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'Poison pill' stops the presses on boardroom coup attempt at Johnston Press

Christopher Williams
Johnston Press is struggling under heavy debts and falling print circulations - Getty Images Contributor

An attempted boardroom coup at Johnston Press has been thwarted by a controversial “poison pill” defence that could hand control of the newspaper publisher to its lenders.

Christen Ager-Hanssen, the activist shareholder plotting to oust chairman Camilla Rhodes and the company’s senior management, has been forced to delay a call for an Extraordinary General Meeting after advisers discovered the tripwire in bond documents.

This weekend Mr Ager-Hanssen was in talks with lawyers at the City firm Mishcon de Reya on how to circumvent the mechanism, known as a “dead hand proxy put”, in preparation for a new attack.

Johnston Press inserted the dead hand proxy put into its bondholder agreements when it last refinanced its £220m debt pile three years ago. Such terms can secure lower interest rates but can also trigger a default if shareholders step in to appoint new directors.

Only the existing board has the power to bring in or approve directors. Mr Ager-Hanssen’s plans may have meant Johnston Press would have had to repay its bondholders immediately, which the struggling company cannot afford. In such a scenario, the lenders would gain control of the company and shareholders would be wiped out.

Dead hand proxy puts have come under scrutiny in the United States in recent years and have been criticised as tools that allow boards to undermine shareholder sovereignty to ward off activists. A Delaware court has branded the tactic “highly suspect” amid claims it represents a breach of directors’ duties to shareholders, who are unlikely to vote for change that would hand a company to its lenders.

Johnston Press is believed to be the first example of an activist coming up against such a poison pill in the UK. Mr Ager-Hanssen, who owns 12.6pc of Johnston Press and the Swedish version of Metro, said he was seeking new routes to take control.

He has lined up new directors including the veteran newspaper executive Steve Auckland to deliver a radical shake-up of the publisher of the i and scores of local titles, in an attempt to rebuild equity in the company, which is currently dwarfed by its debts.

The Norwegian branded Johnston Press’s dead hand proxy put “a grotesque abuse of fiduciary duty”. 

He said: “The poison pill cynically deprives shareholders of their fundamental right to change the board as they see fit. That power has been stolen from them. This is nothing short of corporate theft of power in which only the directors can decide who replaces them. The board seeks to play shareholder and bondholder interests off of one another in the hope that the balance of power can remain in the hands of a few cozy fat cats.”

Mr Ager-Hanssen is backed by other investors including Crystal Amber, the biggest shareholder with 18.2pc. It has criticised Johnston Press’s own attempts to restructure its debts and the company’s remuneration policies.   Since 2013 the board has been paid £6.4m, while the company’s valuation has collapsed from more than £100m to just £15m. Johnston Press declined to comment.