NEW YORK (HedgeWorld.com)–Jana Partners LLC declared a victory for its own campaign to persuade shareholders to withhold their votes from the board of directors of the Houston Exploration Co., while the company itself appeared unmoved.
A dispute has arisen because on April 7, 2005, the Houston-based company, an independent natural gas and crude oil producer, announced the sale of Gulf of Mexico offshore assets for $590 million in cash. Since then, Jana has taken the position that the best use of that cash is the creation of a repurchase program.
Houston does have a stock repurchase plan in the works, but it involves the expenditure of $200 million, which Jana considers inadequate.
According to company bylaws, a challenge to the incumbent directors requires notice six months before the annual meeting. This year’s annual meeting took place April 28. Jana’s dispute with Houston was of course too close to that date to result in a proxy contest this year, although Jana has already indicated it may wage one next year.
Prior to the April 28 meeting, Jana made it known that it thought shareholders should withhold their votes from all directors. “While the current Board faces no opposition this year and thus will undoubtedly be reelected, choosing to withhold your vote for all directors at this week’s annual meeting will tell them that while their seats may be safe for this year, shareholders are watching them closely and demand results,” said Jana’s managing partner, Barry Rosenstein.
On May 3, Jana announced that the number of withholds was 30%, and that it considers this a victory. At last year’s meeting, apparently, only between 4 and 7% of the votes were “withholds.”
In a letter to the directors of Houston dated May 3, Mr. Rosenstein said that the 30% figure was artificially low, because on the record date Jana held most of its own interest in the company in the form of options, later redeemed. It then held only slightly more than 1% of the actual stock, and it now holds 9%, “meaning that the vote would have been closer to 40% had we been able to vote the shares we hold outright today.”