TIDMCCEP
RNS Number : 1006Z
Coca-Cola European Partners plc
15 May 2019
Coca-Cola European Partners plc (CCEP)
15 May 2019
Dear Shareholder of Coca-Cola European Partners plc:
We are writing to ask for your support by voting "FOR" all
resolutions, as recommended by the Board of Directors, at our
upcoming 2019 Annual General Meeting on 29 May 2019.
Certain proxy advisory services reports contain conflicting
advice on Resolution 17 (Waiver of mandatory offer provisions set
out in Rule 9 of the Takeover Code), Resolution 22 (Amendment of
the Articles of Association) and Resolutions 8 and 12 (Re-election
of Irial Finan and Mario Rotllant Solá, respectively) and we want
to provide additional context regarding these resolutions beyond
that in our Notice of Meeting.
Resolution 17 (Waiver of mandatory offer provisions set out in
Rule 9 of the Takeover Code)
The report issued by Glass, Lewis & Co. (Glass Lewis)
recommends a vote "FOR" Resolution 17. The report generated by
Institutional Shareholder Services (ISS) recommends a vote
"AGAINST" Resolution 17. Both Glass Lewis and ISS have recommended
voting "FOR" Resolutions 19 and 20 (Authorities to purchase own
shares).
A share repurchase will not occur unless BOTH Resolution 17 AND
Resolutions 19 and 20 are approved. Therefore, a vote "AGAINST"
Resolution 17 will have the same practical effect as a vote
"AGAINST" Resolutions 19 and 20.
The report issued by Glass Lewis states:
-- "We believe the terms of this proposal are reasonable.
-- We do not believe that this proposal is connected with any
sort of takeover attempt by this party, and thus, we do not believe
this proposal should warrant shareholder concern at this time."
On the other hand, ISS recommended "AGAINST" Resolution 17 based
on the application of its standard policy. We believe that ISS's
undefined "concerns over creeping control" fail to take into
account certain important facts.
Rule 9 of the Takeover Code applies when any entity holds 30% or
more of the voting rights of a company. When a company purchases
its own voting shares, any resulting increase in the percentage of
shares carrying voting rights will be an acquisition for the
purpose of Rule 9. CCEP currently has one shareholder, Olive
Partners, S.A. (Olive), which owns approximately 35% of our
outstanding shares and so any share repurchase would trigger Rule 9
of the Takeover Code.
Olive has confirmed that it has no intention of changing its
approach with respect to CCEP as a result of any increase in its
shareholding due to any share repurchase. It has no intention to
seek any change in the composition of the Board or to the general
nature or any other aspect of the Company's business. Given Olive's
stated position, we believe that any concerns over "creeping
control" are therefore unfounded.
As noted above, a share repurchase will not occur unless BOTH
Resolution 17 and Resolutions 19/20 are approved.
The CCEP Board and management firmly believe these resolutions
are in the best interests of shareholders as they provide the
ability to repurchase shares, enabling our Company to continue to
deliver long-term shareholder value. Accordingly, the Board and
management of CCEP recommend voting "FOR" Resolutions 17, 19 and
20, consistent with the recommendation of Glass Lewis.
Resolution 22 (Adopt new articles of association)
Glass Lewis recommended voting "FOR" Resolution 22, stating:
-- "Glass Lewis generally supports changes made to the articles
of association that do not act contrary to shareholders' interest.
In this case, we believe that the proposed changes will not have a
significant effect on the Company's shareholders."
The report generated by ISS recommends a vote "AGAINST"
Resolution 22 on the basis of its standard policy that a director
who appoints, or who is appointed as, an alternate director "may
not be considered to be independent".
CCEP's Articles of Association require, amongst other things,
independent Non-executive Directors (INEDs) to constitute a
majority of the directors present for a Board meeting to be
quorate. This is seen as an important protection for shareholders.
The purpose of the proposed changes is to ensure that a meeting
will not be inquorate by virtue of an INED being unable to attend a
Board meeting given the number of INEDs relative to other
directors. Under the proposed change, an INED may only appoint
another INED as their alternate (see new Article 87.(A)(ii)). For
this reason, we believe that ISS's concern regarding the
non-independence of an alternate is unfounded.
Resolution 22 also contains proposals to allow the number of
directors on the Board to exceed the current limit of 17. This
proposal is made to allow the Company the flexibility to appoint
additional directors. The requirement under the Articles that the
Board contain a majority of independent directors at all times is
not affected. It is the Board's intention (i) to appoint more than
17 directors only in limited circumstances, (ii) to make
appointments in line with our Criteria for selection of INEDs
(available on our website at ir.ccep.com) and (iii) to return the
number of directors to no more than 17 at the annual general
meeting following the appointment of any additional director. A
vote against Resolution 22 for the reasons set out by ISS will also
be a vote against this proposal.
The CCEP Board and management firmly believes this resolution is
in the best interests of shareholders and recommends voting "FOR"
Resolution 22, consistent with the recommendation of Glass
Lewis.
Resolutions 8 and 12 (re-election of Irial Finan and Mario
Rotllant Solá, respectively)
The report issued by Glass Lewis recommends votes "FOR"
Resolution 8 (the re-election of Irial Finan) and Resolution 12
(the re-election of Mario Rotllant Solá. The report states:
-- "The remuneration committee includes two shareholder
representatives, one nominated by each of the largest shareholders.
The UK Code stipulates that the remuneration committee comprise
independent NEDs.
-- However, in this case, as noted above, Olive Partners SA and
European Refreshments own 35% and 18% of shares, respectively and
are entitled to nominate a director to the committee. We generally
believe that persons or entities with a significant portion of the
Company's voting power should be entitled to representation in
proportion to its ownership interest on the Company's board and
committees, with the exception of the Company's audit committee. As
such, we will refrain from recommending that shareholders vote
against affiliated directors based on the composition of the
remuneration committee.
-- Having reviewed the nominees, and in the context of the
Company's ownership and considering it is not obliged to apply to
the Code, we do not believe there are substantial issues for
shareholder concern."
The report generated by ISS notes that its policy requires
remuneration committees to be comprised solely of independent
directors. It therefore recommends a vote "AGAINST" the re-election
of the two non-independent members of CCEP's Remuneration
Committee. We note that in previous years ISS has not recommended a
vote against Mr. Finan or Mr Rotllant Solá notwithstanding that
they have been members of the Remuneration Committee since
2016.
The CCEP Board and Remuneration Committee Chairman, Christine
Cross, are of the opinion that the re-election of Mr. Finan and Mr.
Rotllant Solá is appropriate because:
-- the presence of Mr. Finan and Mr. Rotllant Solá on the
Remuneration Committee does not render it insufficiently
independent because the Committee has a majority of INEDs;
-- the terms of reference of the Remuneration Committee
stipulate that it must be composed of a majority of INEDs,
including for quorum requirements; and
-- Mr Finan and Mr. Rotllant Solá are not executive directors,
but appointed representatives of the Company's largest shareholders
- it is natural that these shareholders would want a say on the
remuneration of senior executives.
The CCEP Board and management firmly believes this resolution is
in the best interests of shareholders and recommends voting "FOR"
Resolutions 8 and 12, consistent with the recommendation of Glass
Lewis.
We would be glad to discuss the CCEP recommendations in relation
to Resolutions 17, 22, 8 and 12 further with you, should you wish.
If you have any questions, or need assistance in submitting your
proxy to vote your shares, please contact our proxy solicitor,
MacKenzie Partners, Inc., at +1 (800) 322-2885 or
proxy@mackenziepartners.com.
Thank you for your support.
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END
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