European telecom magnate Patrick Drahi prevailed Thursday in his
effort to redomicile his Altice SA company in the Netherlands, part
of an attempt to cement control even as he pursues potentially
dilutive acquisitions across the globe.
Shareholders overwhelmingly voted in favor of an acquisition
that would see Altice, the Luxembourg-based telecommunications
company controlled by Mr. Drahi, taken over by a Dutch subsidiary,
according to people familiar with the matter.
Although Mr. Drahi's success in securing his power was assured,
the move highlights how companies are flocking to the Netherlands
to take advantage of one of Europe's most flexible corporate
codes.
Italy's Agnelli family was able to maintain control of Fiat
Chrysler Automobiles NV when it switched its domicile to the
Netherlands last year. Pharmaceutical firm Mylan N.V. fended off a
bid by Israeli rival Teva Pharmaceutical Industries Ltd. last month
after it moved to the Netherlands, where it instituted a
poison-pill-like takeover device, along with other
management-friendly ploys.
For Mr. Drahi's purposes, the Netherlands is one of the few
spots in Europe where companies can set up a dual-class share
structure, assigning different voting rights to different classes
of shares. The resulting structure means that the billionaire, who
owns 58.5% of the stock of his company, would have 92% of the
company's voting power.
Altice has grown rapidly since its public offering in January
2014 as Mr. Drahi has amassed cable companies and combined them
with mobile operators, undercutting rivals that sell them
separately. It has spent more than $40 billion on acquisitions in
France, Portugal and the U.S. over the past 18 months, according to
Dealogic. So far, the strategy has been popular with investors,
with Altice shares up some 427% in Amsterdam since the IPO.
But some minority shareholders are concerned about Mr. Drahi's
power grab.
"We do not want to create situations where companies are indeed
put into a position that they are not accountable for their
actions," said Rogier Snijdewind, an adviser at Dutch pension fund
manager PGGM who attended the shareholder meeting on Thursday.
"That is what we fear will happen to Altice."
A regulatory filing by Altice explained that the new share
structure will "provide greater flexibility for financing and
corporate transactions." It allows Mr. Drahi and other major
shareholders to "put in place appropriate tools to pursue a
value-enhancing strategy without diluting voting control." In
practice, Altice can now fund takeovers with equity without
diluting Mr. Drahi's voting power.
A spokesman for Altice said Patrick Drahi's track record as a
successful telecoms investor over the past 20 years is a key part
of the company's story. He said the new structure would reinforce
corporate governance as it applied equally to all shareholders and
not just the management.
Some investors in the Netherlands are particularly concerned
about the influx of foreign companies seeking to take advantage of
lax corporate governance rules, where companies aren't legally
required to comply but must explain to shareholders why they are
deviating from the country's corporate governance code. The system,
known as "comply or explain," is popular in several European
countries, including the U.K.
For example, of its eight board members, only two will be
independent. The rest will be Altice executives, including Mr.
Drahi, who will serve as president. The Dutch corporate governance
code requires a majority of board members to be independent.
The chairman of Altice's board, Jurgen van Breukelen, will also
chair its audit committee, another deviation from the code.
Mr. Drahi also has an agreement with each of the shareholding
board members, and some other shareholders, that they must vote in
favor of all his proposals for a period of 30 years. He is also
entitled to what is known as "negative control" over the board,
which means that he is allowed to cast a number of votes equal to
all other board members.
Paul Cronheim, an Amsterdam-based lawyer with the Dutch law firm
De Brauw Blackstone Westbroek, said that "in general, some of these
newcomers are very creative, and introduce innovative governance
structures. It remains to be seen if they will stand up in court if
challenged."
Write to Shayndi Raice at shayndi.raice@wsj.com and Nick Kostov
at Nick.Kostov@wsj.com
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