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The Shareholder Forumtm

support for fair value realization

of stock investments in

DBM Global Incorporated

(f/k/a Schuff International Inc.)



Support of Minority Shareholder Interests

The Shareholder Forum had offered to support Appraised Value Rights ("AVR") of DBM (f/k/a Schuff International) minority shareholders in 2014 following a $31.50 per share tender offer by the company's controlling shareholder, HC2 Holdings, Inc., with the stated intent to proceed with a short-form merger "as soon as practicable.”

HC2 acquired DBM shares in the 2014 tender offer and other purchases bringing its total holdings to 92% of outstanding DBM shares, but has not proceeded with a merger. The Forum has continued to support the minority shareholder interests of its AVR participants in this context.



Forum reference:

Professionals' observation of proxy adviser's policy to replace only some directors while recommending replacement of their supported CEO


The article below from The Deal, which has been a private subscription service of Euromoney Institutional Investor PLC since the beginning of 2019, is provided to Forum participants with permission of the editor.


Source: The Deal, April 24, 2020 article


Ronald Orol, Senior Editor


ISS Urges Shareholders to Remove Falcone From HC2 Board

The proxy adviser wants investors to support three of six dissident candidates to the miniconglomerate’s six-person board and to remove the company’s chief executive, Philip Falcone, from its oversight panel.

By Ronald Orol

Updated on April 24, 2020, 12:16 PM ET

Philip Falcone


Institutional Shareholder Services Inc. has urged shareholders of HC2 Holdings Inc. (HCHC) to vote in favor of removing of Philip Falcone and two other directors from miniconglomerate's board.

The proxy adviser issued a report, obtained by The Deal on Friday, April 24, that recommended investors back three of six dissident director candidates nominated by ex-Third Point LLC analyst Michael Gorzynski for HC2's six-person board.

“The dissident makes a strong case that significant board change is necessary to address the company's prolonged underperformance, need to reduce and potentially refinance debt, excessive executive compensation and a lack of credibility surrounding CEO Falcone,” ISS said in its report.

Gorzynski, manager of MG Capital Management LP, is seeking to install candidates through a written consent solicitation process set to conclude on May 7. Consents for director candidates are due to be tallied and delivered to the company's proxy solicitor by May 12. 

The insurgent manager wants to oust Falcone from his role of CEO and push the company to focus on its core assets, including DBM Global and Continental General, while divesting other units. In addition, Gorzynski wants to become interim CEO in Falcone’s stead. HC2 has business operations in construction, marine services, insurance and other sectors. 

ISS said MG Capital has presented a "compelling" case but added that it is not yet clear whether its divestiture plan is “the best way forward.” In addition, ISS noted shareholders may have some reservations regarding Gorzynski’s ability as interim CEO “given his lack of experience as a public company executive or director.” 

The adviser is recommending that shareholders don’t vote to install Gorzynski, one of MG Capital’s candidates, as a director.

An MG Capital presentation defended Gorzynski's experience, noting he has participated in "dozens of insurance and debt-related restructurings" and that its candidates have committed to cutting director fees by 50% and providing the activist investor $1 for his potential service as interim CEO.

ISS was critical of Falcone. It said it may be difficult to convince the market of management’s ability to generate shareholder value with “Falcone at the helm.” The proxy adviser pointed to “refinancing missteps, questionable accounting decisions and Falcone's prior litigious history” as reasons to remove him from the board.

Seeking to appease disgruntled investors, HC2 announced Tuesday it was installing a new director, Lancer Capital LLC’s Avram Glazer, as board chairman. HC2’s interim chairman, Warren Gfeller, has described Glazer as an “independent and high-quality nominee.” However, Glazer has connections to Gfeller, Falcone and HC2 that suggest he isn’t very independent. 

Even so, ISS said Glazer’s appointment was a “step in the right direction” and that he is a “significant shareholder with prior public board experience.” Glazer’s Lancer Capital owns 5.3%.

In a statement, HC2 said it strongly disagrees with ISS’s recommendation but it was pleased with the adviser’s support of three incumbent directors and the potential appointment of Glazer as board chairman.

In addition, another activist, Julian Singer, a 6.4% holder, reported support for Glazer’s nomination on Tuesday. Singer said April 7 that he didn't support MG Capital’s campaign.

In a related matter, a Delaware judge tentatively scheduled an expedited preliminary injunction hearing for May 1 regarding an investor’s lawsuit targeting a “poison put” defense the company set up in response to the Gorzynski contest.

At issue in the lawsuit is whether a Gorzynski board control win would trigger a provision of HC2’s bylaws requiring that the company repurchase up to $27 million in preferred share securities. HC2 has said it may not have “sufficient proceeds” or the “financing available” to fund such a preferred share securities purchase.

Critics of the provision argue the company is seeking to discourage investors from supporting the activist slate by suggesting their installation on the board would trigger the payment.

HC2 has given mixed messages about whether the poison put would be triggered in the event the dissidents were elected. 

In revised disclosures, the company said April 17 it believed the election of the dissidents will “not trigger” a requirement for the company to make an offer to holders of preferred stock to redeem their stakes. However, the company added that preferred stockholders may take “a different view” if the dissident directors are elected and may “allege that the company is required to make an offer to redeem” their positions. 

The Delaware lawsuit is ongoing.



© 2020 The Deal.




The project supporting investor interests in DBM Global Incorporated (f/k/a Schuff International, Inc.) is being conducted by the Shareholder Forum for the benefit of Participants that have reserved Appraised Value Rights ("AVR") Management, subject to conditions including standard Forum policies that each Participant is expected to make independent use of information obtained through the Forum and that participation is considered private unless the Participant specifically authorizes identification.

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