The Works has secured the backing of a pair of heavyweight shareholder proxies in the discount retailer’s boardroom tussle with an influential activist investor.
The stationary and crafts retailer has been locked in a row with Kelso, a London-listed investment firm, since the investor sought to force a director onto its board.
Institutional Shareholder Services (ISS) and Glass Lewis, two top shareholder advisories, have urged investors in The Works to slap down Kelso’s proposal in a major boost to the retailer.
Kelso has claimed that Graeme Coulthard, a former Card Factor director and major shareholder in The Works, should join the board of the retailer.
But executives at The Works have claimed Coulthard’s presence on the board would “risk derailing” its growth strategy and refused to meet with the prospective director.
Ahead of the vote on Kelso’s proposal at next week’s Annual General Meeting (AGM), ISS told shareholders that the investment firm has “failed to articulate a compelling case for board change”.
Kelso has “not raised any material concerns regarding the company’s performance or strategy,” the proxy said.
Glass Lewis, another leading shareholder advisory, said the investor’s concern over The Work’s low share price “appears to have some merit”.
“[But] the case for electing [Coulthard] remains insufficient, particularly given the company’s improving operating performance and substantial recent shareholder returns.”
Kelso ‘perplexed’ by boardroom tussle
Last month, the boardroom spat took a turn when Kelso hit out at The Works chairman Stephen Bellamy for dialling in to board meetings from his home in New Zealand.
The activist investor said it “believes shareholders would benefit from greater clarity regarding [Bellamy’s] physical attendance and in-person engagement with the business.”
But Glass Lewis pointed to evidence that Bellamy attended all of the company’s seven boardroom meetings last year.
“In the absence of evidence that any presumed virtual participation has prevented Mr. Bellamy from effectively performing his duties as a director, this concern does not provide a sufficient basis for supporting the election of Mr. Coulthard,” the proxy said.
The Works has urged shareholders to vote down Kelso’s proposal, which it says would “create an imbalance in governance and potentially result in particular shareholder interests being prioritised over those of the broader shareholder base, with a consequent risk of value destruction.”
Kelso told its investors on Wednesday that it is “perplexed and disappointed that the current board have chosen to advise shareholders to reject [Coulthard’s] appointment.”
The investment firm is The Works’s third-biggest shareholder, owning 10 per cent of the company, while Coulthard has an eight per cent stake.
In recent years, The Works has sought to overturn its reputation as a ‘pile it high, sell it cheap’ retailer by pivoting to screen-free entertainment for children.
The retailer posted 3.3 per cent sales growth and £260m in revenue to May, pushing adjusted profit up 44 per cent to £7.2m.