Andreas Rialas, ARGO, Argo Group, Kyriakos Rialas, Michael Kloter, Rule 9 Waiver, share buyback, shareholder activism, shareholder value, The Argo Fund
Here’s the recent RNS from Argo Group (ARGO:LN), notifying shareholders of a March-3rd EGM seeking authorisation for a £2 Million Share Buyback & Rule 9 Waiver. [Here’s the actual EGM Circular]:
– Argo Group’s AUM has now declined by a cumulative 85% (to $166 million), the $3.5 million Argo Local Markets Fund remains its only new fund-raising (since the credit crisis), it continues to write-off virtually all the management fees accrued & owed (now totaling $6.2 million) by the Argo Real Estate Opportunities Fund, and it’s also tied up a majority of shareholder funds in illiquid loan & fund investments. Management’s obvious inability to stabilise & increase AUM, plus its wilful neglect of shareholder value, are clearly to blame here for the 50% collapse in Argo’s share price just in the last 3 years.
– Judging by local press reports (for example, here & here), Andreas Rialas originally received a substantially higher offer for Argo’s Indonesian refinery investment (TPPI), but ended up spending another couple of years negotiating (or refusing to negotiate) with Pertamina…to ultimately realise a far lower exit price for fund/shareholders. [Which is consistent with a near-25% write-down (in the last interims) of Argo’s stake in The Argo Fund].
– Pursuant to this letter, in 2014/2015 I introduced and/or referred to Andreas Rialas a number of trade & financial buyers who were interested in potentially acquiring Argo Group, its asset management business, or its fund investments. Since then, I’ve had no meaningful feedback or reason to believe he/Argo have seriously engaged with any of these potential buyers.
– The EGM Notice process was both unprofessional & inappropriate: While most investors learned of the Share Buyback from Argo’s RNS (released after close-of-business on Mon, Feb-8th), the Notice was actually posted the prior week & received by some shareholders on Sat, Feb-6th.
– The Indonesian sale & proposed return of capital is Argo’s first major value-creation event in a number of years. Some level of (prior) consultation with a representative group of external shareholders, plus some additional time to adequately consider & discuss the proposal, would have been appropriate.
– Kenneth Watterson is a director since Argo’s original 2008 Admission. As is David Fisher, who’s also been an AREOF director since 2010. While Michael Kloter has a much longer history with Andreas & Kyriakos Rialas, Absolute Capital Management (which acquired Argo back in early 2007), not to mention Florian Homm (also, see here & here)…and received a post-Admission bonus, while billing Argo for legal services over the years. In aggregate, these directors have earned an estimated $1.4 million in total remuneration from Argo. I must say, I struggle to understand how they still qualify as Independent Directors..?!