TIDMCCEP
RNS Number : 4616Z
Coca-Cola Europacific Partners plc
15 May 2023
Coca-Cola Europacific Partners plc (CCEP or the Company)
15 May 2023
Dear Shareholder of Coca-Cola Europacific Partners plc:
We are asking for your support in voting "FOR" all resolutions,
as recommended by the Board of Directors, at our upcoming 2023
Annual General Meeting on 24 May 2023.
We have recently received certain proxy advisory services
reports from Glass, Lewis & Co. (Glass Lewis) and Institutional
Shareholder Services (ISS). While Glass Lewis recommend a "FOR"
vote in respect of each recommendation, ISS recommend voting
"AGAINST" Resolution 3 (Approval of the Directors' Remuneration
Report), Resolution 24 (Waiver of mandatory offer provisions set
out in Rule 9 of the Takeover Code) and Resolutions 7 (regarding
the re-election of Manolo Arroyo) and Resolution 9 (regarding the
re-election of Jose Ignacio Comenge). Consequently, we believe it
is important to provide additional context regarding these
resolutions beyond that in our Notice of Meeting.
Resolution 3 (Approval of the Directors' Remuneration
Report)
The report from Glass, Lewis & Co. (Glass Lewis) recommends
a vote "FOR" Resolution 3 while Institutional Shareholder Services
(ISS) recommends a vote "AGAINST".
The report from ISS recommends a vote "AGAINST" Resolution 3 and
states:
-- "The Remuneration Committee amended the performance targets
of the 2020 LTIP awards, which vested during the year under review.
The retrospective amendment of performance criteria linked to
in-flight LTIP awards is not considered in line with recommended
best practice, notwithstanding the Company's rationale and downward
discretion applied."
On the other hand, the report from Glass Lewis recommends a vote
"FOR" and concluded that:
-- "The remuneration report provides comprehensive disclosure of
the Company's executive compensation policies and structure, which
generally appear to satisfy best practice guidelines. While
shareholders should be mindful of the concerns noted in our
analysis, particularly the significant outcomes under the long-term
incentive plan, we do not consider any of the issues to be
particularly contentious at this time"
For the Remuneration Committee, a key focus is to ensure that
remuneration outcomes for our people continues to reflect our
underlying philosophy. In particular, incentive schemes should
deliver outcomes which align with business performance and
appropriately reflect the experiences of shareholders and wider
stakeholders, whilst also continuing to act as an incentive to
engage our people to deliver the best possible results.
All of our incentive schemes utilise stretching performance
targets, set at the start of the relevant period and are designed
to drive performance in the context of prevailing expectations for
the business. At the same time, in line with best practice, our
schemes all include discretionary provisions which allow the
Committee to adjust the formulaic result to ensure that the outcome
delivered to participants is a fair and appropriate reflection of
performance over the period.
The 2020 LTIP award was granted in March 2020 immediately prior
to the onset of the COVID-19 pandemic, and had a performance period
which spanned the three financial years to 31 December 2022. As
disclosed in the 2020 and 2021 remuneration reports, following the
acquisition of CCL during 2021, the Committee reviewed the
financial targets for this award in the context of the updated
long-term business plan for the combined business and to take into
account external forecasts and changes to the wider macroeconomic
environment since the targets were set.
In assessing the formulaic vesting outcome of the 2020 LTIP, the
Committee additionally undertook a holistic assessment of overall
performance over the three year period to determine whether the
formulaic outcome was an appropriate vesting level for all
participants and reflected underlying Company performance. The
Committee took into account a wide range of performance reference
points, including financial performance, returns to shareholders,
the stakeholder experience and our sustainability achievements, as
described on page 132 of the Integrated Report. As a result of the
assessment the Committee determined the overall performance of the
business to be strong. However, the Committee considered it
appropriate to apply downwards discretion in respect of the final
vesting level for the CO2e reduction measure and cap this at
target. This reduced the overall vesting level to 1.85x target, and
the Committee believes this to be a fair reflection of overall
performance.
The CCEP Board and management firmly believe the decisions made
in respect of the 2020 LTIP were in the best interests of
shareholders, aligned incentive outcomes for all participants to
reflect performance through the COVID-19 crisis and enabled CCEP to
continue to deliver long-term shareholder value. Accordingly, the
Board and management of CCEP recommend voting "FOR" Resolution
3.
Resolution 24 (Waiver of mandatory offer provisions set out in
Rule 9 of the Takeover Code)
The report from Glass, Lewis & Co. (Glass Lewis) recommends
a vote "FOR" Resolution 24. The report from Institutional
Shareholder Services (ISS) recommends a vote "AGAINST" Resolution
24. Both Glass Lewis and ISS have recommended voting "FOR"
Resolutions 28 and 29 (Authorities to purchase own shares).
Resolution 24 is a standing item at each Annual General Meeting
of the Company to enable CCEP to give effect to Resolutions 28 and
29. Therefore, a share repurchase cannot occur unless Resolution 24
is approved and a vote "AGAINST" Resolution 24 will have the same
effect as a vote "AGAINST" Resolutions 28 and 29.
The report from Glass Lewis states:
-- "We believe the terms of this proposal are reasonable. The
Takeover Code was instituted as a shareholder safeguard in the
event that a major shareholder sought a larger stake in the
Company, possibly to the detriment of other shareholders.
-- In this case, we note that following a repurchase of shares
or exercising of options, the concert party may increase their
ownership stake in the Company but may not gain control of it
without triggering a full takeover bid. Further, we note that the
waiver will not apply to an acquisition of ordinary shares.
-- We do not believe that this proposal is connected with any
sort of takeover attempt by this party, and thus, we do not believe
this proposal should warrant shareholder concern at this time. We
will, however, monitor the concert party's beneficial ownership in
the event that a takeover attempt becomes more likely."
On the other hand, ISS recommends voting "AGAINST" Resolution 24
based on the application of its standard policy as a result of
undefined "concerns over creeping control". This fails to take into
account the purpose of Resolution 24 and Olive Partners, S.A.'s
(Olive) stated intentions.
Rule 9 of the Takeover Code applies when any entity holds 30% or
more of the voting rights of a company. When a company purchases
its own voting shares, any resulting increase in the percentage of
shares carrying voting rights will be an acquisition for the
purpose of Rule 9. CCEP currently has one shareholder, Olive, which
owns approximately 36.21% of our outstanding shares and so any
share repurchase would automatically trigger Rule 9 of the Takeover
Code and result in an obligation on Olive to make a general offer
to shareholders for all the remaining equity share capital of CCEP.
Therefore, the intention of Resolution 24 is to enable CCEP to make
share repurchases without triggering any obligation on Olive to
make a general offer for the Company.
In the Notice of Meeting, Olive has confirmed that it has no
intention of changing its approach with respect to CCEP as a result
of any increase in its shareholding due to any share repurchase. It
has no intention to seek any change to the general nature or any
other aspect of the Company's business. Given Olive's stated
position, we believe that any concerns over "creeping control" are
therefore unfounded.
Further, as set out in the Notice of Meeting, following any
share buyback, (either in whole or in part), Olive will continue to
be interested in Ordinary Shares carrying more than 30% of the
voting rights of CCEP, but will not hold Ordinary Shares carrying
more than 50% of such voting rights, and any further increase in
that interest (other than a further exercise of the buyback
authorities) will be subject to the provisions of Rule 9 of the
Takeover Code.
Given Olive's stated position and the regulatory framework, we
believe that any concerns over "creeping control" are therefore
unfounded.
As noted above, a share repurchase will not occur unless
Resolution 24 is approved.
The CCEP Board and management firmly believe these resolutions
are in the best interests of shareholders as they provide the
ability to return cash to shareholders, enabling CCEP to continue
to deliver long-term shareholder value. Accordingly, the Board and
management of CCEP recommend voting "FOR" Resolutions 24, 28 and
29, consistent with the recommendations of Glass Lewis.
Resolution 7 (re-election of Manolo Arroyo) and Resolution 9
(re-election of Jose Ignacio Comenge)
The report issued by Glass Lewis recommends voting "FOR"
Resolution 7 (the re-election of Manolo Arroyo) and Resolution 9
(the re-election of Jose Ignacio Comenge). The report generated by
ISS notes that its policy requires remuneration committees to be
comprised solely of independent directors. It therefore recommends
a vote "AGAINST" the re-election of Mr Arroyo and Mr Comenge as
non-independent members of CCEP's Remuneration Committee.
The CCEP Board and the Remuneration Committee Chairman, John
Bryant, are of the opinion that the re-elections of Mr Arroyo and
Mr Comenge is appropriate because:
-- the terms of reference of the Remuneration Committee
stipulate that it must be composed of a majority of INEDs,
including for quorum requirements;
-- the Remuneration Committee comprises a majority of
Independent Non-executive Directors (INEDs), notwithstanding the
presence of Mr Arroyo and Mr Comenge; and
-- Although Mr Arroyo and Mr Comenge are not independent they do
not have any conflicts of interest. Avoiding conflicts is the main
purpose of prescribing that the members of the Remuneration
Committee should be independent, particularly to avoid any
executive director being involved in such decisions. They can be
expected to act to drive the long term success of the company on
this Committee in the best interests of all shareholders in the
same way as the Independent Non-Executive Directors.
The CCEP Board and management firmly believe this resolution is
in the best interests of shareholders and recommend voting "FOR"
Resolutions 7 and 9, consistent with the recommendation of Glass
Lewis.
We would be glad to discuss our recommendations in relation to
Resolutions 3, 7, 9 and 24 further with you, should you wish. If
you have any questions, or need assistance in submitting your proxy
to vote your shares, please contact us at
shareholders@ccep.com.
Thank you for your support.
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