The Shareholder Forum

supporting investor interests in long term enterprise value

 

Purpose & History of Services

The Shareholder Forum

The Shareholder Forum supports investor interests in corporate enterprise value with services that require independence – and that may benefit from the Forum’s network resources and recognition for advocacy of long term investor interests – to assure a definition of relevant issues and fair access to information that can be relied upon by both corporate and investor decision-makers.

The policies that provide a foundation for the Forum’s marketplace functions have been carefully developed and tested to allow any investor to participate in its communications, either anonymously or visibly, without acting in concert. Established originally to accommodate professional fund managers, this independent moderator function has proved to be consistently effective in managing orderly processes of issue definition for rational analysis by fiduciaries who are responsible for informed decisions.

Initiated in 1999 by the New York Society of Security Analysts with lead investor and former corporate investment banker Gary Lutin as guest chairman to address the professional interests of its members, and independently supported by Mr. Lutin since 2001, Forum programs have achieved wide recognition for their effective definition of important issues and orderly exchange of the information and views needed to resolve them. The Forum's ability to convene all key decision-making constituencies and influence leaders has been applied to subjects ranging from corporate control contests to the establishment of consensus marketplace standards for fair disclosure, and has been relied upon by virtually every major U.S. fund manager and the many other investors who have participated in programs that addressed their interests.

Currently important applications of the Forum’s independent position include the support of corporate managers who wish to provide the leadership expected of them by responding to activist challenges with orderly reviews of issues relevant to long term investor interests.

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Special Program

 

Independent Analysis of Shareholder Interests

in a merger transaction proposed by

Providian Financial Corporation

 

See

Program Index

 

 

 

The IR behind the Providian deal

 
Juggling investor opposition and a media frenzy
 
September 2, 2005

San Francisco, CA -- After much speculation in the media, shareholders of Providian Financial approved its merger with Washington Mutual (WaMu) on Wednesday. The deal was the subject of much debate with one of Providian's biggest shareholders publicly opposing the merger and the company's proxy firm, Institutional Shareholder Services (ISS), being criticized in the media.

The media frenzy tipped off when Putnam Investments, one of Providian's major holders with 7.5 percent of shares outstanding, went public with its stance against the deal. In a very unusual move, Putnam published a press release saying the bid price was too low. 'In a consolidating industry and in light of the recently announced Bank of America/MBNA transaction, mono-line credit card companies such as Providian represent an increasingly scarce asset that should command a higher price,' wrote Putnam on August 1 about WaMu's offer.

Jack Carsky, senior VP of IR at Providian, was surprised by Putnam's decision to go public with its view. 'When Putnam put out that press release that moved everything up a notch and that was almost unprecedented,' he says. 'I can't think of a case Putnam has ever done that; the CEO, the CFO and myself spoke to Putnam's portfolio mangers and their analysts in a couple of occasions on June 6 [when the offer was first announced] and a couple of days later.'

Carsky notes that communication with Putnam was constant, before and after the press release came out. 'The lines of communications were very good and we understood their point,' he says. 'We respected their point, but we still felt that based on everything we knew that we were getting the best offer for our shareholders.'

Soon after Putnam's announcement the media criticized ISS' role in the deal. A New York Times' column by Gretchen Morgenson questioned ISS' integrity noting it was giving advice to both management and shareholders, posing a potential conflict of interest, and also that in voting in favor of the current bid, shareholders would give up their right to an independent appraisal of the deal. Morgenson also mentioned ISS' refusal to reveal whether any of its clients were key players in the deal. ISS then accused Morgenson of defamation.

Proxy firms were divided on this deal. ISS and Proxy Governance supported the offer while Glass & Lewis and Egan-Jones weren't in favor of the deal's terms.

'While we expected some push back because Putnam voiced their displeasure so loudly on the first day of the announcement and then subsequently in that press release, we didn't expect to see a pile on by the press and the proxy governance services like this,' notes Carsky. 'At that point we were just kind of standing on the side lines looking at all these people taking pot shots at each other wondering what we did wrong in the middle of it all.'

As for ISS, Carsky defends Providian's choice in taking advice from the proxy firm. 'Whether people deem them to be objective or not, ISS gives you the opportunity to essentially speak your case, and they take their time to understand management,' he says. 'To Glass Lewis' fault they don't do that, they just take whatever is contained in the proxy - they don't talk you.'

At the end of the day, Providian's merger was approved with 83 percent of total voting shares approving the merger (or 67 percent of the total outstanding shares).

There is a lesson learned here, says Carsky. 'Never underestimate. We went into this thinking there shouldn't be much of a problem especially after we got the ISS blessing,' he says. 'You can ever underestimate the possibility of other entities making their voices heard for whatever reason.'

by Vanessa Theiss

 

 

 

 

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