Lessons from the Aberdeen Proxy Battle
In the continuing trend of small-cap proxy contests in Canada, Aberdeen International mounted a successful defense to activist investor Meson Capital Partners' aggressive and highly publicized attack.
In December 2014, Aberdeen, a $14 million market cap company with a portfolio of investments in junior mining companies, was the subject of a proxy fight initiated by Meson Capital, a San Francisco based hedge fund and owner of approximately 5% of Aberdeen’s shares. Meson Capital was critical of a number of alleged related party transactions involving Aberdeen and entities associated with its Chairman and CEO. Meson Capital also criticized Aberdeen’s allegedly “lavish” compensation practices at a time when the company was experiencing losses and declining stock price.
On December 19, 2014, the Globe & Mail announced that Meson Capital filed a complaint to the Ontario Securities Commission regarding a private placement of stock and warrants to Sulliden Mining Capital Inc. and other parties. In January 2015, Meson Capital and Nightscape Capital LLP, which held 3.5% of Aberdeen’s shares, commenced a court application seeking to prevent the privately placed shares from being voted at the special meeting that Meson Capital had requisitioned to replace Aberdeen’ board.
On February 2, 2015, after proxy results demonstrated shareholder support for Aberdeen’s incumbent board, Aberdeen announced that Meson Capital and Nightscape had withdrawn their dissident slate, taken steps to dismiss their court application, and agreed to a five-year standstill. Meson’s President also issued an apology to Aberdeen’s Chairman.
The Aberdeen battle is a reminder that it is possible for a well-organized target to mount a successful defense against an aggressive activist attack. It also highlights the risk of activists challenging corporate actions and that boards need to be prepared to justify their decisions to maintain shareholder support. Moreover, this case demonstrates the importance of managing and minimizing the negative publicity that can result from a proxy battle, even where the target company is ultimately successful.