TORONTO – Sherritt International Corp. (TSX:S) urged shareholders on Wednesday to be wary of dissident shareholder George Armoyan and his attempt to join the company’s board of directors along with two other nominees.
The letter to shareholders Wednesday follows a recommendation by proxy advisory service ISS to support the management nominees to the board.
“Mr. Armoyan has a history of forcing his way onto boards of companies whose business he does not understand, with terrible results,” Sherritt chairman Hap Stephen wrote.
The group led by Armoyan is seeking three seats on the Sherritt board and wants to amend the company’s bylaws to require unanimous board support for any major acquisition — essentially giving a veto to any one director. It also wants changes to how both Sherritt directors and executives are paid, as well as some additional perks it says they receive.
The ISS report said the company’s recent operating problems have been largely driven by the discontinuation of its coal division in western Canada, which is being sold to two buyers, and the decrease in the commodity prices.
“Management has demonstrated a high level of shareholder responsiveness since the debut of the dissident, and a number of positive governance changes particularly with respect to the director compensation have been implemented,” the report said.
“On the strategic side, management seems to be clear on its current priorities, including reducing the total debt which can be achieved by leveraging the proceeds from the sale of the coal division and lowering cost structure.”
However, the ISS report also recommended shareholders vote to support a dissident motion to stop “special payments to directors that are not aligned with shareholder value.”
Armoyan, chief executive of investment firm Clarke Inc. (TSX:CKI), represents about five per cent of Sherritt’s stock.
The dissident nominees include Armoyan and David Wood, chief financial of the Municipal Group of Companies, a construction and mining infrastructure company.
The third Clarke nominee is Astor Group chief executive Ashwath Mehra, who is also the former chief executive of MRI Trading AG and senior partner for the nickel and cobalt businesses at Glencore International AG.
Toronto-based Sherritt mines nickel and cobalt in Madagascar and Cuba. It’s also Cuba’s largest independent energy producer.
The company announced a deal in December to sell its thermal coal business in Western Canada for $946 million.