May 16, 2018 / 2:10 PM / 2 years ago

Shareholder advisors, top investor oppose Elliott call for Uniper stake sale probe

FRANKFURT/DUESSELDORF (Reuters) - Shareholder advisory groups and a top-10 investor in Uniper (UN01.DE) have backed the utility’s management as it seeks to fend off calls for an investigation into whether it sought to block the sale of a major stake in the company.

FILE PHOTO: A logo of German energy utility company Uniper SE is pictured in the company's headquarter in Duesseldorf, Germany, March 8, 2018. REUTERS/Thilo Schmuelgen/File Photo

Their support deals a blow to Cornwall Luxembourg S.a.r.l., a fund backed by activist investor Elliott, which had called for the investigation into the planned sale of E.ON’s (EONGn.DE) remaining 46.65 percent stake to Fortum (FORTUM.HE).

Institutional Shareholder Services (ISS), the world’s leading shareholder advisory group, Glass Lewis and Odey Asset Management all recommended shareholders vote against the motion, according to notes and comments sent to Reuters.

The vote, to take place at Uniper’s annual shareholder meeting scheduled for June 6, will decide whether a special auditor will be appointed to identify possible breaches of duty by Uniper’s board in relation to Fortum’s proposed acquisition.

Fortum, which is awaiting regulatory approval to buy E.ON’s stake in Uniper, said in late April that Uniper had actively worked against the proposed transaction.

Uniper has opposed the deal but last week denied it had tried to undermine it.

“A special audit is an unnecessary distraction. All it can reveal is confidential discussions but it cannot affect any outcome,” Crispin Odey, founder of Odey Asset Management, said, adding it would distract management from doing their job.

“We can see no merit in this motion and would urge others to vote against it, too.”

Odey Asset Management holds a 1.56 percent stake in Uniper, making it the group’s fifth-largest shareholder.

ISS, in a note to clients that was sent to Reuters, said Cornwall had failed “to provide a compelling rationale for the special audit”, adding there was no clear evidence of director wrongdoing in relation to the transaction.

Cornwall’s motion came after Russian authorities approved Fortum’s purchase of up to, but not more than, 50 percent of Uniper, denying it a controlling stake and dealing a blow to hedge funds that hoped for a higher follow-up bid.

Knight Vinke and Elliott Management have both disclosed holdings in Uniper - of 5.02 percent and 7.38 percent, respectively.

“While we believe that some shareholders ... will be frustrated with the current regulatory situation in Russia ... we do not believe that there is substantial evidence to suggest that the management board has breached its duties in connection with the takeover offer,” Glass Lewis said in a note.

Much will depend on how E.ON votes, as its large stake can sway the outcome. If the company abstains from the vote, it would raise Elliott’s chances of securing a majority.

A spokesman for E.ON declined to comment and referred to remarks by its CEO last week, who said E.ON would listen to all sides before deciding whether or not to support the motion, adding he was not overly concerned about it.

Knight Vinke and fellow shareholders BlackRock (BLK.N), Deka and Union Investment all declined to comment. Elliott had no immediate comment.

Additional reporting by Maiya Keidan in London; Editing by Arno Schuetze and Susan Fenton

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