25 Apr 2014 09:00
25 April 2014
bwin.party digital entertainment plc
('bwin.party' or the 'Company')
2014 AGM Notice of Further Resolutions
bwin.party announces that it is posting to shareholders today a Notice of Further Resolutions for the forthcoming Annual General Meeting scheduled to take place at 11.00 am (CET) in Gibraltar on 22 May 2014.
Copies of the Notice of Further Resolutions and ancillary documents will all be available on the Company's corporate website, www.bwinparty.com, later today.
In a covering letter to shareholders and depositary interest holders, the Board sets out the following reasons for its recommendation to vote against resolutions 19 to 22, which are the resolutions tabled by SpringOwl (the 'SpringOwl Resolutions'):
"To assist shareholders and depositary interest holders, the Board has set out in detail below the background and reasons for the recommendation it has reached regarding the SpringOwl Resolutions. On the limited information presented to date by SpringOwl on each of the proposed director nominees, and having consulted with many of its leading shareholders and depositary interest holders, the Board is recommending that shareholders and depositary interest holders VOTE AGAINST the SpringOwl Resolutions for the following reasons:
1. With any potential Board appointment, the Board's Nominations Committee needs sufficient information and time to review and interview any candidate in order to determine their suitability and qualifications to serve as a director. The Company has been provided with very little information on each of the four nominees proposed by SpringOwl. Information on the background of each nominee is also vital because, if appointed to the Board, a nominee may have to be licensed as a qualifying individual under state online gaming regulations in the United States. The Nominations Committee must also be given the opportunity to consider how any appointments might impact upon the Board's composition and also the process of effectively overseeing the implementation of the Company's business strategy. In proposing these nominations last week, SpringOwl is seeking to by-pass this normal appointment process, putting at risk the ability of the Board to operate as a unified and effective forum in the best interests of all shareholders and depositary interest holders.
2. The Board does not believe that it is in the best interests of the Company and its shareholders and depositary interest holders for a minority shareholder, holding only 5.25% of the Company's voting share capital, to nominate up to five directors onto the Board.
3. Should the four nominees being proposed by the SpringOwl Resolutions be appointed to the Board, the size of the Board at the conclusion of the 2014 AGM would increase from nine to 13 members. If SpringOwl were to then nominate a further individual for appointment to the Board as they are entitled under the Relationship Agreement (as discussed in (4) below), then the Board would have 14 members. Following the completion of the merger between PartyGaming Plc and bwin Interactive Entertainment AG in March 2011, the Board comprised 13 directors, a number that the Board and leading shareholders viewed as too large. As a result, the Board embarked on a process that has successfully reduced its membership to nine directors. SpringOwl's proposal to increase the size of the Board to 13 or 14 members would therefore result in a more unwieldy decision-making forum as well as add extra cost to the Company.
4. SpringOwl already has a nomination right under the relationship agreement with the Company, which it acquired from Emerald Bay Limited ('Emerald') and Stinson Ridge Limited ('Stinson') on 20 February 2014. This nomination right was created under the terms of the relationship agreement entered into by the Company with Emerald, Stinson and others at the time of the merger (the 'Relationship Agreement') and grants the relevant shareholder the right to nominate an individual for appointment to the Board as a non-independent, non-executive director. The Board believes that if SpringOwl wants its views represented on the Board, then appointing a director under this nomination right is the appropriate way for it to do so. Despite repeated encouragement from the Board for it to do so, SpringOwl has so far chosen not to exercise this nomination right.
The Board's initial observations on SpringOwl and the proposed nominees
Whilst the Board's Nominations Committee has not had sufficient information and time to review and interview the four proposed nominees in order to determine their suitability and qualifications to serve as directors on the Board, the Board would make the following initial observations based on the information received from SpringOwl to date:
a) All four of the nominees proposed by SpringOwl are male. In line with UK and European corporate governance best practice, the Company has stated publicly since 2012 that it is the Board's intention to have appointed at least two women to the Board by the end of 2015, and one has already been appointed in this respect (Sylvia Coleman). The proposed nominees therefore do not aid the Board with fulfilling this objective.
b) The requisition documentation served on the Company by SpringOwl (available at http://www.bwinparty.com/Investors/ShareholderDocuments.aspx?start=6) does not include any justification as to why it is in the best interests of the Company and its shareholders and depositary interest holders to appoint the four proposed nominees as directors or why these four nominees are suitably qualified to serve on the Board of bwin.party. Further, the documentation does not state in what capacity these four individuals are being nominated (for example, as non-executive/executive/independent/non-independent directors).
c) Prior to receiving the SpringOwl Resolutions, in March 2014 SpringOwl approached the Board privately proposing four individuals to the Board, three of whom were different candidates from the current four nominees. At the time the Board was recruiting individuals for the position of either Chairman or Senior Independent Director. The Board evaluated the four proposed individuals through a process which included independent benchmarking by Spencer Stuart, a global executive search and leadership consulting firm. However none of the four individuals put forward was deemed by the independent directors, who were advised by Spencer Stuart, to be suitably qualified for the roles of Chairman or Senior Independent Director.
d) The Board initiated and has maintained a regular dialogue with SpringOwl since its investment in the Company on 20 February 2014. The Board has also encouraged SpringOwl to set out its views on the direction of the Company. In particular, it has asked how SpringOwl might improve the Company's performance and operations and the Board has been open to any constructive discussions with SpringOwl as to how it can generate additional value for shareholders and depositary interest holders. SpringOwl's plan to add four, possibly five additional directors to the Board has not been supported by any constructive views on the Company's future, business strategy or how it intends to improve the Group's prospects.
Independent Board evaluation
Since the merger, the Board has conducted reviews of its performance on an annual basis in accordance with the UK Corporate Governance Code, utilising the services of a third-party corporate governance adviser, Lintstock Limited. This process has resulted in changes to the membership of the Board over the last two years. Consistent with this approach, and as disclosed in the 2014 annual report (see page 68) (http://www.bwinparty.com/Investors/ShareholderDocuments.aspx) the Board has stated its intention to undergo an independent evaluation of its performance in 2014 following the selection of the new Chairman of the Board - a process that would assist the new Chairman to manage and oversee the Board effectively. Following Philip Yea's appointment as a director and Chairman elect on 9 April 2014, and his subsequent appointment as the Chairman of the Nominations Committee, the process to evaluate the performance, structure and composition of the Board has already begun. While it is too early to predict the outcome of this review, it may result in the Board identifying the need for further change to its membership and structure.
As part of this exercise, the Nominations Committee has requested additional information from the four nominees proposed by SpringOwl. Spencer Stuart has been retained to assist in the process of evaluating each of the four nominees. The Nominations Committee is also proposing to interview the nominees. These steps will allow the Nominations Committee to determine whether any of the nominees are suitably qualified to serve as directors of a UK publicly traded company, whether they can be deemed independent and what additional experience and knowledge they might bring to the Board that could benefit the Board's deliberations and decision-making process. Once this procedure has been completed, the Nominations Committee, supported by Spencer Stuart, will then be in a position to make an informed recommendation on the merits of each of the proposed nominees to the Board.
Recommendation
On the basis of the above, the Board believes that the appointment of any of the four nominees to the Board at the AGM is not in the best interests of the Company and its shareholders and depositary interest holders as a whole and therefore recommends that all shareholders and depositary interest holders VOTE AGAINST each of the SpringOwl Resolutions (resolutions 19, 20, 21 and 22)."
Contacts:bwin.party digital entertainment plc
InvestorsPeter Reynolds +44 (0) 20 7337 0177MediaJohn Shepherd +44 (0) 20 7337 0141
Deustche Bank AG, London branch
Charles Wilkinson +44 (0) 20 7545 8000
James Arculus