(Corrects company name in eighth paragraph to Augusta from
By Allison Martell and Euan Rocha
TORONTO, April 17 Two prominent proxy advisers
have split on whether shareholders should vote to maintain
Augusta Resource Corp's shareholder rights plan, which
could thwart a hostile takeover bid from larger Canadian base
metals miner HudBay Minerals Inc.
Glass Lewis has advised its clients to vote to preserve the
plan, while rival Institutional Shareholder Services (ISS) has
come out against the plan. ISS also sharply criticized the
amount of severance that could be paid to Augusta's chief
executive if HudBay's bid succeeds.
Investors will vote on whether to cancel the rights plan at
Augusta's May 2 shareholder meeting. Without the plan, HudBay's
bid, which expires May 5, would be more likely to succeed.
Shareholder rights plans, often called poison pills, are
designed to make hostile takeovers difficult.
HudBay wants control of Augusta's Rosemont project in
Arizona, seen as one of the most promising copper projects in
the United States. Augusta said in March that nine parties had
expressed some interest in the company.
In its report, which was viewed by Reuters, Glass Lewis said
it believes that rights plans are generally "not conducive to
good corporate governance," but that it supports limited plans
in some circumstances.
Poison pills can give directors more time to seek out
friendly bidders, boosting payouts to investors.
Glass Lewis said Augusta's plan does not include any of
several provisions that would normally raise governance
concerns. For example, the plan does not stipulate that buyers
must pay cash, as some plans do.
But in its report, also seen by Reuters, ISS criticized many
features of the plan, including a provision under which the plan
kicks in if an investor acquires 15 percent or more of the
company, and the fact that it does not allow partial bids.
ISS said the size of the severance Augusta could pay its CEO
if there is a change in control is "truly egregious in the
Canadian market," and thus investors should withhold votes from
the three directors that serve on the Augusta board's
If the chief executive resigns for any reason after a change
in control, Augusta would pay four times base salary and a
target bonus as severance. ISS said two times salary and bonus
is best practice in Canada.
Glass Lewis advised clients to withhold votes from another
director, Lenard Boggio, saying he serves on too many audit
HudBay has asked securities regulators to cease trade the
poison pill, which would render it ineffective regardless of the
outcome of the shareholder vote.
"Our intention is to put the power of this important
decision in the hands of Augusta shareholders by giving them the
opportunity to vote on the rights plan on May 2, three days
before the expiry of HudBay's bid," Augusta Chief Executive Gil
Clausen said in a release.
Proxy advisory firms such as Glass Lewis and ISS advise
institutional investors ahead of shareholder votes. Their
reports often influence votes for or against management.
(Editing by Peter Galloway)