Manchester-based PRS REIT plc has pushed back on an attempt to call a general meeting to oust two directors from its board, calling the move expensive and unnecessary, and is looking for further talks with rebel shareholders.
Last week the company said it received a letter from shareholders owning 17.3% of its stock requesting a general meeting to vote on resolutions to remove two of the firm’s independent non-executive directors — David Steffan Francis and chairman Stephen Paul Smith.
The shareholders requesting the meeting are Harwood Capital Management Limited, Waverton Investment Management Limited, CCLA Investment Management Limited, Alder Investment Management Limited, CG Asset Management Limited.
The letter also requests shareholders vote to approve the appointment of Robert Graham Naylor as non-executive chairman and Christopher Harwood Bernard Mills of Harwood Capital Management as a director.
PRS, a closed-ended real estate investment trust established to invest in the Private Rented Sector, with investments of more than £1 billion and over 5,400 new rental homes, said its board has formed a sub-committee comprising the three independent non-executive directors who are not the subject of the letter: Geeta Nanda, Rod MacRae and Karima Fahmy. It said the sub-committee will lead the board’s response and engage with shareholders.
“Changing the composition of a Board through the mechanism of a GM is typically used under extraordinary circumstances. The process abruptly circumvents normal succession planning and UK corporate governance processes, and incurs additional cost, disruption, and potential reputational damage to a company. This type of action would usually occur when constructive prior private discussions have taken place over time and irretrievably broken down,” the company said in a statement.
“The Sub-Committee notes there have only been limited discussions with the Requisitioning Shareholders on the Requisition Notice. The Board also questions the necessity of requisitioning a GM shortly before the 2024 AGM, due to take place in early December, and notes the additional cost and complexity associated with convening two shareholder meetings in short succession. The Sub-Committee believes there are important areas of alignment between the Board and the Requisitioning Shareholders and will seek engagement with the Requisitioning Shareholders and other Shareholders, with a view towards seeking a resolution.”
PRS said it its board “fully acknowledges and shares the frustration raised by the Requisitioning Shareholders and other investors around the discount to NAV and a share price performance that does not reflect the strong operational performance and opportunity of the business.”
“The Board has not been complacent in the face of these pressures and continually reviews actions under its control that may act to address the discount to NAV. The communication of these actions is important and the Board recognises the need for increased dialogue with Shareholders about measures under consideration, including any timing or financial constraints to implementing such measures.”
“The Board continuously reviews all options to maximise value for Shareholders, actively considers actions to narrow the discount to NAV and is fully aware of its fiduciary duties. The Board believes some of the options under consideration in the Requisitioning Shareholders’ Explanatory Statement carry considerable risks and that short-term asset sales would be value destructive. If the currently significant discount to NAV persists, the Board will further consider its options which may include the introduction of continuation votes, share buybacks subject to available cash and/or conducting a strategic review. In addition, Rothschild & Co have been appointed to advise the Board on strategy and value maximisation for Shareholders.”
PRS said the Sub-Committee, with its advisers, will engage with shareholders and seek to meet with the Requisitioning Shareholders around the Requisition Notice and on the substantive issues raised to seek a resolution in the interests of all Shareholders. It said an update will be provided in due course on the progress of these actions and around the convening of a general meeting if appropriate.