- On behalf of all shareholders, Maple Rock is seeking real
independence at the board by replacing two ESW Capital-affiliated
directors who have been characterized as “independent”
- Nominees Ryan J. Morris and Andrew Day are wholly independent
with extensive experience in the capital markets,
telecommunications and software industries and bring a commitment
to serve the interests of ALL Optiva shareholders
- Current directors Christy Jones and Farhan Thawar are not
aligned with shareholders, refuse to communicate, are roadblocks to
value creation, and have supported unprecedented and poor
management actions
Maple Rock Capital Partners Inc., owning approximately 22.1% of
the subordinate voting shares of Optiva Inc. (TSX:OPT) (“Optiva” or
the “Company”), announces it, as investment manager of Maple Rock
Master Fund LP, has requisitioned (the “Requisition”) Optiva’s
Board of Directors (the “Board”) to call a special meeting of
shareholders (“Meeting”) for the purpose of, among other things,
replacing two non-preferred ESW Capital, LLC (or “ESW”)-affiliated
directors with two wholly independent directors.
Maple Rock has been Optiva’s second largest shareholder since
September 2017 and continues to believe in Optiva’s long-term value
creation prospects. However, Maple Rock is concerned the Company
will be unable to reach its full potential with an ESW-controlled
Board and ESW-affiliated CEO who are intent on running the Company
as though it were a private entity to the benefit of ESW and
without appropriate checks and balances. Maple Rock is
disappointed, but not surprised, that following its open letter to
the Board of January 21, 2020, expressing concerns about the
Company and indicating a continued willingness to engage, the Board
has not reached out to Maple Rock. The fact the Board has continued
to ignore its second-largest shareholder in an era where
director-shareholder engagement is the norm, is not only an affront
to the basic standards of good governance, but further indication
of the Board’s willingness to run Optiva as though it is a private
company and their entrenchment.
Maple Rock’s decision to requisition a meeting was not its first
choice nor one it relishes taking. It is, however, needed to
establish the basic tenets of good governance at Optiva.
Over the past several months, Maple Rock has sought to work
constructively with Optiva to implement a small number of modest,
straightforward, commonsense recommendations that would strengthen
the Company’s governance practices and build value for
shareholders. In fact, Maple Rock is so confident about the
prospects for the Company that it has twice offered additional
capital, contingent upon minority nomination rights and basic
governance improvements. The first offer was in the form of a
CDN$15 million loan and then in the form of a CDN$50 million equity
investment at a price per subordinate voting share of C$60.
Rather than accept the additional capital and basic governance
improvements that came with it, the ESW-controlled Board rejected
the offers and instead announced a USD$100 million financing.
Having rejected Maple Rock’s previous offers, it is clear this
financing is not driven by the need for additional capital, but
rather is an entrenchment tactic to dilute shareholders. It’s
especially odd that a company would announce its intention to raise
a significant amount of money with no indications on the sources of
capital or its per share value. The lack of clarity around the
announcement rattled the market with Optiva losing over 21% of its
market value as of the close on January 24, 2020.
It is now apparent that, with this recent action, the only way
to ensure good governance at the Company is to requisition a
meeting of shareholders.
Maple Rock is requesting shareholders remove ESW-related
directors Christy Jones and Farhan Thawar and replace them with
Ryan J. Morris and Andrew Day (the “Nominees”)—two highly-qualified
independent and experienced nominees.
Given the current accountability imbalance at the Board level
and potential for the ESW-controlled Board to take certain actions
counter to the interests of other shareholders in an effort to
further entrench and benefit themselves, Maple Rock requests the
special meeting be held promptly, by no later than March 16,
2020.
Maple Rock is also reminding the Board, particularly the two
deemed independent non-preferred directors in question, of their
fiduciary duty to all shareholders, beyond ESW. If the
ESW-controlled Board is considering a behind-closed-doors process
to replace Ms. Jones and Mr. Thawar with two other ESW-selected
directors in an attempt to create the appearance of change and
independence, Maple Rock warns this will not result in real change.
The new independent directors should be selected by all
shareholders.
Governance Imbalance in Favour of ESW
Optiva’s Board is presently made up of seven directors, four of
whom are entitled to be selected by ESW as the sole preferred
shareholder, while the other three non-preferred directors are
intended to be voted on by subordinate voting shares, of which ESW
owns approximately 27.8%. Since ESW gained its controlling position
on the Board via a private placement on January 26, 2017, Optiva
has lost over 40% of its market value and underperformed its
industry peers and the S&P/TSX Composite Index.
The problem is that the check and balance required on this
structure, namely three truly independent directors, is not in
place. Currently, two of the three non-preferred directors—namely
Ms. Jones and Mr. Thawar (technically deemed to be ‘independent
directors’)—are closely associated with ESW. ESW nominated both as
independent directors who are tasked with overseeing related-party
matters and ensuring minority shareholders are treated fairly, yet
both have deep ties to ESW. Ms. Jones and Mr. Thawar have numerous
historical relationships with ESW.
True independence is incredibly important, especially given the
three independent directors have a critical role in overseeing
transactions that involve and potentially benefit ESW, and in
ensuring shareholders have the ability to consider accretive change
of control opportunities that may not be of interest to ESW.
Notably, Optiva’s subscription agreement contains a drag-along
right that, among other provisions, requires ESW to support any
proposed transaction that is at least 120% of the exercise price of
the warrants then in effect and is supported by the majority of
independent non-preferred directors.
Just because a director is deemed to be independent, it does not
mean they are sufficiently objective to represent the interests of
all shareholders. Directors who have personal and/or previous
professional relationships with parties who have interests that may
be at odds with the interests of other shareholders may be less
likely to engage in a proactive, thorough, and dispassionate review
and debate of matters brought before them.
Maple Rock believes shareholders should have the benefit of full
disclosure regarding Board members’ conflicting relationships and
actions that raise questions about possible breach of certain
directors’ fiduciary duties.
Optiva’s Board Skirting Governance Best Practices
Governance best practices dictate that compensation committees
be composed solely of independent directors. Optiva’s compensation
committee consists of three Board members—Ms. Jones, and
non-independent directors Scott Brighton and Andrew Price—all of
whom have close ties to ESW.
Given the makeup of this committee, Maple Rock is concerned
about its effectiveness in providing oversight and ensuring the
appropriateness and competitiveness of executive pay. For example,
the compensation package for CEO Danielle Royston appears to be
significantly off-market relative to her male peers, is devoid of
any peer group benchmarking, and lacks any performance-based
incentives to deliver returns for Optiva shareholders. It also
raises serious questions about the degree of influence the
ESW-controlled compensation committee has on the Company’s
management.
The Company’s decisions on CEO compensation, coupled with its
recently-released analyst presentation, raise questions about ESW’s
objectives. We wonder why the Board would object to retaining a
globally-recognized compensation consulting agency to review the
CEO’s compensation in order to incentivize shareholder returns and
address off-market levels relative to male peers; and why it would
choose to rely on non-standard financial definitions and accounting
practices in a presentation which confusingly attempts to make the
company look weaker than it is.
We also wonder why Optiva, a publicly-traded company on the TSX,
would go an entire year without a full-time CFO, and to what degree
the Company, without such a CFO, is able to make accurate forecasts
with regard to financial matters, including its fundraising
needs.
Independent, Accountable and Highly-Qualified Director
Nominees
Maple Rock’s Nominees are wholly independent, accountable and
have significant experience in the capital markets,
telecommunications and software industries. In contrast, current
“independent” directors Ms. Jones and Mr. Thawar are closely
associated with ESW.
The Nominees include:
Ryan Morris
- Entrepreneur and investor who served as Chairman of three
publicly-traded companies
- Founder and President of investment firm Meson Capital
Partners, LLC
- Co-Founder and CEO of software company VideoNote, LLC
Andrew Day
- Over 25 years of management experience in telecommunications,
technology innovation, sales and marketing leadership
- Currently Executive Vice President and Chief Operating Officer
of Internap Corp.
- Former Senior Vice President, Head of Consumer Sales / Channels
at Rogers Communications, and CEO of Primus Telecommunications
Group Inc.
Advisors
Kingsdale Advisors (“Kingsdale”) is acting as strategic
shareholder and communications advisor and Norton Rose Fulbright
Canada LLP is acting as legal advisor to Maple Rock.
Information Concerning the Concerned
Shareholder Nominees
As set out in the Requisition, Maple Rock, as investment manager
of Maple Rock Master Fund LP, (together, the “Concerned
Shareholder”) has nominated Ryan Morris and Andrew Day (the
“Concerned Shareholder Nominees”) to serve as new independent
directors of Optiva Inc. (“Optiva”) until the next annual meeting
of shareholders, or until their successors are elected or appointed
in accordance with applicable law. The table below sets out, in
respect of each Concerned Shareholder Nominee, his name, province
or state and country of residence, his principal occupation,
business or employment within the five preceding years, and the
number of subordinate voting shares (the “Shares”) of Optiva
beneficially owned, or controlled or directed, directly or
indirectly, by such Concerned Shareholder Nominee.
Name, Province or State and
Country of Residence
Present Principal Occupation,
Business or Employment and Principal Occupation, Business or
Employment During the Preceding Five Years
Number of Shares Beneficially
Owned or Controlled or Directed (Directly or Indirectly)
Ryan Morris California, United
States
President of Meson Capital Partners LLC
from 2009 to present; Executive Chairman of Software Motor Company
from 2017 to present.
12,488
Andrew Day
Ontario, Canada
Chief Operating Officer and Executive Vice
President of Internap Corporation from 2019 to present; Senior Vice
President and General Manager of Internap Corporation from 2016 to
2019; Senior Vice President – Head of Consumer Sales / Channels of
Rogers Communications Inc. from 2013 to 2015.
Nil
Other Boards of Reporting Issuers
As at the date of this Requisition, neither of the Concerned
Shareholder Nominees serve as directors of any reporting issuers
(or the equivalent) in Canada or otherwise.
Other Information Concerning the Concerned Shareholder
Nominees
To the knowledge of the Concerned Shareholder, no Concerned
Shareholder Nominee is, at the date hereof, or has been, within ten
(10) years before the date hereof: (a) a director, chief executive
officer or chief financial officer of any company that (i) was
subject to a cease trade order, an order similar to a cease trade
order or an order that denied the relevant company access to any
exemption under securities legislation that was in effect for a
period of more than thirty (30) consecutive days (each, an
“order”), in each case that was issued while the Concerned
Shareholder Nominee was acting in the capacity as director, chief
executive officer or chief financial officer, or (ii) was subject
to an order that was issued after the Concerned Shareholder Nominee
ceased to be a director, chief executive officer or chief financial
officer and which resulted from an event that occurred while that
person was acting in the capacity as director, chief executive
officer or chief financial officer; (b) a director or executive
officer of any company that, while such Concerned Shareholder
Nominee was acting in that capacity, or within one (1) year of such
Concerned Shareholder Nominee ceasing to act in that capacity,
became bankrupt, made a proposal under any legislation relating to
bankruptcy or insolvency or was subject to or instituted any
proceedings, arrangement or compromise with creditors or had a
receiver, receiver manager or trustee appointed to hold its assets;
or (c) someone who became bankrupt, made a proposal under any
legislation relating to bankruptcy or insolvency, or became subject
to or instituted any proceedings, arrangement or compromise with
creditors, or had a receiver, receiver manager or trustee appointed
to hold the assets of such Concerned Shareholder Nominee.
To the knowledge of the Concerned Shareholder, as at the date
hereof, no Concerned Shareholder Nominee has been subject to: (a)
any penalties or sanctions imposed by a court relating to
securities legislation, or by a securities regulatory authority, or
has entered into a settlement agreement with a securities
regulatory authority; or (b) any other penalties or sanctions
imposed by a court or regulatory body that would likely be
considered important to a reasonable securityholder in deciding
whether to vote for a Concerned Shareholder Nominee.
To the knowledge of the Concerned Shareholder, none of the
Concerned Shareholder or directors or officers of the Concerned
Shareholder, or any associates or affiliates of the foregoing, or
any of the Concerned Shareholder Nominees or their respective
associates or affiliates, has: (a) any material interest, direct or
indirect, in any transaction since the commencement of the
Corporation’s most recently completed financial year or in any
proposed transaction which has materially affected or will
materially affect the Corporation or any of its subsidiaries; or
(b) any material interest, direct or indirect, by way of beneficial
ownership of securities or otherwise, in any matter proposed to be
acted on at the Meeting, other than the election of directors.
Additional Information
The information contained in this press release does not and is
not meant to constitute a solicitation of a proxy within the
meaning of applicable securities laws. Although the Concerned
Shareholder has requisitioned a meeting of shareholders, there is
currently no record or meeting date and shareholders are not being
asked at this time to execute a proxy in favour of the Concerned
Shareholder Nominees or any other resolutions set forth in the
Requisition. In connection with the Meeting, the Concerned
Shareholder may file a dissident information circular (the
“Information Circular”) in due course in compliance with
applicable securities laws.
Notwithstanding the foregoing, the Concerned Shareholder is
voluntarily providing the disclosure required under section 9.2(4)
of National Instrument 51-102 – Continuous Disclosure Obligations
in accordance with securities laws applicable to public broadcast
solicitations.
This news release and any solicitation made by the Concerned
Shareholder in advance of the Meeting is, or will be, as
applicable, made by the Concerned Shareholder, and not by or on
behalf of the management of Optiva. All costs incurred for any
solicitation will be borne by the Concerned Shareholder, provided
that, subject to applicable law, the Concerned Shareholder may seek
reimbursement from Optiva of the Concerned Shareholder’s
out-of-pocket expenses, including proxy solicitation expenses and
legal fees, incurred in connection with a successful reconstitution
of the Board.
The Concerned Shareholder is not soliciting proxies in
connection with the Meeting at this time, and shareholders are not
being asked at this time to execute proxies in favour of the
Concerned Shareholder Nominees (in respect of the Meeting) or any
other resolution set forth in the Requisition. Proxies may be
solicited by the Concerned Shareholder pursuant to an Information
Circular sent to Shareholders after which solicitations may be made
by or on behalf of the Concerned Shareholder, by mail, telephone,
fax, email or other electronic means as well as by newspaper or
other media advertising, and in person by directors, officers and
employees of the Concerned Shareholder, who will not be
specifically remunerated therefor. The Concerned Shareholder may
also solicit proxies in reliance upon the public broadcast
exemption to the solicitation requirements under applicable
Canadian corporate and securities laws, conveyed by way of public
broadcast, including through press releases, speeches or
publications, and by any other manner permitted under applicable
Canadian laws. The Concerned Shareholder may engage the services of
one or more agents and authorize other persons to assist in
soliciting proxies on behalf of the Concerned Shareholder.
The Concerned Shareholder may retain Kingsdale to assist the
Concerned Shareholder in soliciting shareholders should the
Concerned Shareholder commence a formal solicitation of proxies. If
Kingsdale is retained in such capacity, its responsibilities may
include advising the Concerned Shareholder on governance best
practices, where applicable, liaising with proxy advisory firms,
developing and implementing shareholder communication and
engagement strategies, and advising with respect to meeting and
proxy protocol for a fee to be agreed upon at the time of such
engagement.
The Concerned Shareholder is not requesting that Optiva
shareholders submit a proxy at this time. Once the Concerned
Shareholder has commenced a formal solicitation of proxies in
connection with the Meeting, proxies may be revoked by instrument
in writing by the shareholder giving the proxy or by its duly
authorized officer or attorney, or in any other manner permitted by
law or the articles of incorporation or by-laws of Optiva.
Optiva’s principal office address is 2233 Argentia Rd, East
Tower, Suite 302, Mississauga, Ontario L5N 2X7. A copy of this news
release may be obtained on Optiva’s SEDAR profile at
www.sedar.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200127005324/en/
Media: Kingsdale Advisors Ian Robertson Executive Vice
President Communication Strategy Office: 416-867-2333 Cell:
647-621-2646 irobertson@kingsdaleadvisors.com
Optiva (TSX:OPT)
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