Phil Falcone Hangs Onto HC2 Board Seat in Activist Battle
The company’s stock tanked on the news that activists lost their
push to oust the controversial executive.
May 14, 2020
Phil Falcone (Christopher Goodney/Bloomberg)
billionaire Phil Falcone has managed to hold onto his board seat at
HC2 Holdings, the struggling company he built and runs.
In a settlement
fended oﬀ first- time activist Michael Gorzynski, who had waged a
bitter proxy battle over control of the company.
“An amazing exhibition
of Falcone survival skills (luck?)” is how Gary Lutin, chairman of the
Shareholder Forum and Falcone critic, described the outcome in an
the founder of MG Capital, had launched his
in January and wanted to replace HC2’s entire six- person board of
directors, including Falcone. He had won support from three proxy
advisors in his eﬀort. Both Institutional Shareholders Service and
Glass Lewis also questioned Falcone’s suitability to serve as HC2’s
In the end, the activist
walked away with only two board seats, along with two new directors
appointed by HC2.
disappointment in the outcome was clear. The stock fell more than 20
percent Thursday on the news, closing at $2.40 per share.
In recent months,
Falcone had taken measures to bolster his chances by agreeing to
separate the roles of chairman and CEO. HC2 nominated Lancer Capital’s
Avram Glazer, former CEO of Zapata Corporation, to become the new
chairman, while Falcone would remain CEO.
Glazer also took a 5.3
percent stake in HC2.
At the request of
another prominent shareholder, Julian Singer, who recently filed a
13-D announcing a 6.4 percent stake, Falcone later added two more new
board members to its proposed slate, including independent consultant
Under the settlement,
both Glazer and Lombard will join the board, along with Gorzynski, who
had previously been a Third Point analyst, and Kenneth Courtis, a
former Goldman Sachs banker, from the MG Capital side.
The board will
immediately grow to ten members. But three of the current directors –
Robert Leﬄer, Lee Hillman, and Julie Totman Springer – announced that
they will not stand for re- election at the annual meeting, which is
slated for July 8.
After that time the
board will be composed of seven people, four of them new.
The company’s slate will
include current board members Falcone, Wayne Barr Jr., and Warren
“Ken and I want to thank
the board for carrying out HC2’s director refreshment process in a
thoughtful manner,” Gorzynski said in a joint statement with HC2. “We
no longer view ourselves as MG Capital nominees, but rather HC2
directors firmly committed to advocating for stockholders’ best
interests in the boardroom.”
In his quest to take
over the board and the company, Gorzynski had criticized Falcone’s
compensation, the company’s huge debt load, poor stock performance,
and questionable dealings that the activist argued had brought the
company to the brink of bankruptcy.
But the Covid-19
pandemic has made shareholder activism a diﬃcult pursuit.
Instead of waiting for
the annual shareholder meeting — where people must attend in person
for their votes to be counted — Gorzynski had turned to a consent
solicitation process. That was cumbersome, as shareholders had to mail
in their ballots, with a May 12 deadline. The votes were still being
counted when the settlement was struck, according to an individual
familiar with the process.
was not quoted in the press statement and did not return a request for
comment in time for publication.
Institutional Investor LLC.