Proxy Advisors Back Some Waterton Nominees at Hudbay; Glass Lewis Calls Company “Disingenuous” - CorpGov
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Proxy Advisors Back Some Waterton Nominees at Hudbay; Glass Lewis Calls Company “Disingenuous”
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Proxy Advisors Back Some Waterton Nominees at Hudbay; Glass Lewis Calls Company “Disingenuous”

Glass Lewis Highlights Disingenuous Attack on Waterton Nominee Daniel Muñiz Quintanilla


By John Jannarone

Leading proxy advisors Glass Lewis and ISS have issued support for multiple directors nominated by Waterton Global Resource Management in its proxy fight with mining company Hudbay Minerals, a strong sign the activist may win seats at the upcoming shareholder meeting.

Glass Lewis endorsed three directors nominated by Waterton: Richard Nesbitt, David Smith, and Daniel Muñiz Quintanilla. ISS recommended two of the activist’s nominees, Messrs. Smith and Muñiz Quintanilla.

The endorsement of Mr. Muñiz Quintanilla comes after the company levied an apparently unfair attack against the longtime industry executive, as CorpGov outlined in this recent article. The issue of concern was the inclusion of a block of text about a 2006 mining accident at Southern Copper, where he wasn’t a director until 2008.

“With respect to Mr. Quintanilla, we are concerned Hudbay’s critiques are even more disingenuous,” Glass Lewis wrote in a note. “In particular, in the service of sidestepping what appear to be Mr. Quintanilla’s clear bona fides as a mining executive with experience in South America, the Company centers on the health and safety record of entities which have historically employed Mr. Quintanilla. In supporting this position, Hudbay dubiously cites an MSCI research note referencing a February 2006 mining accident leading to the death of 65 workers, a potentially damaging reference.”

Glass Lewis also highlighted another issue raised in the CorpGov report – that Hudbay altered its proxy materials secretly to remove a serious accusation against Waterton.  On April 4, the company issued a circular that read “Bloomberg Article Seeded by Waterton” referring to this report detailing Hudbay’s discussions with Chile’s Mantos Copper about a possible acquisition. The apparent insinuation was that Waterton had planted a negative article with Bloomberg in order to depress the share price and build on its stake, which at the time was roughly 4.8% of the company. It’s unclear how long the words “Seeded by Waterton” remained in the circular, but as of mid April, they had quietly disappeared without any announcement from the company.

“Further still, we note Hudbay’s to-date wholly unsupported allegation also implicitly undermines the editorial credibility of Bloomberg by asserting a private investor of sufficient size can, with effective impunity, direct the publication of a market-moving article by an otherwise credible market publication in the service of that investor’s own financial objectives,” Glass Lewis said. “We consider the exclusive burden of supporting such an unusual claim falls firmly on Hudbay, and, in the absence of such support, we believe the Company’s formerly implied view in relation to the Bloomberg article is entirely lacking in credibility…Taken together with other recent entrenchment actions, we believe this procession reflects rather poorly on the Hudbay board.”

Both ISS and Glass Lewis also highlighted a lackluster total shareholder return over the last several years. The Toronto-based company has grown from a single key mining asset in Manitoba several years ago to a global company with operations in Peru, Arizona, and Nevada. But as CorpGov wrote in this analysis, the company has experienced growing pains and its international expansion hasn’t translated well to shareholder returns.

“Through the unaffected date, Hudbay significantly underperformed the ISS Peer Group median and the broader industry benchmark over the one-, three-, and five-year periods. However, Hudbay outperforms the peer median if the TSR performance periods are extended past the unaffected date to Apr. 24, 2019, but still underperforms the industry benchmark,” ISS wrote in its note. “While several indicators point to a recovery, a key measure like ROIC shows the company has not made the best out of its asset base. This appears to support the dissident’s argument that additional board change may be warranted.”

In a statement Monday, Hudbay said the reports from Glass Lewis and ISS “recognize the positive momentum at Hudbay and how the company’s leadership is driving value creation.”



John Jannarone, Editor-in-Chief

Twitter: @CorpGovernor

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