GAMCO Invokes Proxy Access at National Fuel Gas

GAMCOGAMCO First to Invoke Proxy Access

On November 9, 2016, GAMCO Asset Management Inc. (“GAMCO”) and certain affiliates, delivered a letter to the Issuer (the “Nomination Letter”) nominating Mr. Lance A. Bakrow (the “Nominee”) for election to the Issuer’s Board of Directors (the “Board”) at the Issuer’s 2017 Annual Meeting of Stockholders (the “2017 Annual Meeting”). As far as I know, this is the first use of a proxy access bylaw.

GAMCO’s nomination is pursuant to Article IA of the Issuer’s Bylaws, which is a recently-adopted proxy access provision which is intended to provide stockholders with greater access to put forward nominations of individuals for director on the Issuer’s proxy card.  GAMCO believes its Nominee’s skill sets and highly relevant business and financial experience, as evidenced by his bio included in the 13D/A filing, will be extremely valuable to the Issuer and GAMCO is confident that its Nominee will have an immediate positive impact on the Board.

Below is information regarding GAMCO’s “independent highly-qualified nominee:”
Lance A. Bakrow, Age 59, is the co-founder and a director of Greenwich Energy Solutions, a private company that provides independent energy solutions in the northeastern United States (“GES”).  Mr. Bakrow founded and has worked at GES since July 2009.  Mr. Bakrow is also co-founder and director at SourceGreen, LLC (“SourceGreen”), a private company that is a leading developer, owner and operator of industrial scale renewable energy solar infrastructure projects, which he co-founded in October 2010.  In 1994, Mr. Bakrow founded Greenwich Energy Partners, a private global energy trading and asset investment firm which, after extremely rapid growth, was sold in 1997 to Duke Energy Corporation (NYSE: DUK) (f/k/a Cinergy Corp.), an electric power holding company, where he continued to work until 2008.  Mr. Bakrow, in 2000, formed Greenwich Power, a private equity company focused on energy investments in new technology, alternative energy, and energy risk management solutions and he worked there as co-founder and director until 2006.  Prior to this, from 1985 to 1994, Mr. Bakrow worked as a Partner at The Goldman Sachs Group, Inc. (NYSE: GS) (“Goldman Sachs”), a global investment banking firm, where he ran energy and other related commodity trading and marketing, for the firm.  Prior to his time at Goldman Sachs, Mr. Bakrow worked as a trader at Cargill, Inc., a privately held global agribusiness company, from 1981 to 1985.  Mr. Bakrow earned a Bachelor of Arts Degree in Business from the University of Arizona in 1979.
Just under 40% of the S&P 500 Index now has a proxy access bylaw. Since this is, as far as I know, the first use of proxy access, I’m sure there will be much more press coverage to come. This is another history making moment in corporate governance. Read much more at Gabelli seeks National Fuel board seat via The Buffalo News.

GAMCO First to Invoke Proxy Access: Update 11/11/2016

From yesterday’s Global Proxy Watch,
First! Proxy access has swept across US corporates faster than any governance idea in decades. But no one actually has used investors’ newfound right to nominate directors on the corporate proxy—until now. On Wednesday Mario Gabelli’s GAMCO Investors hedge fund nominated Lance Bakrow, co-founder of privately held Greenwich Energy Solutions, to the board of National Fuel Gas, which adopted an access bylaw in March. GAMCO owns 7.8% of National Fuel and has been pushing for a spinoff of some units. Expect business groups to cite the nomination as confirmation of arguments that access opens doors to shareowners with private agendas.
Yes, I think Aaron Bernstein is right, opponents of proxy access may well use this first case to argue that proxy access will be used mostly by hedge funds. That may be right. When the SEC enacted Rule 14a-11, it had no limits on the number of shareholders that could combine to form a nominating group. The Council of Institutional Investors (CII) found that even if the 20 largest public pension funds were able to aggregate their shares, they would not meet the 3% criteria at most of the companies examined.
Mainstream mutual funds like Vanguard, Fidelity and BlackRock might meet the 3% holdings requirement at many companies but they have never even filed a proxy proposal. Nominating and electing directors is much more costly and work intensive. These funds compete mostly on the basis of low costs, so they cannot be expected to step up to the plate. SRI funds are generally much smaller than the largest pension funds belonging to CII. That leaves hedge funds as the only logical user in most cases if the group limitation remains at 20. Change that limit to 40 and it could make all the difference.
More thoughtful comments can also be found from Josh Black at Activism this week. Black reminds us:
Gamco is not a typical activist, however. It holds many of its investments in mutual and closed-end, not hedge funds. Its average holding period for current activist investments is over nine years, according to Activist Insight Online (it has been involved at National Fuel Gas since 2010). And it has a habit of doing things differently, sponsoring a precatory (non-binding) proposal promoting a spinoff at National Fuel Gas a few years ago, and often soliciting proxies in-house for proxy contests proper (saving proxy solicitor fees that often run in the hundreds of thousands of dollars, and millions for the biggest fights).

An even more extensive analysis within the context of current proposals at GAMCO’s First Use of Proxy Access and “Fix-It” Proposals.

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