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George Armoyan, chief executive officer of Halifax-based conglomerate Clarke Inc., has demanded three seats on the Sherritt board.Rogelio V. Soli/The Associated Press

A proxy battle for control of the board of mining company Sherritt International Corp. is heating up, with the current chairman attacking dissident shareholder George Armoyan as unqualified and bereft of ideas.

Mr. Armoyan, chief executive officer of Halifax-based conglomerate Clarke Inc., returned the fire, saying the Sherritt board and management is just trying to protect its nest egg and "is almost like the Senate of Canada."

Mr. Armoyan, a long-time activist investor, made a move on Sherritt in December, complaining that the board and management owned less than 1 per cent of the shares of the company. Clarke, which had bought up 5 per cent of the stock, asked for a shareholder meeting to replace some of Sherritt's directors and shrink the size of the board. Sherritt rejected the proposals.

Since then, Mr. Armoyan has submitted four shareholder proposals that he said would help align shareholder and director interests. They included a requirement for unanimous director agreement for major acquisitions, a "say-on-pay" vote for shareholders, more shareholder input on executive compensation, and an end to "special perquisites" for directors that he said have made the company "a private club, apparently run for the benefit of the board of directors."

On Monday, the rhetoric escalated when Sherritt chairman Hap Stephen slammed Mr. Armoyan in a letter to shareholders accompanying the corporate proxy circular for the May 6 annual meeting. He described Mr. Armoyan as having "no experience in mining, metals or international business, a poor track record of corporate governance, and no credible ideas for Sherritt beyond the board's current strategy." Mr. Stephen's letter said Mr. Armoyan's move "threatens to throw a wrench" into Sherritt's progress, at a time when it is "gaining momentum with a disciplined strategy to pay down debt, cut costs and focus on our core are of expertise."

In an interview, Mr. Stephen said Sherritt has tried to avoid a costly and disruptive proxy fight by negotiating with Mr. Armoyan, but these efforts were spurned. Mr. Armoyan's proposed directors – himself and two colleagues – "have no experience in our types of business, our size of businesses, and he has a chequered track record," Mr. Stephen said.

He noted that Mr. Armoyan's board move, if successful, would give him control over 40 per cent of the board with only 5 per cent of the shares, and an effective veto on some board decisions. Mr. Stephen also noted that the company is introducing a "say-on-pay" resolution for executive and director compensation at the annual meeting, a move that has been in the works for some time. Overall compensation is "right in line with our peers," he said.

Mr. Armoyanl said in an interview that it is the incumbent management and directors whose record is poor, since Sherritt's stock price has been sliding for three years. "I know how to make money. I'm willing to put my record against their record any day." If it wasn't for his pressure, Mr. Armoyan said, the company would not now be focusing on cost cutting.

In the past, Mr. Armoyan has taken control of more than a dozen faltering but asset-rich companies by buying up shares, taking seats on the board, and in some cases selling the companies off after engineering a turnaround. At one point, Mr. Armoyan was so successful that investors started buying up companies where he had taken positions, pushing up prices in what became known as the "Armoyan effect."

Not all of his moves have proved to be winners, however. He bought into Quebec furniture maker Shermag Inc. in 2006, but attempts to turn it around failed, and it went into creditor protection in 2008 before being sold off.

Sherritt, which has nickel and cobalt mining operations, has just sold its coal business for $946-million.

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