Altice, the Luxembourg-based telecommunications company controlled by Drahi, has become the latest company to announce that it is moving to the Netherlands to take advantage of one of Europe’s most flexible corporate codes.
According to the Wall Street Journal, the flexible corporate governance rules are why Italy’s Agnelli family was able to maintain control of Fiat Chrysler Automobiles NV when it switched its domicile to the Netherlands last year.
The paper also notes that pharmaceutical firm Mylan NV fended off a bid by Israeli rival Teva Pharmaceutical Industries last month after it moved to the Netherlands, where it instituted a poison-pill-like takeover device, along with other management-friendly ploys.
In an attempt to redomicile Altice in the Netherlands, a total of 91.5% of shareholders voted in favour of an acquisition that has seen Altice taken over by a Dutch subsidiary.
The resulting structure means that European telecoms magnate Patrick Drahi, who owns 58.5% of the stock of his company, will have 92% of the company’s voting power.
Why the Netherlands?
The Netherlands is one of the few countries in Europe where companies can set up a dual-class share structure, assigning different voting rights to different classes of shares.
The “comply or explain” corporate governance system is similar to that in the UK.
Companies are not legally required to comply but instead must explain to shareholders why they are deviating from the country’s corporate governance code
Of Altice’s eight board members, only two will be independent. The Dutch corporate governance codes requires a majority of board members to be independent.
In another deviation from code guidelines the chairman of Altice’s board will also chair its audit committee.
Altice has grown rapidly since its IPO in January 2014 as Drahi has aquired cable companies and combined them with mobile operators, undercutting rivals that sell them separately.
It has spent more than €35bn on acquisitions in France, Portugal and the US over the past 18 months, according to Dealogic.
The Wall Street Journal notes that 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 Drahi’s power grab.
Rogier Snijdewind, an adviser at Dutch pension fund manager PGGM who attended the shareholder meeting, tells the Journal: “We do not want to create situations where companies are indeed put into a position that they are not accountable for their actions. That is what we fear will happen to Altice.”
A spokesman for Altice responded to the paper saying Drahi’s track record as a successful telecom investor over the past 20 years is an important part of the company’s story. He says the new structure reinforces corporate governance as it applies equally to all shareholders and not just the management.
Fighting a losing battle
However, it appears on this occasion that the shareholders have been fighting a losing battle.
Altice has now completed the transfer of the telecom holding company and the shares now trade on Euronext Amsterdam.
The A Shares have one voting right each, and a nominal value of one euro-cent. The B Shares have 25 voting rights each and a nominal value of 25 euro-cents. Shareholders are permitted to convert their B Shares into A Shares at a 1:1 ratio.
Altice says it may continue its share buy-back programme, as announced on 2 June, subject to further announcement.
Dexter Goei, CEO of the Altice Group, says: “Pursuant to the Merger, the Group will benefit from a powerful equity acquisition currency without prejudicing voting control of the company’s founding shareholder group. This will further strengthen Altice’s position in the next phase of value-enhancing growth.”