TIDMDTY
RNS Number : 8790T
Dignity PLC
30 March 2021
30 March 2021
Dignity plc
("Dignity" or the "Company")
Publication of Circular and Notice of General Meeting
On 10 March 2021, Phoenix UK Fund (" Phoenix ") (the Company's
largest single shareholder with a holding of approximately 29.9% of
the issued Ordinary Shares) served a requisition notice under
section 303 of the Act seeking to remove Clive Whiley as executive
chairman and replace him with the chief investment officer of
Phoenix, Gary Channon. The responsibility for responding to the
Requisition Notice, convening the required General Meeting and
providing the Board's views on the Resolutions that have been
proposed has been delegated to the Independent Directors.
Dignity is today publishing a circular which is being sent to
Shareholders (the " Circular ") for the purposes of convening the
required General Meeting to consider the Resolutions . The General
Meeting of the Company is to be held at 4 King Edwards Court, King
Edwards Square, Sutton Coldfield, West Midlands, B73 6AP on 22
April 2021 at 11.00 a.m . All shareholders are encouraged to vote
on the proposed resolutions and the procedures for participating
and voting at the General Meeting are set out in the Circular.
The Circular includes a letter from the Independent Directors
setting out their recommendation to Shareholder regarding the
Resolutions. The full text of that letter is set out in Appendix 2
to this announcement. The text of a statement made by Phoenix in
relation to the Resolutions (and which the Company is required to
share with Shareholders under the Act) is set out in full in
Appendix 1 to this announcement.
This announcement and its appendices should be read together and
in full, but a summary of the views of the Independent Directors is
as follows:-
-- This wholly unnecessary act came at a time when the Board had
been making considerable progress towards the completion of the
previously announced root and branch review which, since
mid-December 2020, has involved an extensive collaborative approach
with Phoenix - something which the Independent Directors welcomed
and believed was likely to provide significant benefits to the
Group.
-- The Group is determined to complete delivery of its current
strategic review and the current Requisition Notice not only takes
up current management time, but (if successful) would result in
widespread Board and senior management change that would take
valuable time away from this process and prolong it unnecessarily.
The Board is confident that the current root and branch review is
on track for delivery in June 2021 and would want the opportunity
to present the outcome of this exercise to the market as soon as
possible. This should give the confidence to Shareholders and
investors in the continued growth and success of Dignity. The
Independent Directors believe management continuity is vitally
important to the strategic direction of the business, as the Group
works toward stability and growth.
-- The timing of the Requisition Notice is hard to comprehend,
given the good progress on the Group's strategy plans to date. The
behaviour displayed by Phoenix in the run up to the Requisition
Notice and in determining to serve it on the Company at this time
has led all three of the Independent Directors to form the view
that Phoenix is not acting in the best interests of Shareholders as
a whole, but is instead driven primarily by its own self-interest.
The Independent Directors believe Phoenix is now seeking to exert
executive control over the Board (and thereby control of the
Company) without paying any bid premium and its actions show a
willingness to act in a manner which does not respect the corporate
governance principles applicable to public companies.
-- The Independent Directors also unanimously agree that, by
virtue of his behaviour throughout the course of the Board's
dealings with him, Gary Channon has demonstrated himself as lacking
the skills and judgement required of someone seeking to be
responsible for leading the executive function of a public company
of Dignity's stature. The basis on which the Independent Directors
have formed this view is set out in the letter in Part 2 of
document.
-- In stark contrast, each of the Independent Directors believes
that, since his appointment as executive chairman, Clive Whiley has
worked tirelessly to deliver on the root and branch review he was
brought in to orchestrate, at all times seeking to balance the
interests of all Shareholders and other stakeholders in an
appropriate manner. This process has been conducted against the
challenging backdrop of a global pandemic, a CMA investigation into
the funeral industry as a whole and the forthcoming introduction by
the FCA of a new regulatory regime applicable to the Group's
pre-need business.
-- The Independent Directors believe that Clive Whiley has had a
galvanising effect on the business, is well-regarded within the
business and is respected in the City as an experienced and
effective executive chairman. He should therefore be given the time
to conclude the strategy review and re-positioning of the Company
with the continuing help of the Group's executive management team,
so that the Board can reach properly thought-through conclusions,
without being dictated to by a minority shareholder whose
motivation appears to be driven primarily by its own
objectives.
-- Should the Resolutions be passed, each of the Independent
Directors has reluctantly reached the conclusion that they would
not feel able to fulfil their respective roles on the reconstituted
Board with Gary Channon at the helm. They would therefore feel
compelled to resign, which would have the unfortunate and unwanted
effect of further consolidating executive control in the hands of
Phoenix.
-- The Independent Directors strongly recommend that
Shareholders therefore vote AGAINST both of the Resolutions
proposed in the Requisition Notice so as to ensure that the
Company's affairs can be run in the best interests of Shareholders
as a whole, according to sound corporate governance principles and
not according to the wishes of a minority shareholder under the
direction of an individual who (in the views of the Independent
Directors) has generally shown himself to be unwilling to accept
views which do not accord with his own.
Further details of the Resolutions and the General Meeting
(including the procedures for participating and voting) are set out
in the Circular.
Given the size of Phoenix's existing shareholding, the vote of
all Shareholders on this matter is crucial. The Independent
Directors urge all Shareholders to act immediately upon receipt of
the Circular by voting AGAINST both of the Resolutions being
proposed at the General Meeting, so as to prevent Phoenix acquiring
executive control of the Company and thereafter acting in a manner
which could be seriously damaging to the Company, its Shareholders
and other stakeholders.
A copy of the circular published today will shortly be available
on the Company's website www.dignityplc.co.uk and available at the
National Storage Mechanism w hich is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
A message from Dignity's Independent Non-Executive Directors can
be viewed here:
https://webcasting.buchanan.uk.com/broadcast/6061c5d0d7d1917e69018b6f
Capitalised terms used in this announcement have the same
meaning as set out in Appendix 3 to this announcement unless
otherwise defined.
LEI: 21380049687CNAYKV483
Helpline
The procedure for voting at the General Meeting and the action
to be taken is in the letter set out on part 2 of the circular.
Dignity Shareholders who have any questions regarding the General
Meeting and the procedures to follow in casting their votes may
raise these, either: (i) by calling Boudicca from Equiniti on 0371
384 2903 (calls are charged at the standard geographic rate and
will vary by provider. Calls from outside the United Kingdom will
be charged at the applicable international rate. The helpline is
open between 9:00 a.m. and 5:00 p.m., Monday to Friday excluding
public holidays in England and Wales. Please note that Boudicca
from Equiniti cannot provide any financial, legal or tax advice and
calls may be recorded and monitored for security and training
purposes), or (ii) by writing to Boudicca from Equiniti, PO Box
5214, Aspect House, 63 Spencer Road, Lancing Business Park, Lancing
BN99 9EZ.
For further information please contact:
Dignity plc +44 (0)20 7466 5000
Clive Whiley, Executive Chairman
Dean Moore, Interim Chief Financial Officer
Buchanan +44 (0)20 7466 5000
Richard Oldworth
Chris Lane
Tilly Abraham
www.buchanan.uk.com dignity@buchanan.uk.com
Appendices
Appendix 1, 2 and 3 are extracted without amendment from the
Circular and accordingly references in the Appendices to other
parts of the document are references to the Circular.
Appendix 1 - Statement provided by Phoenix pursuant to section
314 of the Act
"Dear Fellow Shareholder,
We are today requisitioning a general meeting to ask for your
support for a motion to replace the executive chairman, Clive
Whiley, with Gary Channon, the founder and CIO of Phoenix,
Dignity's largest shareholder. We believe this step is in the best
interests of the long term shareholder value of Dignity.
If that motion is successful then James Wilson of Phoenix will
step down as a non-executive director of Dignity, thereby
maintaining a single Phoenix representative on the board of the
Company.
Gary Channon will not be paid for his services as an executive
director of the Company, just as James Wilson has been unpaid. Gary
and Phoenix will receive no compensation or cost reimbursement in
any form from the Company. The only way in which we will benefit
from the proposals is through increasing the value of our 29.9%
shareholding in Dignity.
We are not seeking to control the board. We pledge that there
will never be more than one Phoenix representative on the board,
meaning that the independent directors will always have the final
say on important decisions.
It is also important to make clear that we do not seek control
of the equity. We pledge that while Gary is on the board, Phoenix
will not increase its shareholding beyond its existing 29.9% and we
pledge not to make a bid for the Company, unless a third party has
bid. Gary is willing to put himself up for re-election at all
future AGMs. We believe all of these commitments make us fully
aligned with the long term interests of you, our fellow
shareholders.
Phoenix and Gary have a 23 year record of conducting business
with integrity and transparency. We have an open and honest way of
communicating with investors and Dignity shareholders can expect
the same. Following his appointment, Gary intends to write a report
to shareholders with an honest appraisal of what he has found and
to explain the strategies being pursued.
Based on our understanding of the business resulting from our
involvement with Dignity, we believe that although the Company
faces many significant challenges as the funeral industry changes,
there is great value to be unlocked if the right course is pursued
in an expedient manner. We have been involved inside the business
since the Company's announcement on 14 December 2020, and are bound
by a confidentiality agreement with the Company not to share the
details.
We therefore ask for your support in voting in favour of the
resolutions set out above at the forthcoming General Meeting."
Appendix 2 - Independent Directors' letter
"Letter from the Independent Directors of
Dignity plc
(Incorporated in England and Wales with registered number
04569346)
Registered Office
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands
B73 6AP
Directors
Clive Whiley, Executive Chairman
Andrew Judd, Director of Funeral Operations
Dean Moore, Interim Chief Financial Officer*
Paul Humphreys, Non-Executive Director*
Gillian Kent, Non-Executive Director*
James Wilson, Non-Executive Director
(*Considered to be Independent Directors for the purposes of
this letter)
To Shareholders
Dear Shareholder,
GENERAL MEETING CONVENED UNDER SECTION 303 OF THE ACT
1. Introduction
On 10 March 2021, Phoenix UK Fund (the Company's largest single
shareholder with a holding of approximately 29.9% of the issued
Ordinary Shares) served a requisition notice under section 303 of
the Act seeking to remove Clive Whiley as executive chairman and
replace him with the chief investment officer of Phoenix, Gary
Channon. The timing of delivery of the Requisition Notice, at a
point when a constructive and collaborative exercise between the
Company's executive management teams and Phoenix regarding the
future strategy for the business (announced on 14 December 2020)
was drawing to what the Independent Directors believed would be a
productive and successful conclusion, is quite extraordinary.
This has led the Independent Directors to conclude that Phoenix
is not acting in the best interests of Shareholders as a whole, but
is driven primarily by its own self-interest, is now seeking to
exert executive control over the Board (and thereby control of the
Company) without paying any bid premium and shows a willingness to
act in a manner which does not respect the corporate governance
principles applicable to public companies. The Independent
Directors have also formed the strong view that, by virtue of his
behaviour throughout the course of the Board's dealings with him,
Gary Channon has demonstrated himself as lacking the skills and
judgement required of someone seeking to be responsible for leading
the executive function of a public company of Dignity's
stature.
The Independent Directors believe very strongly that the
Requisition Notice was entirely unnecessary and totally against the
best interests of the majority of Shareholders and other
stakeholders. Indeed, they implored Phoenix and Gary Channon not to
proceed with it and the fact that the carefully considered views of
the Independent Directors on this crucial matter were totally
disregarded re-enforces the conclusions they have reached.
In this context, it falls upon the Independent Directors to
explain the background to the Requisition Notice, the reasons
behind their decision to recommend that Shareholders vote against
the Resolutions and the rather stark choice now facing
Shareholders.
2. Constitution of the Requisition Committee
Following receipt of the Requisition Notice, the Board met to
consider the appropriate response. In view of Clive Whiley being
the subject of one of the Resolutions in the Requisition Notice and
James Wilson's interest as a representative of Phoenix, both
recused themselves from the initial meeting convened to consider
this matter.
At its meeting, the Board resolved to appoint a Requisition
Committee charged with convening the General Meeting and expressing
the views of the Independent Directors. The Board considered it
important to include Clive Whiley as a member of the Requisition
Committee in an advisory capacity, given his familiarity with many
of the matters to be considered. The Board also unanimously agreed
that Andrew Judd, who joined the Board as an additional executive
director on 14 December 2020 and who has responsibility for the
Group's funeral operations, should not participate on the
Requisition Committee so that he could focus on his executive
duties. Bearing in mind that Andrew Judd's appointment to the main
Board in December 2020 was, in part, sponsored by Phoenix, the
Requisition Committee has also concluded that it would be
inappropriate to include him as an Independent Director for the
purposes of this letter.
The views expressed in this letter are therefore entirely the
views of the Independent Directors, all of whom were initially
appointed as non-executive directors of independent standing
(although Dean Moore has since moved to an executive role on an
interim basis, largely as a result of the actions of Phoenix).
3. Background to the Requisition Notice and the relationship
between the Company and Phoenix
Since Phoenix became a significant minority shareholder in early
2019, the Board has recognised that it has needed to tread a fine
balance between listening to and respecting the views of its
largest single shareholder and protecting the interests of
Shareholders as a whole and other stakeholders in the Company.
The Independent Directors believe it is important to share with
all Shareholders some context behind the relationship with Phoenix
and the apparent triggers for the delivery of the Requisition
Notice, as this helps explain why the Independent Directors have
formed the conclusions they have reached.
This is not the first time Phoenix has sought changes to the
Board and/or threatened to requisition a meeting of Shareholders in
order to get its way
In the Phoenix Statement, Phoenix claims that it is not seeking
to control the Board and yet its behaviour and the actions of Gary
Channon on its behalf over the last two years demonstrate quite the
opposite. Gary Channon has continually threatened the Board with
requisitions to remove and/or appoint directors whenever he has
felt that the Board has been unwilling to accede to his wishes.
-- During the period from February to April 2019, there was a
series of interactions between Phoenix and the Company regarding
the position of Peter Hindley (the then non-executive chairman, who
had served as chairman for over 10 years). The Company had
identified a prospective replacement to accommodate Peter's
retirement after an extensive executive search. However, Gary
Channon informed the Company that the proposed chairman candidate
identified by the Board was not (in his view) suitable and at that
point also started agitating for a representative on the Board. In
order to accommodate the views of Phoenix, it was agreed that Peter
Hindley would stay on as chairman while a new search was commenced,
but retire at the next annual general meeting and, in the meantime,
a Phoenix representative, James Wilson, would be appointed to the
Board as an additional (though non-independent) non-executive
director.
-- In August 2019, Gary Channon threatened the Board with the
requisition of a general meeting of Shareholders to appoint Clive
Whiley as chairman, largely because he believed the Company was
delaying the appointment of a new chairman. Clive Whiley (who had
been proposed as a potential chairman candidate by another Dignity
shareholder), was well-known to Gary Channon from his time as an
executive director of The Stanley Gibbons Group plc and was someone
he rated "highly". At the time, Gary Channon wrote to the Company
saying "a candidate for the role has been proposed who we and
others are delighted with and yet you not only have not been able
to meet him or interview over the phone but you are still looking
for other candidates. Surely all you need to do is speak to Clive
and see whether you are happy with him, or at least don't have a
reason to object to his appointment." Ultimately, the Board agreed
with Phoenix's assessment of Clive Whiley and concluded that he did
have the requisite experience and knowledge and was suitably
independent from Phoenix, and as such, should be appointed to the
Board as chairman. This was announced on 27 September 2019. It is
ironic that Phoenix now wishes to replace Clive Whiley, whom it had
previously rated "highly" and with whom they were "delighted".
Shortly before this time, Mary McNamara, a non-executive director
of Dignity, had indicated that
she wished to resign from the Board and this was announced on 18
September 2019.
-- In February 2020, shortly before the announcement of
preliminary results for the 52 week period ended on 27 December
2019 , James Wilson wrote to the Board expressing Phoenix's view
that the actions of the management had not been decisive and market
share was not being protected. He expressed the view that the
transformation plan announced to the market was flawed and proposed
that a re-branding exercise should be suspended. According to James
Wilson, Phoenix believed that the Company needed to undertake
serious pricing trials and that competitor reactions and the CMA
outcome would then determine the right strategy for the Group's
funerals business. The Board agreed with many of these views,
although it believed they were already being properly addressed in
a considered manner and felt that, under the stewardship of Clive
Whiley, the Company was making significant and rapid progress.
-- However, Phoenix did not agree, because on 12 March 2020
(less than a month later), Gary Channon requested a meeting with
Mike McCollum and Steve Whittern (then Chief Executive and Finance
Director, respectively) at which he informed Mike McCollum and
Steve Whittern that Phoenix had "lost confidence" in them and that
it would therefore be seeking their removal from the Board. Gary
Channon indicated that he would make Phoenix's position clear to
the Board and that, should the Board not agree with these views,
Phoenix was ready to exercise its voting rights to have them
removed. The Board felt that the removal of both the CEO and CFO at
the same time and without having identified replacements would have
had a materially detrimental effect on the business and its
operations, particularly as the impact of the COVID 19 pandemic at
that time was only just emerging. On 3 April 2020, Mike McCollum
(who had been with the Company for over 20 years) resigned from the
Board, with Clive Whiley assuming the role of executive chairman.
On the same day, the Company announced the decision of Jane
Ashcroft, another non-executive director, to resign from the Board
with immediate effect.
-- In light of the developments in March 2020, the Board
initiated a search for a suitable CEO candidate. Despite coming up
with a short list of high calibre candidates, most of whom who were
interviewed by Clive Whiley and the then independent non-executive
directors, Phoenix rejected all of these candidates in December
2020, leading to the CEO search being suspended for the time
being.
-- In November 2020, Phoenix notified the Board that it believed
the Board was not listening to Phoenix' views on strategic plans
for the business and that the actions of the Board in relation to
the various initiatives underway were taking far too long to reach
a conclusion. As a consequence, Phoenix indicated that it had
instructed lawyers to draw up papers to requisition a general
meeting of Shareholders at which it would be looking to remove
Steve Whittern, Richard Portman and Clive Whiley from the Board and
make certain appointments in their place, including certain
existing and former employees of Dignity. In at least one of these
cases, Phoenix had not even established the willingness of its
proposed alternatives to serve. The primary tenet of Phoenix's
position seems to have been that further changes to the executive
board were required in order for its vision of the correct way
forward for the Company to be progressed, even though it had at
that point declined to share that vision with the Board.
-- Faced with another threatened requisition of a general
meeting, it fell to the then independent non-executive directors
(Gillian Kent and Dean Moore) to determine the appropriate
response. Their initial conclusions were that:
o as the Board did not at that stage have details of Phoenix's
fully worked-through views on strategy, it was not immediately
obvious that there were, in fact, any major difference of opinion
on the right strategy to be adopted.
o although Phoenix's strength of feeling about the time being
taken to develop a detailed strategy plan for the Group was
unexpected, (given that the objective of completing the necessary
work for this so as to allow a comprehensive plan to be published
at the time of the announcement of the interim results in July 2021
had been discussed by the full Board and had been made public on a
number of occasions), this was nevertheless something that could be
re-assessed and steps could be taken to try and accelerate
this.
o however, the candidates proposed as replacements for the
directors Phoenix was proposing to remove did not, on the face of
it, have the requisite experience to fulfil the roles proposed,
which would leave the Board weaker and less effective.
-- The independent non-executive directors were keen to avoid
the unnecessarily public and operationally disruptive consequences
of a requisitioned general meeting and therefore, so as again to
try and accommodate Phoenix's concerns, the Board invited Phoenix
to enter into a collaborative process with the Group's senior
management team, with a view to understanding the Phoenix view of
strategy and then working with the benefit of Phoenix's views to
formulate a strategy which could subsequently be put to the Board
for approval on an accelerated timetable.
-- On 14 December 2020, the Company announced that it would be
working closely with Phoenix to formulate strategy plans for the
Group and that Steve Whittern and Richard Portman would be
resigning. It was also agreed (at Phoenix's suggestion and with the
agreement of the remaining directors) that Andrew Judd should be
appointed to the Board as an executive director.
-- In light of Steve Whittern's resignation, Dean Moore agreed
to step into the executive role of Interim Finance Director,
pending the identification of a suitable longer-term candidate for
the role. Paul Humphreys joined the Board as an additional
non-executive director and chair of the Audit Committee on 23
February 2021, given that Dean Moore could no longer fulfil that
role.
The apparent catalyst for the Requisition Notice
The collaborative approach to the development of strategy plans
for the Group with Phoenix, which has now run for close to three
months, has been very extensive, involving half a dozen or so
members of the Phoenix team (led by Gary Channon) interacting on a
daily basis with close to 40 members of the Group's senior
management team. In the view of the Independent Directors, very
considerable progress has been made and there is no doubt that the
Company has benefited to some degree from the input of Phoenix in
this respect. However, the working style of Phoenix (and Gary
Channon in particular) has been far from easy for certain members
of the executive management team to adapt to and it must be
remembered that the team has already been operating in unique and
very challenging circumstances. These have included contending with
the impact of the COVID-19 pandemic, adapting to the regulatory
considerations arising from both the CMA's report on the funeral
sector and the FCA's recently published plans for a new regulatory
framework for the pre-need industry, as well as responding to the
cessation of the previously announced transformation plan and the
implementation of the subsequent root and branch review.
That good progress on the Group's strategy plans was being made,
to the point where it was expected final plans might be approved by
the Board ahead of the timescale previously indicated to the market
(although the FCA's announcement of its plans for pre-need will
inevitably result in additional work being needed to assess this
fully and reflect it in strategy plans), is a huge testament to the
efforts of the senior management team across the Group. Clive
Whiley's role as executive chairman in co-ordinating this should
not be under-estimated, not least given he was also the subject of
the threatened requisition by Phoenix in November of 2020.
Against this backdrop, the Independent Directors were shocked to
receive yet another threat to requisition a shareholder meeting,
this time to remove Clive Whiley and replace him with Gary Channon.
The decision of Phoenix to carry through with that threat,
notwithstanding strong representations by the Independent Directors
to Phoenix that this was an unnecessary step which would be
damaging to staff morale and the business as a whole, is (in the
view of the Independent Directors) extraordinary.
Based on what the Independent Directors have observed, it seems
there have been two primary catalysts for Phoenix's latest
precipitous action:
-- At a board meeting on 5 March 2021, there were detailed
discussions relating to the approach of the Company to its pre-need
business. In the run up the board meeting, Phoenix (as part of its
engagement on strategy) had challenged the Company's approach to
this. The Board listened carefully to the concerns raised and spent
a significant amount of time and energy working with Phoenix to
explain the rationale for its approach, taking into account the
newly announced FCA plans for new regulation in this area of the
business. There is no doubt that the new regulation is going to
have an impact which needs to be carefully and methodically
assessed. However, during the whole period of debate with Phoenix
on this issue, Gary Channon adopted an aggressive and disparaging
attitude to anyone who held differing views to his own.
Notwithstanding that Phoenix agreed that this was a matter that
should ultimately be a board decision and notwithstanding the
fulsome debate on the matter, the fact that the Board ultimately
reached a conclusion which Gary Channon disagrees with has led to
Phoenix now maintaining that it was being 'ignored'.
-- Also in early March 2021, the Company received an unsolicited
approach from a third party expressing an interest in acquiring the
Group's Crematoria business. The Board gave full and proper
consideration to this approach, but ultimately concluded that it
seriously undervalued that division and that it would not therefore
be in the best interests of the Company or its Shareholders to
pursue it. The Board was in a position to assess this third-party
expression of interest swiftly, in part because (at the behest of
Clive Whiley), steps had been taken to seek an independent
valuation of the Crematoria division in May 2020. This exercise had
been undertaken as a defensive measure because, at that time the
Board believed the Company was vulnerable to an unwanted approach,
given the collapse in its share price and the unknown out-come of
the CMA investigation and it was therefore essential to be well
prepared to mount a bid defence, if needed. It was also considered
important for the Board to have an up to date view of the value of
assets within the business, for the purposes of the wider strategy
review, given that it is incumbent on the Board to consider all
possible avenues for maximising value for the benefit of
Shareholders as a whole. In this context, considerable work has
been done, not just on the valuation of the Crematoria division as
a stand-alone business, but also on other elements of the business
and in the context of the various potential strategies currently
under consideration. Although the seeking of a valuation of the
Crematoria business in 2020 was referred to in Board (and therefore
presumably known to Phoenix, given the presence of James Wilson on
the Board), Gary Channon claimed its existence only came to his
attention at the time of the unsolicited approach in March 2021.
Whilst Phoenix has since confirmed that it concurs with the
decision of the Board to dismiss the third party expression of
interest, Gary Channon appears to have taken exception to not being
consulted on the commissioning of a valuation (on the basis that
Phoenix would have been well-qualified to express a view on any
such valuation). Against this backdrop, Gary Channon has questioned
the timing of the third party expression of interest, implying that
Clive Whiley may have been, in some way, complicit in it and that
Clive Whiley's actions may be being driven more by a desire to sell
the Crematoria business for short term gain than to protect the
longer-term interests of Shareholders. The Independent Directors'
view is that, by definition, any valuation of this nature needed to
be undertaken independently of Phoenix, given its position as a
significant Shareholder. The Independent Directors are further of
the view that, under the stewardship of Clive Whiley, the Board has
been acting in the interests of Shareholders as a whole by properly
assessing all potential strategies for the Group.
At the time the Company agreed to collaborate with Phoenix on
strategy development in December 2020, it was agreed that if
Phoenix had any concerns about how the process was running and
these could not be resolved between Phoenix and the executive
management team, then these should be raised in the first instance
with Gillian Kent and Dean Moore. When Phoenix revealed its latest
threat to requisition a general meeting, all three of the
Independent Directors met with Phoenix in the expectation that any
particular concerns could be discussed and resolved in the manner
previously agreed by both parties. However, it became immediately
apparent that there was no willingness on the part of Phoenix to
try to find an alternative solution. The Independent Directors were
presented with an ultimatum that Phoenix would call a general
meeting to replace Clive Whiley with Gary Channon unless the
Independent Directors voluntarily agreed to effect that change.
This, in the view of the Independent Directors, is a clear attempt
to obtain effective executive control of the Board (and thereby the
Company) regardless of the views of the Independent Directors.
The Independent Directors implored Phoenix to seek to resolve
the situation privately rather than call a general meeting at a
time when the Group is still in the midst of a global pandemic and
also asked it not to risk throwing away the chance of reaching a
conclusion on a mutually acceptable strategy plan that Phoenix has
so desperately wanted and which the Board was driving towards.
Phoenix was even offered the opportunity to appoint Gary Channon as
a Director in place of its current representative, James Wilson, if
the concern was that Gary Channon's views were not being properly
heard.
The fact that Phoenix declined to even discuss these initiatives
is, in the view of the Independent Directors, at the same time both
shocking and reckless behaviour by a shareholder which appears to
be unable to see beyond its own wishes. They consider it to be a
completely destructive and disproportionate response, which has
little (if any) regard to the interests of the Company and its many
other stakeholders, not least the interests of the other 70% of
Shareholders on the register.
Why the Independent Directors have concluded the Resolutions are
not in the best interests of the Company, its Shareholders as a
whole and other stakeholders
The Independent Directors strongly believe that Shareholders
should vote against the Resolutions for two primary reasons:
Phoenix is acting in its own interests and is seeking executive
control of the Company
The evidence has led the Independent Directors to conclude that
Phoenix, despite the statements to the contrary in the Phoenix
Statement, is seeking to exert executive control over the Board
(and therefore the Company) without paying a bid premium and has
shown itself to be willing to act in a manner which does not
respect the corporate governance requirements applicable to public
companies.
In particular:
-- The Independent Directors can have no confidence in the
statement in the Phoenix Statement that " the independent directors
will always have the final say on important decisions". The
Independent Directors have expressed strongly to Phoenix on
numerous occasions that they do not consider the requisitioning of
a shareholder meeting to effect board changes to be in the best
interest of the Company or its Shareholders as a whole. Having had
their views on this vital decision totally disregarded, there is no
reason to suppose the Independent Directors will be allowed to hold
sway on decisions put forward by an executive team led by Gary
Channon.
-- The other statements made in the Phoenix Statement which seek
to persuade Shareholders that Phoenix is not seeking (and will not
seek) control can be of limited real value and comfort to other
Shareholders, in that:
o The proposal that James Wilson of Phoenix will step down as a
non-executive director of Dignity thereby maintaining a single
Phoenix representative on the board of the Company and the pledge
that Phoenix will never have more than one board member needs to be
considered in context. The Independent Directors offered the
opportunity for Gary Channon to replace James Wilson on the Board
anyway and this was declined, implying it is executive control Gary
Channon is seeking. In any event, in observing the interaction
between James Wilson and Gary Channon, the Independent Directors
have formed the view that Gary Channon's views tend to prevail
anyway. Accordingly, if Gary Channon is appointed as an executive
director in place of Clive Whiley, it is clear that he intends to
be in control of the executive function of the Board (and thereby
have day to day control).
o The commitment that Phoenix will not seek to increase its
equity participation in the Company has no real meaning, given that
(as an existing 29.9% Shareholder) it would not be able to acquire
further shares in the Company without making a mandatory offer for
the Company in any event. That commitment is also qualified in the
event that a third party makes an offer for the Company and it is
only valid for so long as Gary Channon remains on the Board. In any
event, should the Resolutions be approved, Phoenix would have no
need to increase its stake, as it would have effective executive
control.
o The commitment from Phoenix to put Gary Channon up for
re-election at future Annual General Meetings of the Company is of
limited value, particularly where Phoenix will (if the Resolutions
are approved) already have effective executive control. The
re-election of directors annually is a requirement of the UK
Corporate Governance Code in any event and, with a shareholding of
around 30%, Phoenix will always be in a disproportionate position
when it comes to influencing the voting outcome on such
resolutions.
-- The decision of Phoenix and Gary Channon to requisition a
general meeting appears in part to have been a reaction to the
Board having followed due corporate governance in discussing and
considering appropriately all issues raised by Phoenix in respect
of the Group's pre-need business, but thereafter reaching a
conclusion with which Phoenix does not agree. This behaviour is (in
the view of the Independent Directors) indicative of a desire to
assert executive control.
-- Should the Resolutions put forward in the Requisition Notice
be approved, the effect will be to leave Phoenix in a position of
executive control and move the Company further away from having a
balanced and effective board capable of meeting the core UK
corporate governance requirements for a listed company of the size
and nature of Dignity. This is something the Board has been
striving to address over many months, but has been constantly
hamstrung by Phoenix's interventions.
-- During the course of the discussions with Phoenix and Gary
Channon, the Independent Directors have become aware of the fact
that during the second quarter of 2020, at a time when the Group
was on the back foot, contending with (amongst other things) the
pandemic, board changes, the pausing of the transformation plan,
and adverse press comment (with the consequence that the share
price was significantly depressed), Phoenix was actually preparing
a formal bid for the Company (notwithstanding that James Wilson
remained a Board member throughout). The Independent Directors are
of the view that, given the comparatively low share price at the
time, the logical conclusion to reach is that had such an offer
been made, it would have been made at a relatively low price and
would therefore have been opportunistic. No formal bid was received
from Phoenix and the Independent Directors have concluded that this
is most likely to have been because the Company's share price began
to recover following the announcements of the Group's interim
results for the 26 week period ended 26 June 2020 and the CMA's
provisional decision report announced on 29 April and 13 August,
respectively.
Gary Channon is not suitable as a replacement for Clive
Whiley
In the course of their dealings with Gary Channon, the
Independent Directors have had the opportunity to assess his
suitability as a replacement for Clive Whiley. All of the evidence
has led the Independent Directors to conclude that, quite aside
from the fact that appointing the principal of a major shareholder
to take executive leadership of the Company would be contrary to
the principles of good corporate governance, he would lack the
skills and judgement required for the role. This conclusion has
been reached for a number of reasons including the following:
-- Despite statements to the effect that he is respectful of the
Board as the decision makers, Gary Channon has shown himself to be
intolerant of any views of directors that do not coincide with his
own and has a record of threatening to remove directors when he
doesn't get his own way. The Independent Directors do not believe
that these characteristics lend themselves well to someone seeking
responsibility for the executive function of the Company.
-- The Independent Directors are also concerned about Gary
Channon's ability to foster an empowered thriving culture within
the senior leadership team of the Group immediately below the Board
level. Since his appointment, Clive Whiley has been working hard to
build a more diverse and inclusive culture within the senior
leadership team, seeking to transform the culture from one of
command and control (resulting in a siloed mentality) to a culture
of participation and empowerment. However, in his dealings with
members of the Group's executive management team throughout the
collaboration process, the Independent Directors have at various
times observed Gary Channon to be disrespectful of those members of
the senior management team voicing opinions different to his own.
Concerns expressed by members of the executive management team
about Gary Channon's management style have led the Independent
Directors to believe that replacing Clive Whiley with Gary Channon
is likely to create an environment of fear and submission which, in
their view, would be a retrograde step.
-- The Independent Directors have real concerns about Gary
Channon's judgement. They believe that, by insisting on pressing
ahead with the Requisition Notice at this time and thereby putting
his own interest and those of Phoenix ahead of the Company and its
Shareholders as a whole, despite the firm opposition of the
Independent Directors, Gary Channon has acted irresponsibly and
demonstrated alarmingly poor judgment and decision making. The
Independent Directors have serious concerns that this poor
judgement might be replicated in fulfilling his duties as an
executive director, should Gary Channon be appointed as a
replacement for Clive Whiley.
-- The Independent Directors' concerns about lack of judgment
are compounded by concerns that Gary Channon demonstrably has
limited (if any) experience of leading the executive function of a
plc board for a company of the size and scale of Dignity. The
skills required for this are, in the opinion of the Independent
Directors, vastly different to those Gary Channon might possess as
the founder and chief investment officer of Phoenix.
Based on feedback from some members of the senior management
team who have had dealings with Gary Channon, the Independent
Directors believe there to be a significant "flight risk" of key
talent leaving the Company should the Resolutions be passed and
Gary Channon appointed. The Independent Directors believe that Gary
Channon has underestimated the support and respect that Clive
Whiley has in the business whilst at the same time misjudging the
level of support that he would have, should he be appointed to
replace Clive Whiley.
In the opinion of the Independent Directors, it would be totally
irresponsible of the Board to destabilise the Group by replacing
Clive Whiley, who was placed into the business with shareholder
support, who is in the final stages of the root and branch review
of the business, who has successfully led the organisation through
the pandemic, the CMA review, numerous changes in leadership
instigated by Phoenix, who is preparing Pre-Need for its
forthcoming regulation by the FCA, and who has the support of the
operating board and the organisation as a whole with an individual
who the Independent Directors believe not to be sufficiently
well-qualified to fulfil the role as effectively.
Intentions of the Independent Directors in the event that the
Resolutions are passed
Each of the Independent Directors has reluctantly formed the
view that, should the Resolutions be passed, they would have no
option but to resign their positions, as they cannot see a way in
which they could effectively fulfil their respective roles with
Gary Channon appointed as a replacement for Clive Whiley.
The Independent Directors have not formed this view lightly, as
they each recognise that their resignations would further
consolidate control of the Board (and therefore the Company) in the
hands of Phoenix and leave the Company without a finance director
or any non-executive directors in the short term.
The choice facing Shareholders
The Independent Directors believe that Shareholders are faced
with a stark choice - to hand over effective executive control of
the Company to Phoenix, under the guidance of someone who is (in
their view) ill-equipped to fulfil that role, or to allow Clive
Whiley to conclude the job he was appointed to do, answering to a
properly functioning Board acting in the best interests of
Shareholders as a whole.
Should Shareholders choose to reject the Resolutions, the
Independent Directors recognise that Shareholders may nevertheless
have concerns about the ability of Phoenix to disrupt the Board's
effective operation. In this context:
-- Phoenix has questioned the commitment of Clive Whiley to his
current role by pointing to the expiry of his fixed term
appointment on 27 September 2021 and seeking to argue that as a
result of this, he is driven by his own short term objectives
rather than the longer term interest of Shareholders. The
Independent Directors are satisfied that this is simply not the
case and have the agreement in principle from Clive Whiley that he
would be happy to extend his term until the job at hand is
concluded to the satisfaction of the Board, should this not be
achieved by the end of his current term.
-- The Independent Directors believe that if Shareholders
support the current Board and vote down the Resolutions, although
the Board should continue to have regard to the views of Phoenix
for so long as it continues as a Shareholder, it would no longer be
appropriate for it to have representation on the Board. The
Independent Directors would therefore seek to exercise the powers
under the Company's articles to remove James Wilson from the Board
and would thereafter treat Phoenix on an arms' length basis, and in
the same manner as with all other Shareholders.
Details of the General Meeting
Set out in Part 3 of the Circular is a notice convening a
General Meeting of the Company to be held at the Company's
registered office, 4 King Edwards Court, King Edwards Square,
Sutton Coldfield, West Midlands B73 6AP at 11.00 a.m. on 22 April
2021, where the following resolutions will be proposed:
Resolution 1
This is an ordinary resolution and is being proposed to remove
Clive Whiley as a director of the Company with immediate
effect.
Resolution 2
This is an ordinary resolution and is being proposed to appoint
Gary Channon as an executive director of the Company. It is
expressed to be conditional on the passing of the Resolution to
remove Clive Whiley as a director.
Although the Requisition Notice does not specify in what
capacity Gary Channon is to be appointed (other than as an
executive director), the Phoenix Statement makes it clear that
Phoenix views him as a replacement for Clive Whiley.
The chairperson of the General Meeting (which it is anticipated
will be one of the Independent Directors) will direct that voting
on both of the Resolutions set out in the Notice of General Meeting
will take place by way of a poll, so as to ensure that all proxy
votes are taken into account.
Action to be taken by Shareholders
The Board takes the well-being of its employees, customers and
Shareholders very seriously. Given the UK Government's current
guidance on social distancing and prohibition on non-essential
travel and public gatherings in place at the date of this Notice,
we regret that it will not be possible for Shareholders to attend
the General Meeting in person.
In order to reduce the risk of infection we are asking
Shareholders not to seek to attend the General Meeting in person
and any Shareholder who seeks to do so will not be admitted. The
Company is taking these precautionary measures to safeguard its
Shareholders', stakeholders' and employees' health and make the
General Meeting as safe and efficient as possible.
It is currently contemplated that two of the Independent
Directors (one of whom will act as chairperson), together with the
Company Secretary and a small number of personnel supporting the
logistics of the meeting (including the Company's Registrars, EQ,
which will act as scrutineer for the poll) will attend the meeting
in person. No other directors or members of the executive
management team will attend and social distancing measures will be
in place in order to comply with current requirements.
We therefore strongly encourage Shareholders to vote on all
Resolutions in advance of the General Meeting, either by completing
and the returning the accompanying Form of Proxy in the manner set
out below or by completing an online proxy appointment form, in
each case appointing the Chairperson of the meeting as your proxy
to vote according to your wishes, The Independent Directors
unanimously recommend all Shareholders to VOTE AGAINST the
Resolutions.
Shareholders are also being given the opportunity to participate
in the General Meeting via a conference call and ask questions
during the meeting, should they so wish. Any Shareholder wishing to
participate in the General Meeting in this manner must notify the
Company of their desire to do so by email to
DignityGM@buchanan.uk.com by no later than 11.00 a.m. on 20 April
2021. After this time, but before the time of the General Meeting,
details of how to log into the conference call will be emailed to
Shareholders who have validly asked to participate.
It should be noted, however, that it will not be possible for
Shareholders to cast their votes on the Resolutions via this
facility and the Company cannot be responsible for any technical
failures of the conference call facilities that may arise,
resulting in a Shareholder not being able to participate in the
manner intended.
In view of this (and to be sure their votes count), all
Shareholders are strongly urged to cast their votes using the proxy
procedures referred to below, whether or not they intend to
participate in the General Meeting via the conference call.
How do I vote?
Given that the UK Government's current restrictions mean that
neither you nor any person you might appoint other than the
chairperson of the meeting will be able to attend the meeting in
person, you are strongly encouraged to appoint the Chairperson of
the meeting as your proxy. Shareholders can register their votes
and the appointment of the Chairperson of the meeting as their
proxy in the following ways:
1. by completing the Form of Proxy sent to you with this
document, and returning it to the Company's registrars; or
2. electronically, by logging on to the website
www.sharevote.co.uk. You will need your voting reference numbers
(the voting ID, Task ID and shareholder reference number shown on
your form of proxy). Alternatively, if you have registered for a
Shareview portfolio, please access the EQ shareview website at
www.shareview.co.uk and log onto your portfolio using your usual
user ID and password. Once logged in simply click "View" on the "My
Investments" page, click on the link to vote then follow the
on-screen instructions; or
3. (if you are a CREST member) using the CREST electronic proxy appointment service.
Your proxy appointment must be received by 11.00 a.m. on 20
April 2021. Further details are set out in the notes to the Notice
of General Meeting set out in Part 3 of the Circular. Forms of
Proxy should be returned so as to be received by the Company's
registrars, EQ, Aspect House, Spencer Road, Lancing, West Sussex,
BN99 6DA as soon as possible and in any event no later than 11.00
a.m. on 20 April 2021, being 48 hours before the time appointed for
the General Meeting.
Shareholders are encouraged to submit their voting instructions
and Form of Proxy as soon as possible, even if they might intend to
participate in the General Meeting via the proposed conference
call, as they will not be able to cast their votes via that
facility.
The Independent Directors will keep the situation under review
and may need to make further changes to the arrangements relating
to the General Meeting, including how it is conducted, and
shareholders should therefore continue to monitor the Company's
website and announcements for any updates.
The Independent Directors consider that the steps set out above
are necessary and appropriate ones to take, given the current
Covid-19 pandemic. The Independent Directors would like to thank
Shareholders for their understanding in these exceptional
times.
Recommendation of the Independent Directors
The Independent Directors consider that the Resolutions to
remove Clive Whiley and replace him with Gary Channon are not in
the best interest of Shareholders as a whole and would indeed be
detrimental to the interests of Company's Shareholders as a whole
and other stakeholders.
The Independent Directors have reached the conclusion (through
the actions and behaviours of Phoenix and Gary Channon) that
Phoenix is, in effect, seeking to exert executive control over the
Board (and thereby the Company) notwithstanding its position as a
minority shareholder. Furthermore, through his conduct, the
Independent Directors have formed the view that Gary Channon would
not be able to divorce the interest of Phoenix from the interests
of other Shareholders and stakeholders and is therefore an
unsuitable candidate for the role of an executive director.
Shareholders should note that should Resolution 1 be passed, but
Resolution 2 fail, this would leave the Company without an
executive chairman or chief executive officer in the short term.
The Independent Directors do not consider this to be in the best
interests of Shareholders as a whole.
The Independent Directors strongly believe that Clive Whiley
should be retained to conclude on the job that he was recruited to
do and therefore unanimously recommend that you VOTE AGAINST both
of the Resolutions.
Yours faithfully,
Gillian Kent Dean Moore Paul Humphreys
Independent Directors
Appendix 3 - Definitions
"Act" the Companies Act 2006, as amended;
"CMA" the Competition and Markets Authority;
"Company" or "Dignity" Dignity plc;
"Directors" or "Board" the directors or board of the Company for
the time being (as the context requires,
currently comprising those persons whose
names are set out on page 7 of the Circular;
"FCA" the Financial Conduct Authority;
"Form of Proxy" the form of proxy for use by Shareholders
at the General Meeting;
"FSMA" the Financial Services and Markets Act
2000, as amended;
"General Meeting" the general meeting of the Company convened
for 11.00 a.m. on 22 April 2021, or any
reconvened meeting following any adjournment
thereof, notice of which is set out in
the Notice of General Meeting;
"Group" the Company and its subsidiaries;
"Independent Directors" those of the Directors who are considered
to be independent for the purposes of expressing
the Board's views on the Requisition Notice,
being each of Gillian Kent, Dean Moore
and Paul Humphreys;
"Notice of General the notice of the General Meeting which
Meeting" is set out In Part 3 of the Circular;
"Ordinary Shares" ordinary shares of 12 48/143 pence each
in the Company;
"Phoenix" Phoenix UK Fund, acting by its investment
manager, Phoenix Asset Management LLP;
"Phoenix Statement" the statement set out in Part 1 of this
document and required to be communicated
to Shareholders in accordance with section
314 of the Act;
"Requisition Committee" the committee of the Board constituted
for the purposes of giving due consideration
to the Requisition Notice and convening
the General Meeting, comprising the Independent
Directors and Clive Whiley;
"Requisition Notice" the notice delivered on the Company by
Phoenix on 10 March 2021 in accordance
with section 303 of the Act, requiring
the convening of the General Meeting for
the purposes of considering the Resolutions;
"Resolutions" the ordinary resolutions set out in the
Notice of General Meeting;
"Shareholders" holders of Ordinary Shares;
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END
MSCEANDNASFFEFA
(END) Dow Jones Newswires
March 30, 2021 02:00 ET (06:00 GMT)
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