Governance in Swiss translation?  <more>

Friday the 13th in March 2020 Woodstock or Halloween: Events have moved very fast since Berkshire issued its annual report on February 22. The annual meeting will be held at 3:45 p.m. on May 2nd as scheduled. However, we will not be able to allow shareholders to physically attend the meeting, and all special events are canceled. I very much regret this action; for many decades the annual meeting has been a high point of the year for me and my partner, Charlie Munger. It is now clear, however, that large gatherings can pose a health threat to the participants and the greater community. We won’t ask this of our employees and we won’t expose Omaha to the possibility of becoming a “hot spot” in the current pandemic. Therefore, we will limit attendance to me, possibly Charlie, and several Berkshire employees who will deliver proxy votes. It’s possible that one or more of the journalists that we listed on page A-2 of the 2019 annual report will be present to ask some of the questions submitted to them. We are deferring a decision on this matter, but encourage you to continue to send your questions to them. Yahoo has confirmed that it will stream the meeting. They have provided great coverage in the past, and you can watch what takes place in Omaha from your armchair. Charlie and I will miss you, but we will see many thousands of you next year.Thanks for your understanding, Warren E. Buffett

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VIPsight - 2nd Quarter 2020 <click here>

VIPsight - News

 

April 2020

Uniper SE: Fortum reached its Goal. What´s next?

Although the homepage still carries the opening statement “Wellcome to the new Uniper!”, the resignation of all five independent Supervisory Board Members on April 3^rd indicates that the days of “new Uniper” are over. The move is a reflection of recent changes in the ownership structure, with Fortum increasing its shareholding to close to 70 percent of all shares outstanding.

In the early days of Uniper, some investors even regarded the company as a bad bank for the unattractive conventional energy assets of E.ON. Following the successful spin-off, E.ON later decided to sell its remaining shares in Uniper to Fortum, which since increased its holding to a majority position. However, Fortum´s approach was met with resistance by the former management of Uniper, which believed in an independent strategy of the group. As of today, it can be concluded that this strategy delivered good results, developing Uniper into one of the most successful European energy companies with an impressive return for investors.

But this chapter is closed by now. Hence, investors are looking forward to learning from the new management about the amended strategy and its medium-term implications, such as a potential bid for the outstanding shares in Uniper. A good opportunity to ask these questions should be this year´s AGM.

 

GEA Group AG: Advance Payment of Dividend due to Postponement of AGM

Many companies decided to cancel or postpone dividend payments amidst the COVID-19 crisis. Occasionally one gets the impression that this is probably just an excuse for measures to be taken anyhow amidst an already week liquidity position, or even worse, just an imitation of the corresponding announcements by other companies. In light of this, it is very much appreciated when a company takes on a pioneering role and takes the right measures.

Similar to many other companies, GEA decided to postpone this year´s AGM, which was originally planned for April 30th, 2020. The argument for this move did not come as a surprise: “The health of the company´s shareholders, employees and the service providers involved takes the highest priority.” Instead of postponing the AGM, GEA could have opted to hold a virtual event. This decision was based on the expectation of an especially high number of questions at the AGM in conjunction with the COVID-19 crisis.

The company confirmed the dividend proposal of EUR 0.85 per share as published in its 2019 annual report. However, in light of the decision to postpone the AGM, the Executive Board and the Supervisory Board of GEA also decided to pay the maximum possible advance payment of EUR 0.42 per share. This advance payment is set for May 6, 2020, when payment of the full dividend was originally planned. The AGM is expected to be held at the end of 2020.

 

Deutsche Lufthansa AG: First restructuring Package decided, what´s next on the Agenda?

Although the COVID-19 crisis has been going on for a while, strategic decisions for the time after that are seldom heard yet. This is probably because so many companies are still busy communicating postponements of AGMS, profit warnings, and dividend cancellations.

No wonder that only a few companies think about tomorrow in this situation. A positive example is Lufthansa. The airline industry had a particularly heavy blow from this crisis, and it is still open if any airline can survive in 2020 without government help.

But Lufthansa is already one step further with the recent decision on a first restructuring package. The company expects a significant decline in air travel for the period after the crisis, while a return to pre-crisis levels is not expected in the foreseeable future. Based on this assumption, Lufthansa decided to reduce the capacity of flight operations and administration long term. Parts of the fleet will be permanently decommissioned, while other planes will be withdrawn from short-haul operations. Further reductions apply to Lufthansa Cityline and Eurowings, while the already initiated restructuring plans at Austrian Airlines and Brussels Airlines will be further intensified, including steps to reduce the fleets, while SWISS International Airlines is expected to take similar initiatives.

The flight operations of Germanwings will be discontinued to speed up the already planned bundling of all flights of the Eurowing Group in one unit. Also, the Lufthansa Group airlines have already terminated almost all wet-lease agreements with other airlines. There was also a clear message for the employees: The aim is to offer as many people as possible continued employment within the Lufthansa Group. In this respect, talks with unions and workers` councils are to be arranged quickly.

At first glance, Lufthansa´s decision on a first restructuring package as part of the preparations for the time following the crisis comes as a positive surprise. But then again, there are these ongoing rumors of a government bailout. With state money in the accounts, if definitively would become much harder to restructure the business for later times. Could it be that the package may not be aimed at the time after the crisis, but rather serves to prepare for a more substantial step?

 

OSRAM Licht AG / ams AG: No Reason to question the Acquisition Financing

Investors in OSRAM can take a deep breath: No reason to worry about the financing of the takeover attempt. But perhaps the banks involved in this transaction now have a strong interest in the wellbeing of ams also in the long term.

This story started already on January 24^th, 2020, when the extraordinary meeting of shareholders of ams approved a rights issue of up to 1.649 million. The proceeds of this issue should be used to repay a portion of the EUR 4.4 billion acquisition bridge facility for the public offer for OSRAM.

The preparations for the rights issue proceeded as planned. On February 11^th, 2020, ams successfully placed its entire treasure stock of 3.350.688 shares at a price of CHF 44.25 per share with institutional investors. On the same day, the Management Board of ams decided on the terms of the right issue. In the capital increase, 189,869,454 new shares were offered by way of a discounted rights offering at an offer price of CHF 9.20 per share. For each existing ams share, shareholders received one subscription right. Four rights entitled to purchase nine new shares at the offer price during the subscription period, which ended on March 30th, 2020.

On March 19^th, 2020, ams informed the market about the outlook for the public offer and the status of the capital increase. The company expects that the public offer for OSRM will be closed in the second quarter of this year. Also, the capital was proceeding on the terms set out in the prospectus published on March 13, 202, the statement confirmed. Accordingly, the only remaining closing condition relates to the receipt of the required regulatory approvals. This was good news to the OSRAM shareholders, but not so much for the banks, since the rights issue was fully underwritten by a syndicate consisting of the same banks that had also underwritten the fully committed acquisition bridge facility of up to EUR 4.4 billion.

With the completion of the rights exercise period on March 30, 2020, subscription rights for 117,451,512 new shares were exercised, corresponding to 62% of the 189,869,454 offered shares. 15,023,697 of the remaining 72,417,942 shares could be placed with investors at a price of CHF 9.20 in a second step. Accordingly, a total of 132,475,209 shares have been taken up by investors, corresponding to approx. 70% of the 189,869,454 shares offered in the rights issue. The remaining 57,394,245 shares no sit on the books of the syndicate banks according to their underwriting quota.

 

Infineon Technologies AG: Progress with the Acquisition of Cypress Semiconductor Corporation

Time passes quickly. Infineon´s plans to acquire Cypress Semiconductor Corporation were published in early June 2019. The transaction, which was valued at EUR 9 billion at the time, should help to strengthen the focus on structural growth drivers and serve a broader range of applications. But most of all, it was supposed to accelerate Infineon´s “path of profitable growth”. The closing of the transaction was expected by the end of 2019, or early 2020. But while the ad hoc announcement underpinned the importance of speed in this way, even nine months later the transaction still has not been concluded. The obstacle still is missing approvals by the relevant regulatory bodies.

In this regard, the recently granted approval by the Committee on Foreign Investment in the United States was a major step forward and appreciated by investors. According to Bloomberg, Cypress stated that “CFIUS has completed its review of Cypress´s previously announced merger transaction with Infineon Technologies AG and determined that there are no unresolved national security concerns”. However, the combination still needs a sign-off from China´s State Administration for Market Regulation, according to Bloomberg. Many analysts seem to think that this is an easy hurdle. However, here it comes again: While in the days pre-COVID 19 the trade war between the US and China seemed to fade away, new massive disputes are emerging due to the Chinese handling of the disease.

 

December 2019

Proxinvest publishes its twentieth third report: “Annual General Meetings and shareholder activism – 2019 season”

(Hans-Martin Buhlmann and Jose Ignacio Sanchez Galan after VIP remarks in 2019 Iberdrola AGM)

Restrained General meetings

While the “Place de Paris” (i.e stakeholders on the French listed market) wonders about the potential framework regarding shareholder activism, Proxinvest’s report on General Meetings displays that in fact General Meetings of French companies remain very controlled. In point of fact, 57.6% of voting rights exercised in the 315 General Meetings analyzed by Proxinvest were in the hands of reference shareholders (36% in the CAC 40), explaining why only 0.64% of resolutions were not adopted.

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