underperforming
and unreliable leader: Mr. Falcone. Although Mr. Falcone and the
directors labeled as “independent” may try to refresh the Board or
enact incremental improvements in the coming weeks, we firmly
believe our slate offers the best path toward a better HC2. That is
why we strongly discourage the Board from authorizing any knee-jerk
divestitures or entrenchment maneuvers designed to upend corporate
democracy in its favor.
While we are beginning to solicit support for our proposals, our
six nominees have already been working together as a group—as if
they were in the boardroom—to create a long-term strategy that will
enhance stockholder value. We are focusing on initiatives that will
address HC2’s conflict-ridden governance, haphazard divestitures,
high debt, and fragmented approach to investing. We are also coming
up with an appropriate and aligned management structure at the
holding company level. Our goal is to share this wholistic strategy
for a better HC2 in the near-term.
CERTAIN INFORMATION CONCERNING THE
PARTICIPANTS
MG Capital Management, Ltd. together with the other participants
named herein (collectively, “MG Capital”), intends to file a
preliminary proxy statement and an accompanying GREEN consent card
with the Securities and Exchange Commission (“SEC”) to be used to
solicit consents for the election of its slate of director nominees
at the upcoming 2020 annual meeting of stockholders of HC2
Holdings, Inc., a Delaware corporation (the “Company”).
THE NOMINATING STOCKHOLDER ADVISES ALL STOCKHOLDERS TO READ THE
CONSENT STATEMENT AND OTHER CONSENT MATERIALS AS THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH
CONSENT MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEB
SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS
CONSENT SOLICITATION WILL PROVIDE COPIES OF THE CONSNET STATEMENT
WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES
SHOULD BE DIRECTED TO THE PARTICIPANTS' CONSENT SOLICITOR.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’
PROXY SOLICITOR: SARATOGA PROXY CONSULTING LLC (TEL: (888) 368-0379
OR (212) 257-1311; EMAIL: INFO@SARATOGAPROXY.COM)
The participants in the consent solicitation are anticipated to
be MG Capital Management, Ltd., a Cayman Islands company limited by
shares (“MG Capital”), Percy Rockdale LLC, a Michigan limited
liability company (“Percy Rockdale”), Rio Royal LLC, a Delaware
limited liability company (“Rio Royal”), Michael Gorzynski, a
natural person, (“Mr. Gorzynski,” and, together with MG Capital,
Percy Rockdale and Rio Royal, the “ MG Capital Participants”),
George Brokaw, a natural person (“Mr. Brokaw”), Kenneth Courtis, a
natural person (“Mr. Courtis”), Robin Greenwood, a natural person
(“Mr. Greenwood”), Liesl Hickey, a natural person (“Ms. Hickey”),
and Jay Newman, a natural person (“Mr. Newman” and together with
Mr. Brokaw, Mr. Courtis, Mr. Greenwood, Mr. Gorzynski and Ms.
Hickey, each a “Nominee” and collectively, the “Nominees”; the
Nominees and the MG Capital Participants collectively, the
“Participants”).
As of the date hereof, Percy Rockdale is the direct owner of
2,422,000 shares of common stock of the Company, $0.001 par value
(“Common Stock”). As of the date hereof, the Rio Royal is the
direct owner of 10,000 shares of Common Stock. MG Capital
Management, as the investment holding company of Rio Royal, may be
deemed the beneficial owner of the 10,000 shares of Common Stock
owned by Rio Royal. Mr. Gorzynski as the sole Manager of Percy
Capital and the sole Director of MG Capital Management, may be
deemed the beneficial owner of (i) the 2,422,000 shares of Common
Stock owned by Percy Rockdale and (ii) the 10,000 shares of Common
Stock owned by Rio Royal. As of the date hereof, Mr. Brokaw is the
beneficial owner of 26,001 shares of Common Stock. As of the date
hereof, Mr. Courtis is the beneficial owner of 237,336 shares of
Common Stock. Except as described herein, no other Participant
beneficially owns any Common Stock as of the date hereof.
1 MG Capital Nominates Full Slate of Candidates for Election to
HC2’s Board of Directors, February 18, 2020 (link).
2 Bloomberg; TSR reflects share price and performance up until
January 14, 2020, which is the day before the Reporting Persons
filed a 13D with the Securities and Exchange Commission. TSR
assumes dividends reinvested.
3 The “2019 proxy peer group” includes: Cannae Holdings, Inc.,
Carlisle Companies, Inc., Compass Diversified Holdings, 2CSW
Industrials, Inc., E.W. Scripps Co., Entravision Communications,
Gannett Co., Inc., Legg Mason, Inc., Meredith Corp., Opko Health,
Inc., Prestige Brands Holdings, Inc., Raven Industries Inc.,
Spectrum Brands Holdings and Steel Partners Holdings LP.
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version on businesswire.com: https://www.businesswire.com/news/home/20200313005248/en/
For Investors: Saratoga Proxy Consulting LLC John Ferguson / Joe
Mills, 212-257-1311 jferguson@saratogaproxy.com /
jmills@saratogaproxy.com
For Media: Profile Greg Marose / Charlotte Kiaie, 347-343-2999
gmarose@profileadvisors.com / ckiaie@profileadvisors.com
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