Paulson Rebuffed From Stocking Detour Board by ISS
(Bloomberg) -- Paulson & Co.'s effort to replace most of Detour Gold Corp.'s board was dealt a blow after a prominent shareholder advisory firm urged investors to side with the company's plans to appoint just two of the activist's eight nominees.
Institutional Shareholder Services Inc. said while Paulson had made a case that change was warranted at the Toronto miner, Detour had been responsive to its concerns by appointing three new directors in August and offering to appoint two of the dissident's nominees to its board.
“Despite seeking to replace all but one of the incumbent nominees, the dissident has not articulated a sufficiently detailed go-forward plan,” ISS said in its report issued late Friday.
The advisory firm did say that due to the company's prolonged under performance, investors may want to instill “the board with an even greater sense of urgency and perhaps speed up the CEO search.” It recommended investors consider supporting an additional dissident nominee, such as Dawn Whittaker, in that case, in addition to Steven Feldman and Christopher Robison, who are supported by both the company and Paulson.
Alex Morrison, Detour's chairman, said he was pleased ISS had joined a number of shareholders in recognizing the changes the company had made and the role interim Chief Executive Officer Michael Kenyon will have in overseeing the company's plans and the selection of his successor.
Ongoing Battle
“We understand we have a lot of work ahead of us and look forward to working with Paulson once this proxy contest is over to build value for shareholders,” he said in an emailed statement. “I am confident that together we can achieve this.”
The New York-based hedge fund run by billionaire John Paulson has been locked in a battle with the company since June, initially pushing Detour to explore strategic alternatives, including a sale. Paulson is seeking to replace eight of the company's nine directors at a special shareholder meeting slated for Dec. 11. Wholesale changes are needed at the company because the current board is entrenched and failing shareholders, according to Paulson.
Paulson, which has a 5.7 percent stake in Detour, has also called for Detour's interim CEO and chairman to resign.
‘Backwards'
“Real change for the better will only happen with the replacement of the core, long-term directors who have overseen prolonged value destruction,” Paulson said in an emailed statement. “We appreciate ISS recognized many of the concerns that shareholders have, but they haven't gone far enough. Momentum is building behind the campaign for real change.”
Detour's board and management have resisted Paulson's efforts. In a recent letter to shareholders it argued the hedge fund would move the the company “backwards.” While the miner said it saw value in appointing two of Paulson's nominees, replacing the entire board would be a “disaster.” It said it would resume its search for a new CEO the day the proxy fight was over.
ISS urged investors to vote for two of Paulson's nominees, Feldman and Robison, on the company proxy card as Detour proposed last month. It also recommends investors vote for the removal of Lisa Colnett and Jonathan Rubenstein.
--With assistance from Danielle Bochove.
To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net
To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Virginia Van Natta, James Ludden
©2018 Bloomberg L.P.
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