Public-to-Private investigation and subsequent developments
Apart from the more usual business themes, 2006 for Stork was dominated by the investigation into a possible Public-to-Private transaction, which would mean a delisting of Stork, and the situation that arose as a result of the change in strategy desired by the shareholders Centaurus and Paulson. This will be described in detail below.
Announcement of the strategy
On 1 February 2006 Stork announced its strategic choices for the next phase of value creation: Stork Prints and Stork WorkSphere would be divested and Stork would continue in the following phase with three groups: Aerospace, Food Systems and Technical Services.
The announcement by Stork on 1 February 2006 was well received by the market. On that day the price of Stork shares rose from € 36.70 to € 39.14, and a large number of analysts responded positively to the announcement and/or adjusted their target prices for the shares upwards. In addition, many analysts said that they intended to reduce or remove completely the conglomerate discount which they had formerly applied.
However the large shareholders Centaurus and Paulson (C&P) were not satisfied. After the announcement by Stork on 1 February 2006, C&P jointly contacted Stork by letter. They claimed at that time to have a joint shareholding of approximately 20% in Stork. In their letter, C&P urged Stork to undertake a more rigorous restructuring of the company. They saw two options for Stork:
1. Stork divests all its divisions with the exception of Stork Aerospace, which it expands into an important player in the aviation and aerospace industry. Surplus liquidity released by the proceeds of the sale would then be paid to the shareholders; or
2. Stork becomes a conglomerate with three divisions (as the management of Stork intended), but in the form of a privately held company instead of a listed company. In their letter, C&P asked for these options to be placed on the agenda for the Annual General Meeting of Shareholders (AGM) on 10 March 2006, so that the shareholders of Stork would be able to vote on them.
Public-to-Private transaction
After extensive consideration, the Board of Management decided that a Public-to-Private transaction could in the situation described possibly be in the interests of all stakeholders of Stork, and should therefore be investigated. The Supervisory Board agreed with this view.
In a press release issued on 14 February 2006, Stork announced that it would investigate the possibility of a Public-to-Private transaction. With this announcement Stork reaffirmed the strategy that it announced on 1 February and noted that this strategy could possibly best be implemented as a privately held company.
Transcript webcast conference call press and analysts
At the AGM on 10 March 2006 Stork gave an explanation of the strategic decisions that it took in February 2006, and entered into a dialogue about these decisions with its shareholders. At this AGM a representative of C&P indicated that C&P supported the initiative of a Public-to-Private investigation.
In the months of February to July 2006, a detailed investigation was carried out into the possibility of a stock exchange delisting. Stork concluded that this was not realistically feasible, and announced this in a press release on 4 July 2006, together with a shareholder letter giving a more detailed explanation. The investigation showed that a Public-to-Private transaction that would appropriately reflect the fair value and strengths of Stork and that had a fair chance of a successful execution was not feasible.
Presentation outcome Public-to-Private investigation
Transcript webcast pressconference
Transcript webcast analystmeeting
Following up the shareholder letter of 4 July 2006, and taking into account the reactions received from shareholders, Stork decided to call an informative Extraordinary General Meeting of Shareholders (EGM) on 5 September 2006. At this EGM the Board of Management gave a detailed presentation of the Publicto- Private investigation to provide shareholders with insight into the process, the course and the outcome of this investigation, as well as into the reasons why Stork decided not to continue with the investigation. Stork entered into dialogue with its shareholders on this subject at the EGM. C&P – although present at the meeting – took no part in that dialogue.
Difference of views on strategy
In a letter to Stork dated 7 September 2006, Centaurus & Paulson then requested the Board of Management and the Supervisory Board to call a further EGM before 19 October 2006, at which a vote would be held about the following requests to the Board of Management and the Supervisory Board:
· to fully concentrate on the aerospace division in order to create a Dutch aerospace champion;
· to divest all other businesses, including Stork Prints, Stork Technical Services and Stork Food Systems;
· where necessary, to re-invest any proceeds from divestments in the further growth of the Aerospace division and to return excess capital to shareholders while maintaining an appropriate capital structure;
· to commence the implementation of the above strategy with immediate effect in order to benefit from the current market momentum and to create a focused Dutch aerospace company within one year.
Stork complied with the request by C&P and called a meeting on 12 October 2006 at which a vote could be held on the proposal by C&P. It should be noted that Stork indicated in advance that the outcome of this vote would not be binding on the grounds of the Dutch corporate governance rules. C&P handed out a presentation explaining their proposal at the meeting. The proposal was adopted.
At the end of this EGM, the Board of Management and the Supervisory Board stated that they would give careful consideration to all the views expressed at the meeting, and that they would inform the shareholders as soon as possible of their findings.
A week after the EGM of 12 October 2006, C&P proposed by letter dated 19 October 2006 to the Supervisory Board to hold a discussion to investigate whether any common ground could be found between the strategic visions of Stork on the one hand and C&P on the other.
It took approximately four weeks to analyse the proposal by C&P, the underlying assumptions on which this was based and the arguments of C&P. After this thorough analysis, the Board of Management and the Supervisory Board concluded that it was expedient to hold a further discussion with C&P. A discussion took place in Paris on 11 November 2006 between representatives of the Board of Management and the Supervisory Board and representatives of C&P. Unfortunately this discussion did not lead to a rapprochement.
On 14 November 2006 the Board of Management and the Supervisory Board announced by means of a shareholder letter that implementation of the proposal of C&P would be irresponsible and that they, taking into account their responsibilities under Dutch corporate governance, were unable to accept the outcome of the vote at the EGM on 12 October 2006. In that letter Stork explained that the proposal by C&P would not provide a credible alternative to the strategy of Stork and would not be in the interests of the company, its shareholders and other stakeholders.
Implementation of the proposal by C&P would have a significant adverse effect on the risk profile of Stork, while there was no proof that there would be an appropriate reward for this increased risk. It would not put Stork Aerospace in a better position to execute its strategy. Furthermore, implementation of this proposal and the demanded urgency would probably lead to significant uncertainty and execution risks that would have a negative effect on shareholder value.
MP3-file conference call press and analysts
Proposal for a vote of no confidence in the Supervisory Board and amendment of the articles of association
On 23 November 2006 C&P requested Stork to hold a (third) EGM at which they wished to propose a vote of no confidence in the Supervisory Board and to propose the introduction of a statutory right of approval by the general meeting of shareholders for mergers and/or acquisitions or divestments with a value of more than € 100 million.
On 14 December 2006 Stork announced that it would comply with the request of C&P and call an EGM on 18 January 2007. In a letter of the same date (14 December 2006) Stork reported to its shareholders that the proposals of C&P were irresponsible and not in the interests of Stork and the enterprise connected therewith.
Various stakeholders in Stork, including in particular employees, suppliers, partners and (other) shareholders, have indicated that they considered their interests would be best served by continuation of the – in their view successful – strategy of Stork. They have at the same time said that they feared their interests would be damaged if the proposals of C&P were to be adopted at the EGM of 18 January 2007 of if the strategy advocated by C&P were to be executed.
On 19 December 2006 the executive committee of the Stork Foundation (Stichting Stork) exercised its option right to acquire cumulative preference shares in Stork. The Foundation thereby acquired 30,233,170 cumulative preference shares, slightly less than 50% of the issued share capital of Stork. The Foundation took this action because it feared that there was a serious threat to the development, independence and continuity of Stork. The executive committee of the Foundation has stated that the reason for it to exercise its option was the recently announced Extraordinary General Meeting of Shareholders of Stork, to be held on 18 January 2007 at the request of Centaurus Capital and Paulson. The Foundation also stated that it intended to vote against the proposals of Centaurus and Paulson at the meeting.
Enterprise Chamber
On 5 January 2007 C&P requested the Enterprise Chamber of the Amsterdam Court of Appeal to hold an investigation into the policy and affairs of Stork. They also requested the Enterprise Chamber to take provisional measures, including cancellation of the voting rights of the 30,233,170 cumulative preference shares B held by the Stork Foundation.
On 17 January 2007 the Enterprise Chamber of the Amsterdam Court of Appeal delivered its ruling on the above request. The Enterprise Chamber decided to hold an investigation into the policy and affairs of Stork which have led to the current situation.
For the duration of the investigation, the Enterprise Chamber further ordered the following measures with immediate effect:
· Prohibition of voting on the agenda items for the Extraordinary General Meeting of Shareholders (EGM) that were proposed by C&P;
· The appointment of three extra Supervisory Board members in addition to the current members. These new members will have the exclusive right to determine the agenda of ordinary and extraordinary general meetings of shareholders. They will also have a deciding vote on matters relating to the strategy of Stork and on those matters on which Stork and Centaurus and Paulson are divided, to be determined at the discretion of these Supervisory Board members.
· Stork will withdraw the cumulative preference shares B in Stork that were issued at the request of the Stork Foundation on 19 December 2006.
Following this ruling, Stork issued a press release with the following quote from CEO Sjoerd Vollebregt: “This ruling of the Enterprise Chamber is favourable for the company as Stork will return in calmer waters following this decision. We are pleased that the Enterprise Chamber has stated that Stork’s business strategy has passed the test and that its strategy is sound and based on good arguments. It has also acknowledged the widely based support for Stork, both within and outside the company. The ruling stated that Centaurus and Paulson cannot force the company to drastically change the strategic direction at this time. We already suggested earlier to appoint a new Supervisory Board member. The Enterprise Chamber has now decided to appoint three Supervisory Board members, which we welcome. We expect this to restore mutual confidence and trust. We are confident as to the expected outcome of the investigation and will fully cooperate with the investigators to be appointed by the Enterprise Chamber in this respect.”
On 27 January 2007 the Enterprise Chamber announced that the investigation will be carried out by Mr. L.P. van den Blink and prof. D.L. Traas, and that Mr. D.G. Eustace, Mr. C.J.A. van Lede and Mr. W. Kok have been appointed as members of the Supervisory Board. In relation to these Supervisory Board members, the Enterprise Chamber has announced that they will not be accountable on the grounds of their position to (the shareholders and other bodies of) Stork.
In accordance with the ruling of the Enterprise Chamber, the Board of Management took the decision to withdraw the cumulative preference shares B, and will ask the General Meeting of Shareholders on 2 March 2007 to confirm this decision.
Disclosure of Major Holdings in Listed Companies Act (WMZ)
Apart from the above discussion, an investigation is currently still in progress into whether C&P have observed the requirements of the Disclosure of Major Holdings in Listed Companies Act (WMZ). Actions taken by Stork In relation to this investigation have included initiating a preliminary hearing of witnesses.
Press release 4 October 2006
Petition C&P
Press release 16 November 2006