The transfer of Ferrovial’s headquarters from Spain to the Netherlands will reduce the ability of small shareholders to influence the company’s assemblies because Dutch regulations establish limitations on the participation of these investors that are more demanding than Spanish regulations.
This conclusion is part of the report issued regarding the next Ferrovial shareholders’ meeting by the ‘proxy’ agency Institutional Shareholder Services (ISS), one of the largest in the world in issuing voting recommendations in this type of meeting.
ISS gives its support to the reverse merger plan by which the Dutch subsidiary will absorb the Spanish parent company to promote the change of headquarters, which is an endorsement of the project presented by the board of directors, which is pending a vote at the board of directors shareholders on April 13.
The agency considers that the approach is “reasonable”, especially in view of the fact that the subsequent listing in the United States “will provide more liquidity and exposure to the North American capital markets”.
It will also make the company “a global European organization”, “strengthen the conditions for access to financing” and give it “brand visibility”. If the company uses Amsterdam as a platform to list in the United States, it is for “technical reasons” and “because there are precedents” of other companies that have done so.
However, the voting recommendation agency warns that “the relocation to the Netherlands will not be carried out without consequences for minority shareholders, whose rights will be negatively affected in various aspects.”
Apart from the founding nucleus, Ferrovial’s shareholding is highly fragmented. The president, Rafael del Pino, has 20% of the capital, against 8.2% of his sister María de él and 4.2% of his brother Leopoldo, who is expected to vote against the proposal.
Among the significant shareholders are Lazard, with 4.6%, and Blackrock, with 3.1%, in addition to Vanguard, which has 1.7%. The activist investor Chris Hohn, who is promoting changes in Cellnex, has 0.9% of the capital and has been in favor of the operation.
In Spain, indicates ISS, minority shareholders can add a point on the agenda if they exceed 3% of the capital, while in the Netherlands this percentage only serves for the board to analyze the possible transfer to the shareholders’ meeting. To add any element to the agenda, the threshold established in the Netherlands is 10%.
Another difference is that in Spain a certain quorum is necessary to carry out some proposals, while in the Netherlands there is no minimum attendance, which makes it easier for the main shareholders to promote initiatives.
ISS further indicates that in the Netherlands non-financial reports are not required to be filed with shareholders at the meeting. Companies in the country have more room to repurchase shares, when in Spain the limit is 10% of the capital.
It also warns that, under Dutch jurisdiction, Ferrovial must establish a clear separation between the position of chairman of the board of directors and that of the chief executives. The first cannot have functions of this type.
“Despite the governance aspects that do not benefit minority shareholders, the company of the company is very oriented towards the US market and will therefore benefit from a US listing, and not an ADR program, and from greater liquidity and exposure to the country’s markets. On this basis, the measure is supported,” he concludes.
