Paulson & Co. won some support from a prominent shareholder advisory firm for replacing three members of Detour Gold Corp.’s board, including its chairman, after nominating eight candidates.
The recommendation by Glass Lewis & Co. on Tuesday was slightly more forceful than the stance taken by advisory firm Institutional Shareholder Services Inc. on Friday, when it urged shareholders to back Detour’s proposal to elect just two of the activist investor’s nominees.
Glass Lewis noted that Detour — under pressure — had taken steps to address Paulson’s concerns, appointing three new directors in August. It said shareholders would be best served by additional incremental change at the Toronto-based mining company.
“We ultimately see validity in Paulson’s central thesis that, for substantive change to take hold at the company, certain of the core and long-term directors who have presided over value destruction and overseen technical failures of prior mine plans need to be replaced,” Glass Lewis said.
While the miner said it saw value in appointing two of Paulson’s nominees, replacing the entire board would be a disaster.
Glass Lewis urged shareholders to oust Detour’s chairman, Alex Morrison, along with two other board members.
A representative for Detour described Glass Lewis’s recommendation as rejecting Paulson’s demand for wholesale change and agreeing with the company on keeping Paulson’s nominees as a minority on the board.
Paulson said in an emailed statement Tuesday that it was pleased Glass Lewis recognized that “the incumbent directors appear to have been deficient in their oversight function.” It said it continues to believe that wholesale change is needed to bring real change.
The New York-based hedge fund run by billionaire John Paulson has been locked in a battle with the company since June, initially pushing Detour to explore strategic alternatives, including a sale. Paulson is seeking to replace eight of the company’s nine directors at a special shareholder meeting slated for Dec. 11.
Paulson, which has a 5.7 percent stake in Detour, has also called for Detour’s interim CEO and chairman to resign.
Detour’s board and management have resisted Paulson’s efforts. In a letter last week to shareholders, it argued the hedge fund would move the the company “backwards.” While the miner said it saw value in appointing two of Paulson’s nominees, replacing the entire board would be a “disaster.” It said it would resume its search for a new CEO the day the proxy fight was over.
(By Scott Deveau and Michael Hytha)
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