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Argo challenger withdraws board nominations

13th December 2022 - Author: Matt Sheehan

Argo has confirmed that activist investor Capital Returns Master has withdraw its nomination for two candidates to Argo’s Board of Directors, just days before shareholders were set to vote on its composition at the company’s December 15th annual general meeting (AGM).

argo globalArgo and Capital Returns have been in a protracted struggle to win the support of shareholders for months now, with the latter having sought to install its own picks for two board positions in order to rectify what it has described as “years of underperformance and poor decision-making” at Argo.

But a recent development may have taken the wind out of the investor’s sails, as ISS and Glass Lewis – the two largest global proxy advisory firms – both decided to publicly endorse the candidates put forward by Argo, rather than Capital Returns.

Additionally, Voce Capital Management, which owns a significant 9.5% of Argo’s common shares, also recently confirmed that it had voted for all of Argo’s nominees ahead of the AGM.

Voce was itself in the role of activist investor through 2019, when it pressured Argo into making several changes to its Board amid the corporate expense scandal that led to a subpoena by the US Securities and Exchange Commission and the departure of CEO Mark Watson.

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Despite having seemingly won this latest battle, Argo accepts that its performance metrics and share price are not yet at an acceptable level, and is in the process of implementing a strategic review, which is evaluting options for the future of the company that include a potential sale, with Argo claiming to have already reached out to 80 parties, with assistance from its financial advisor, Goldman Sachs.

The company notes that, over the past two years, it has announced significant divestitures to exit international businesses and to focus on its most profitable business lines, and has also entered into two major risk transfer transactions with Enstar and Westfield.

Argo also says it conducted a formal interview process for the candidates nominated by Capital Returns, but concluded by telling shareholders they would “not be additive to your Board’s collective skillset and would diminish the level of expertise and diversity on your Board.”

However, while surely a relief for Argo’s management, the withdrawal of Capital Returns’ challenge could leave some investors feeling even more embittered about the company’s performance, particularly given the lawsuits already launched over alleged mismanagement and lack of transparency.

For its part, Argo says it will “continue to maintain an ongoing dialogue with its shareholders,” following the withdrawal of nominations.

“We appreciate the constructive discussions we have had and the overwhelming support received for the Company’s director nominees,” it assured. “Argo has a highly qualified, fully engaged and significantly refreshed Board, and we will continue to take actions to maximize value for our shareholders.”

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