By Svea Herbst-Bayliss
BOSTON (Reuters) – HC2 Holdings Inc
This would bring to an end a proxy contest between a first-time activist Michael Gorzynski, who runs MG Capital, and Philip Falcone, a former hedge fund manager turned corporate executive who cemented his fame with bets against the housing market during the last financial crisis.
Gorzynski criticized Falcone’s handpicked board for poor governance, conflicts of interest and missing regulatory issues, and pushed to have him removed. Gorzynski said he wanted to cut the company’s annual costs and refocus on HC2’s core holdings.
In the end both men will serve on the board, the sources said.
MG Capital, which pushed to replace the entire board, will get two seats, with the second going to Kenneth Courtis, who was one of MG’s six director candidates, the sources said.
The board of the construction and marine services company would be expanded by one to seven members at the annual meeting in July.
Additionally Avram “Avie” Glazer, an investor with a roughly 5.3% stake in HC2 would also join the board. HC2 said last month that it planned to put Glazer onto its slate for shareholders to vote on at the annual meeting in July.
Glazer is executive co-chairman and director of soccer club Manchester United PLC
The fourth board seat would go to Shelly Lombard, a representative of HC2 shareholder JDS1, the sources said.
A representative for HC2 declined to comment and a representative for MG Capital could not be reached.
This was one of only a few campaigns that has not settled quickly this year as the coronavirus outbreak shuttered much of the U.S. economy.
It pitted Gorzynski, who once worked for prominent hedge fund manager Daniel Loeb, against Falcone, a former billionaire whose bet against the overheated housing market earned his fund Harbinger Capital a 116% return in 2007.
In the last decade Falcone has turned from fund investor to corporate executive.
Warren Gfeller, currently the interim non-executive chairman and who has been on the HC2 board since 2016, will remain as a director, the sources said. Additionally Wayne Barr, who has been a director since 2014, will also stay, they said.
Proxy advisers ISS and Glass Lewis both supported MG’s campaign, with ISS, the bigger and more influential of the two, recommending that shareholders elect three MG directors but not Gorzynski. Glass Lewis, in an rare move, backed all six MG directors to replace the entire board.
(Reporting by Svea Herbst-Bayliss; Editing by Shri Navaratnam and Christopher Cushing)
