Explains M&G Perspective on Long-Termism, Ownership and
Risk
Vote Today on the BLUE Proxy Card to Elect
M&G's Four Highly-Qualified Nominees to the Board
LONDON, March 28, 2019 /CNW/ -- M&G Investments, the
investment manager of approximately 16.5% of the shares of Methanex
Corporation ("Methanex" or the "Company") (TSX:MX) (Nasdaq: MEOH)
today released the following open letter to its fellow
shareholders.
Dear Methanex Shareholders,
In light of our nomination of four highly-qualified director
nominees, Lawrence Cunningham,
Paul Dobson, Patrice Merrin and Kevin
Rodgers, for the Board of Methanex, we wanted to take the
opportunity to share our views on long-term investing, ownership
and risk.
Our fundamental investment strategy is this: we invest for the
long-term, we favor long-term value creation at the companies in
which we invest, and we encourage those companies to minimize risk
and to maintain an appropriate and conservative asset allocation
approach.
It is precisely because of those basic principles, and because
of our concerns about Methanex's corporate governance, that we have
made the decision to provide Methanex shareholders with the
opportunity to elect four new, highly-qualified, independent
directors.
A Long-Term Perspective
We have been significant
owners of Methanex for more than 10 years. Under appropriate
circumstances we would continue to own Methanex indefinitely.
Notably, there are companies that we have owned for extremely long
periods of time – some positions spanning several decades. This
reflects our judgement that after we have identified a company that
meets our investment standards, we should become a resource for
that company, providing encouragement and suggestions as
appropriate. Significant mismanagement of the Company is one of the
very few reasons we would change this approach.
Thus, for us, a substantial investment reflects a belief that we
can work together with the management and board of the company to
provide long-term value for shareholders and other stakeholders.
This means that high-risk efforts must not take precedence over the
patient building of value. We are disappointed and unhappy that
after a 10-year relationship with us, Methanex has chosen to
radically change its course.
A Focus on Long-Term Value Creation
Methanex is an excellent example of our approach to long-term value
creation. As evidence of this, during the last decade, M&G has
been supportive of a number of Methanex management initiatives for
capital expenditures because we believed that those steps would
contribute to the long-term value of the business. Those steps
included disassembling and relocating two of the four plants in
Chile to Geismar; increasing
capacity of the New Zealand
operations; re-opening the Medicine
Hat facility; re-opening the two remaining plants in
Chile (in progress); and
potentially increasing capacity at Geismar 1 and 2. In fact, we
also support the development of Geismar 3, but only if Methanex
brings in a financial partner – as we have repeatedly made
clear.
Our Approach to Risk
We recognize that Methanex faces one principal risk over which it
has no control. That risk is the inherent volatility of prices for
methanol. For example, in May
2016 the Methanex Non-Discounted Reference Price dropped to
a low of $249 /mt from $449 m/t in January
20151 (a 45% decline and down from a prior peak
of $632 / mt in January 2014).
During times of sharp declines in the price of methanol it is
critically important for Methanex that it has a conservative
balance sheet position that enables it to weather the certainty of
volatility in the price of methanol. We have continually and
repeatedly encouraged Methanex to maintain such a conservative
balance sheet.
Methanex has indicated that it may build the Geismar 3 plant by
itself. That step, if taken without a partner, will likely result
in a material increase in Methanex's leverage. While at current
methanol prices that leverage is generally sustainable, if methanol
prices dropped to 2016 levels and remained there for a prolonged
period Methanex would face severe financial difficulty. That
scenario would simply not be in the interest of any of Methanex
stakeholders, and certainly would not be not in the interest of any
long-term shareholder of any company.
Clarifying our Views on Asset Allocation
There are times when the market price of Methanex stock does not
reflect the intrinsic value of the Company. At those times, as long
as Methanex's balance sheet remains conservatively geared, Methanex
should invest in its own stock. For the vast majority of our
ownership period we supported the capital allocation policy of
management, but in the latter half of 2016 the option to repurchase
shares, while maintaining a robust balance sheet, represented such
a compelling opportunity that we increased our engagement with the
Company to pursue this policy (and M&G subsequently filed a 13D
to that effect).
Should the share price in Methanex appreciate to a level
approaching or above the intrinsic value of the Company, then
M&G would clearly discourage repurchasing shares at that level.
Our point in this regard is that shares should only be purchased at
low levels with a substantial discount to the underlying asset
base.
If the Geismar 3 project proceeds without a partner, in addition
to creating a high degree of risk, it will make it impossible for
Methanex to engage in well-timed stock repurchases. The Company
therefore will have effectively handcuffed itself should methanol
prices decline and such pricing opportunities occur.
Governance
Methanex has nominated 11 incumbents for re-election to its Board.
Five of those incumbent directors have served on the Methanex Board
for over 10 years. It stands to reason that if a director has
worked closely with management for many years, at some point he or
she loses a certain degree of independence.
The four candidates we have nominated will not have the long
relationships with management of the longest serving Methanex
directors who we ask that they replace. They will bring a fresh,
but deeply experienced, perspective to corporate matters,
unburdened by long-term relationships with management. Each
Director is entirely independent of us.
Conclusion
Should Methanex pursue the Geismar 3 plant independently it will
transform the Company from a stable, conservatively-financed,
growing business, into a high-risk leveraged bet on the methanol
price. We think this is a serious mistake that stems in part from
deficiencies in corporate governance, and we encourage shareholders
to support our four independent, highly-qualified nominees to the
Methanex Board. If they are elected, the new Methanex Board will
include a substantial minority of directors who will encourage the
entire Board to take a fresh look at the future of the Company. We
believe, based on our long investing history and our long-term
outlook, that this would prove valuable for all shareholders over
the long-term.
Please vote on the BLUE proxy card for the
election of Lawrence Cunningham,
Paul Dobson, Patrice Merrin and Kevin
Rodgers, for the Board of Methanex.
If you have any questions or need assistance in voting your BLUE
proxy card, please call our proxy solicitor, D.F. King &Co.,
Inc., at (800) 864-1460 (toll-free) or (212) 269-5550 (call
collect).
Sincerely,
Stuart Rhodes
Fund Manager
M&G Investment Management
About M&G
M&GPrudential has c. $338 billion
of assets under management (as at Dec
2018) and has more than 7 million customers in the UK,
Europe, Asia and the Americas including individual
savers and investors, life insurance policy holders and pensions
scheme members.
Investor Contact
D.F. King & Co., Inc.
Edward McCarthy / Geoffrey Weinberg / Susy
Monteiro: 1-212-269-5550
Media Contact
Sloane & Company
Dan Zacchei / Joe Germani: 1-212-486-9500
E-mail: Dzacchei@sloanepr.com
JGermani@sloanepr.com
Required Information Under Canadian Law
Information in Support of Public Broadcast Exemption
M&G Investment Management Limited (MAGIM) is relying on the
exemption under section 9.2(4) of National Instrument 52-102 –
Continuous Disclosure Obligations to make this public
broadcast solicitation. The following information is provided
in accordance with corporate and securities laws applicable to
public broadcast solicitations. This solicitation is being
made by MAGIM, and by M&G Global Dividend Fund and M&G
(Lux) Investment Funds 1 (collectively, "M&G"), and not by or
on behalf of the management of Methanex Corporation
("Methanex"). The head office of Methanex is 1800 Waterfront
Centre, 200 Burrard Street, Vancouver,
British Columbia, V6C 3M1.
MAGIM has filed an information circular dated March 25, 2019 (the "M&G Circular")
containing the information required by Form 51-102F5 –
Information Circular in respect of its proposed nominees for
election at the upcoming annual meeting of Methanex shareholders on
April 25, 2019 (the "Annual
Meeting"). The M&G Circular is available on Methanex's
company profile on SEDAR at http://www.sedar.com.
Proxies may be solicited by proxy circular, mail, telephone,
telecopier, email or other electronic means, as well as by
newspaper or other media advertising and in person by managers,
directors, officers and employees of M&G who will not be
specifically remunerated therefor. In addition, M&G may
solicit proxies by way of public broadcast, including press
release, speech or publication and any other manner permitted under
applicable Canadian laws. M&G may engage the services of
one or more agents and authorize other persons to assist it in
soliciting proxies on behalf of M&G. The costs incurred
in the preparation and mailing of the M&G Circular or proxy
solicitation will be borne directly and indirectly by
M&G. M&G has not yet determined whether it intends to
seek reimbursement from Methanex of such solicitation expenses.
M&G has entered into an agreement with D.F. King & Co.,
(D.F. King) pursuant to which D.F. King has agreed that it will
provide certain consulting and related services, including acting
as M&G's proxy solicitor. Pursuant to this agreement,
D.F. King will receive an initial fee of $10,000 and an additional fee of $200,000 upon the mailing of final proxy
materials, plus an additional fee for telephone calls and
telecommunication charges in an amount to be agreed upon by the
parties. In addition, D.F. King may be entitled to a success
fee on the successful completion of a solicitation, as determined
by M&G in consultation with D.F. King.
Proxies may be revoked by a registered holder of Methanex shares
(i) by completing and signing a valid proxy bearing a later date
and returning it in accordance with the instructions contained in
the accompanying form of proxy; (ii) by depositing an instrument in
writing executed by the shareholder or by their attorney authorized
in writing, as the case may be: (a) at the registered office of
Methanex at any time up to and including the last business day
preceding the day the Annual Meeting or any adjournment or
postponement of the Annual Meeting is to be held, or (b) with the
Chairman of the Annual Meeting prior to its commencement on the day
of the Annual Meeting or any adjournment or postponement of the
Meeting; or (iii) in any other manner permitted by law. Proxies may
be revoked by a non-registered holder of Methanex shares at any
time by written notice to the intermediary in accordance with the
instructions given to the non-registered holder by its
intermediary.
None of MAGIM, M&G Global Dividend Fund or M&G (Lux)
Investment Funds 1 or any of their associates or affiliates (i) has
any material interest, direct or indirect, by way of beneficial
ownership of securities of Methanex or otherwise, in any matter to
be acted upon at the Annual Meeting, other than the election of
directors, or (ii) has had any material interest, direct or
indirect, in any transaction or proposed transaction since the
commencement of Methanex's last financial year that has materially
affected or would or could materially affect Methanex or any of its
subsidiaries.
1
https://www.methanex.com/sites/default/files/methanol-price/MxAvgPrice_Feb%2028%2C%202019.pdf
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SOURCE M&G Investments