Making Green Off of the Green Movement

The rush to creatively capitalize on the green movement is becoming more prevalent.  Note Georgia-based Wells Timberland REIT, a one-of-a-kind fund that capitalizes on timber properties and forestry products whose subsidiary, Timberlands II just signed a “carbon storage agreement” with Carbon TreeBank.  The agreement asks that Timberlands participate in a program that will offset carbon dioxide for the purpose of storing atmospheric carbon.  Similarly, Canadian-based Carbon Friendly Solutions implemented a “carbon sequestration project” in Europe and Canada that concentrates on forested land and the growth of trees to “maximize carbon absorption.”  

Finger Pointing at Bank of America

Finger Interests, a longtime shareholder of Bank of America, recently announced an unusual exempt solicitation, asking shareholders to vote against two members: the board chairman (and CEO) and lead director.  In a seemingly sour-grapes move over the merger with Merrill Lynch, the Houston-based investment group noted a lack of disclosure on BoA’s losses up to last December and cited the 60% premium paid for Merrill.  Another bank also received an exempt solicitation – State Bancorp.  Similar to Finger Interests, Illinois-based investment firm PL Capital recently filed an exempt solicitation to oust certain members of State’s board.  The bank’s largest “outsider” shareholder submitted its solicitation to State’s other shareholders asking for their votes against three of the company’s directors and for the declassification and a size reduction of the board.

Another Takeover Defense – Standstill Agreements

Standstill agreements, where parties agree not to conduct certain actions (such as outside partnerships), are on the rise.  As an example, Silicon Valley-based Micrel, Inc. just announced an agreement with Obrem Entities, one of its “significant” holders.  The agreement asks that Obrem abstain from combining into a partnership, syndicate, and otherwise refrain from building additional positions in the company.  BCSB Bancorp also announced a standstill agreement with PL Capital Parties, under which BCSB amended its bylaws to remove residency requirements for directors – as long as PL Capital maintains a 5% stake in the bank.  PL Capital must also avoid: augmenting its current share position; forming groups to influence the voting of shares; and arrange for the financing of future share purchases.

Issuing Debt to Reduce Debt

Reflecting the current economic times, many companies are preserving capital through operational changes.  Entities are implementing such measures as workforce reductions or asset sales, and companies with consistent track records are still able to combine debt sales with operational changes to ideally weather the storm and return to sunnier skies.  Public utilities are no exception – Midwestern gas and electric supplier Union Electric Co. (d/b/a Ameren Corp.) just announced a $350 million debt sale to be used for the repayment of outstanding short-term debt.  This debt sale also comes on the heels of an announced 39% dividend reduction, which the company claims was meant to reduce expenditures.  Similarly, Southern California Edison just sold $750 million in debt securities almost simultaneously with a rate hike.   

Ultimate Shareholder Activism – Derivative Actions

Frustrated shareholders can be a force to be reckoned with, especially those concerned enough to bring a potentially material lawsuit against the very company in which they hold shares.  Enter California-based biotech Anesiva, Inc.  The company just announced a derivative suit brought on by one of its individual shareholders.  The suit alleges breach of fiduciary duty based on Anesiva’s entrance into an “investor agreement.”  Prompting the derivative action was the company’s January sale of $7 million in securities to a consortium of investors, the proceeds of which are meant to be used to provide additional financial “needs.”  The plaintiff seeks to void provisions of the investor agreement that would pay the consortium seven times the principal of the purchased securities in the event of a change in control.

Published:  March 26, 2009