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A creeping takeover attempt for Cromwell Property Group (ASX: CMW) from Dr Gary Weiss-backed ARA Group claimed its first three victims yesterday, with potentially more to come at a board spill after a remuneration report was rejected by shareholders at the fund's AGM.
Within two months of shareholders approving the appointment of Weiss (pictured) and another ARA nominee Joseph Gersh, yesterday they kicked out chairman Leon Blitz, deputy chairman Andrew Fay and director John Humphrey.
Blitz has now been replaced by Jane Tongs as an independent non-executive chair.
A spill meeting must now take place within 90 days of the AGM, putting board positions in question for three remaining directors - including Tongs - who are not affiliated with Singapore-based ARA.
The spill is required under the second strike rule. Longstanding managing director Paul Weightman will not need to stand for re-election, although bad blood between him and ARA makes it highly unlikely a transformed board would keep him on the payroll.
In mid-2019 Cromwell blocked its then biggest shareholder ARA from taking part in a $375 million capital raise on the advice of its lawyers, prompting the resignation of director David Blight, the CEO of ARA Australia.
Yesterday's AGM result and the September appointments of Weiss and Gersh are textbook examples of how a substantial shareholder and its allies don't need a majority stake in a company to achieve their aims.
ARA is pushing to own close to half of the company through a creeping proportional offer that has been extended until the end of this month, but for now it holds close to 30 per cent.
It also appears the antagonistic shareholder's moves are supported by the Tang family, which owns 16 per cent.
That roughly 46 per cent share is more than enough to vote down a remuneration report, which only needs a 25 per cent 'no' vote to receive a strike.
In theory that shouldn't be enough to vote in a new director though, with some retail shareholder backing seemingly needed to achieve a majority.
However, in practice the situation is different as there will always be a segment of shareholders who don't bother to vote, thus pushing the percentage of votes cast from dissident shareholders into majority territory.
Sources close to Cromwell argue this is the strategy that has been employed by ARA, meaning it could take over the property fund without offering a significant premium to the company's share price.
The percentage of votes cast against the remuneration report and the director appointments, as well as for the spill resolution, were all in a similar range to the 59 per cent that voted for Gersh's appointment two months ago.
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