Blackwells Capital Sends Letter to the Board of Directors of IHS Holding Limited Regarding the Immediate Need for Governance Enhancements
- Blackwells Capital has expertise in the telecommunications industry and a track record of helping companies enact value-enhancing change.
- MTN and Wendel have put forward proposals for shareholder representation on the board, indicating concerns about corporate governance.
- IHS shares have fallen by 60% since the company's IPO in October 2021.
- None.
Believes the First Step Toward Fixing Disclosure Issues, Governance Failings and Value-Destructive Strategic Lapses is Reconstituting the Board
Calls on the Company to Disclose Any Proposals Submitted by MTN, Wendel or Other Shareholders in Connection with 2023 Annual Meeting
Notes That Blackwells’ Private Letter to Board From August of 2022 Was Met With Inaction
The full text of the letter follows:
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June 28, 2023
Via E-Mail and Federal Express
The Members of the Board of Directors
IHS Holding Limited
1 Cathedral Piazza
123 Victoria Street
Attn: Mustafa Tharoo
Executive Vice President and General Counsel
IHS Towers
152 West 57th Street
Attn: Colby Synesael
Executive Vice President of Communications
To the Members of the Board of Directors:
Blackwells Capital LLC (“Blackwells”) is a significant, long-term shareholder of IHS Holding Limited (“IHS” or the “Company”). As you are aware from prior discussions, we have expertise in the telecommunications industry and related infrastructure, as well as a demonstrated track record of helping companies to enact value-enhancing change. Unfortunately, we have suffered a substantial diminution in the value of our investment as IHS shares have fallen by a staggering
In this letter, we detail numerous disclosure issues, governance failings and strategic lapses that have contributed to value destruction at IHS. We believe, that among other actions, the IHS Board of Directors (the “Board”) needs to be reconstituted as a precursor to necessary changes at the Company. Blackwells will take all necessary steps to overhaul the current Board in the event the status quo persists.
After relying on unaudited quarterly financial statements for the second quarter of 2021—financial statements that suggested a clear up-and-to-the-right trajectory as the Company was going public—the Company thereafter retreated from substantial reported profits to staggering, and increasing, losses. In August 2022, the Company released its appalling Second Quarter 2022 (“Q2 2022”) earnings report, which sent the IHS stock price down by more than
It is apparent from the Company’s earnings releases since Blackwells’ August 2022 letter that management has no serious focus on enhancing value for the Company’s shareholders. Although revenue increased overall in 2022, the Company’s reported loss for the year increased 18-fold, from
The Company uses a non-standard metric, what it terms Recurring Levered Free Cash Flow (“RLFCF”), “to measure the free cash flows [it] has generated from operations, after accounting for the cash cost of funding and recurring capital expenditure required to generate those cash flows.” The Company calls RLFCF “useful to investors because it is also used by [Company] management for measuring [its] operating performance, profitability and allocating resources.” But under even this bizarre measure, RLFCF has decreased by more than
These are among the metrics that Blackwells can actually see or infer from the Company’s public filings. By themselves, they are a source of great concern about the focus and capability of the Company’s management team and Board. But Blackwells is seriously concerned that there is a good deal more bad news; as conveyed in its August 2022 letter, the Company’s disclosure record reflects a serious lack of transparency. One need look no further than the way the Company has performed since its IPO. The Company’s performance since its IPO does not remotely approach the implied financial performance from the Company’s IPO Prospectus. But more generally, many of the Company’s disclosures are opaque and simply fall short of what shareholders expect as good corporate governance.
Indeed, despite Mr. Darwish’s assertions accompanying the quarterly earnings releases that Company performance has been strong and that he was “pleased with how [IHS] performed in 2022 and the direction [the] business is heading,” the stock price remains unacceptably low. The market either does not believe, or cannot understand, the basis for Mr. Darwish’s bullish pronouncements. After the disastrous Q2 2022 earnings release, the stock price continued to fall until hitting a low closing price of
Blackwells suggests that the stock price remains low in substantial part because the Company refuses to embrace transparency with investors and corporate governance standards that more align with the norms of companies listed for trading on
It speaks volumes about where IHS and its Board stand on corporate governance and basic shareholder rights that shareholders with this large ownership interest are rebuffed in a manner even more dismissive than the brush-off Blackwells received last year. Given the ownership position of MTN and Wendel, Blackwells infers that these shareholders did not raise their proposal concerning Board representation for the first time at the annual meeting. It strains credulity to suggest that the proposals (and no doubt other matters that these significant owners raised with management) were not fully vetted before the annual meeting; yet the Board refused to put the proposals to a vote. Indeed, it appears that IHS management failed to give notice of these shareholders’ proposed resolutions, despite provisions in the IHS Shareholders Agreement that seem to require the Company to notify all shareholders of additional agenda items subject to shareholder vote within five days of receiving notice of the agenda items from two or more of the shareholders subject to the Agreement—shareholders parties to the Agreement that include MTN and Wendel. And the predictable result: MTN has announced that it is “evaluating its options” with the intention of fully enforcing its rights under the Shareholders Agreement and the Company’s Articles of Association. Yet rather than engage with MTN, the Company is now reportedly preparing to defend against a hostile takeover—an effort that promises only to divert management and the Board further from responding to the Company’s apparent financial and operational problems.
It is clear that the Board and management rejected the MTN and Wendel proposals consistent with its approach, in place since at least the IPO, that meaningful engagement with and transparency to shareholders somehow constitutes an evil that the Company must combat. It seems that the Board and management are determined to ignore the will of an increasingly large segment of the IHS shareholder population, and to avoid the responsibility and accountability that attend the common governance principles with which investors in
The mere fact that a company is incorporated in the
Blackwells demands that the Company and the Board take the following immediate actions:
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Reconstitute the Board with genuinely independent directors, with deep experience in the industry, and who have the clarity of insight to hold management and themselves accountable for their performance;
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Recommend, and put to a shareholder vote, that the Company stop hiding behind Cayman law to take advantage of the opacity and legal immunities that it permits, and (a) either eschew the default provisions of Cayman law in favor of governance rules that afford shareholders the basic rights they routinely enjoy and which are in line with shareholder rights of other issuers listed on a
U.S. securities market, or (b) reincorporate the Company inDelaware orMaryland , consistent with appropriate tax and other considerations;
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Call and convene a special shareholders’ meeting to consider the enhanced governance matters or reincorporation contemplated by No. 2, as well as any and all shareholder proposals put forward by MTN and Wendel. (As a significant shareholder in its own right, Blackwells is quite interested in knowing what those proposals are—and in having the opportunity to vote on them); and
- Disclose to all shareholders without any further delay the proposals submitted by MTN, Wendel and any other parties in connection with the Company’s 2023 Annual meeting.
The Company’s reincorporation under
As was the case last August, Blackwells stands ready to assist the Company. However, should the Board continue to follow its traditions, we are prepared to take whatever actions are necessary to reconstitute the Board ourselves to ensure that our demands are promptly met.
In the meantime, we reserve all rights.
Very truly yours,
Jason Aintabi
Chief Investment Officer
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About Blackwells Capital
Blackwells Capital was founded in 2016 by Jason Aintabi, its Chief Investment Officer. Since that time, it has made investments in public securities, engaging with management and boards, both publicly and privately, to help unlock value for stakeholders, including shareholders, employees and communities. Throughout their careers, Blackwells’ principals have invested globally on behalf of leading public and private equity firms and have held operating roles and served on the boards of media, energy, technology, insurance and real estate enterprises. For more information, please visit www.blackwellscap.com.
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Longacre Square Partners
Dan Zacchei / Greg Marose (646) 386-0091
blackwells@longacresquare.com
Source: Blackwells Capital LLC
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