STYLE="font: 10pt Times New Roman, Times, Serif">
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934
(Amendment No. )
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Filed by a Party other than the Registrant ☒
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☐ | Preliminary Proxy Statement |
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☐ | Definitive Proxy Statement |
☒ | Definitive Additional Materials |
☐ | Soliciting Material Under Rule 14a-12 |
HUNTSMAN CORPORATION |
|
|
|
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Starboard Value LP, together
with the other participants named herein (collectively, “Starboard”), has filed a definitive proxy statement and accompanying
BLUE proxy card with the Securities and Exchange Commission to be used to solicit votes for the election of its slate of highly-qualified
director nominees at the 2022 annual meeting of stockholders of Huntsman Corporation, a Delaware corporation (the “Company”).
On March 14,
2022, Starboard issued the following press release:
ISS
Recommends HUNTSMAN SHAREHOLDERS Vote STARBOARD’s BLUE Proxy Card
Concludes that Starboard Has Made a “Compelling
Case” That Change is Required on the Board to “Address Concerns with Management Accountability and Ensure That the Interests
of Shareholders are Prioritized"
Recommends Huntsman Shareholders Vote to
Elect Starboard’s Nominees – James Gallogly and Jeffrey Smith - at Upcoming Annual Meeting on Starboard’s
BLUE
Proxy Card
Believes the Addition of Starboard’s
Nominees is Warranted to “Enhance Oversight” and Bring an “Independent Presence That is Unquestionably Aligned with
Shareholders”
Agrees with Starboard That the Board Has
Overseen a Troubling History of Operating and Share Price Underperformance, Poor Corporate Governance Practices and Failed Commitments
to Huntsman Shareholders
Highlights Concerns with the Board’s
“Defensive Posture” and Recent Shareholder-Unfriendly Tactics, Noting That the Board’s Actions are “Challenging
to Reconcile with the Best Interests of Shareholders”
States That the Board’s “Previous
Refreshment Efforts Had Been Insufficient” and Recognizes that Starboard’s Involvement Likely Prompted the Recent Board Changes
Starboard Urges All Shareholders to Vote
the
BLUE
Proxy Card to Support the Election of All
Four
of Starboard’s Highly Qualified Nominees
NEW YORK, NY – March 14, 2022
/PRNewswire/
-- Starboard Value LP (together with its affiliates, “Starboard” or “we”), one of the largest shareholders of
Huntsman Corporation (NYSE: HUN) ("Huntsman," “HUN,” or the "Company"), with an ownership interest of
approximately 8.8% of the Company’s outstanding shares, today announced that Institutional Shareholder Services Inc. (“ISS”),
a leading independent proxy voting advisory firm, has recommended that Huntsman shareholders vote on Starboard’s
BLUE
proxy card to elect Starboard nominees, James L. Gallogly and Jeffrey C. Smith, to the Huntsman Board of Directors (the “Board”)
at the Company’s upcoming 2022 Annual Meeting of Shareholders (the “Annual Meeting”). ISS’ strong show of support
is a clear call for further change on the Huntsman Board.
ISS concluded that shareholders should
vote on
Starboard’s
BLUE
proxy card
saying
1
:
“The dissident has made
a compelling case
for further change
.
Jim Gallogly will bolster the board's independence, while adding industry and executive experience,
and Jeff Smith will provide the perspective of a significant independent shareholder
. In combination with other independent voices
already on the board,
the addition of these two dissident nominees should be sufficient to
ensure independent oversight of management
and ensure that the interests of shareholders are prioritized
.”
1
Permission to quote from the ISS report was neither sought nor obtained. Emphases added.
Jeffrey Smith, Managing Member of
Starboard
Value LP, responded to the ISS report, stating, “We are gratified that ISS, one of the leading independent proxy voting advisory
firms, recognized the need for further change and enhanced oversight on Huntsman’s Board. We are pleased that ISS recognizes the
positive impact we have had at Huntsman since our involvement began and that the current Board must be held accountable for overseeing
an extensive period of operating and share price underperformance, failed commitments to shareholders and poor corporate governance practices.
Importantly, we are gratified that ISS shares our concerns with the Board’s recent and defensive shareholder-unfriendly actions,
including its refusal to use a universal proxy card, reactive Board refreshment process and inappropriate attacks on Starboard and its
nominees. ISS also recognized several of the concerns we outlined regarding the questionable independence and troubling interconnects
among certain Board members.
We invested in Huntsman because it has highly attractive
assets, strong market positions, diverse product portfolios, innovative chemistries, and a difficult-to-replicate manufacturing footprint
with opportunities to drive significantly improved financial results and shareholder returns. As we approach the end of this election
contest, it is our hope to have the privilege and the opportunity to work with Huntsman, its leadership team, employees, customers, and
partners. Our objective is to see Huntsman succeed and thrive under the oversight of a significantly enhanced Board. We have nominated
a fantastic slate of highly-qualified director candidates who are truly independent, have relevant experience, and will seek to ensure
that the Board acts independently and in the best interests of shareholders at all times.
We appreciate the strong support from shareholders
who have already voted for Starboard’s nominees on the
BLUE
proxy card and urge all of our fellow shareholders to
vote for the election of all
four
of our highly-qualified nominees - James L. Gallogly, Sandra Beach Lin, Susan C. Schnabel,
and Jeffrey C. Smith - on the
BLUE
proxy card
TODAY
.”
Excerpts from ISS’ Analysis &
Recommendation
On ISS's Conclusion That Huntsman Shareholders
Should Vote Starboard's BLUE Proxy Card to Elect James Gallogly and Jeffrey Smith:
"
The dissident has made
a compelling
case for change
. The addition of two dissident nominees
is warranted to address concerns with management accountability
and ensure that the interests of shareholders are prioritized
."
"
Gallogly's addition would bolster the
board's independence, while adding industry and executive experience.
These are competencies that will
support the board's
ability to hold management accountable."
"
Smith will add the perspective of a significant
and independent shareholder
."
"
However, there are
concerns about [Dr.
Beckerle’s] independence from Peter Huntsman
. Like Beckerle, Ferrari appears to have the appropriate credentials to be a
capable director, given his experience as a chemical industry executive and his familiarity with international markets.
However, he
has a link to HUN via a former employment relationship, which creates doubts about his independence
.
If Beckerle and/or Ferrari
are replaced by Gallogly and/or Smith, the benefit of the added independence would outweigh any lost contribution."
Glass Lewis & Co. (“Glass Lewis”),
in its report issued in connection with the Annual Meeting
2
,
also shared similar concerns regarding the lack of independence and problematic interconnects plaguing two of the Company’s incumbent
board members, Dr. Mary Beckerle and Mr. Daniele Ferrari:
“To be sure,
we still have some
governance
concerns related to the true independence of the two remaining directors [Dr. Mary Beckerle and Mr. Daniele Ferrari] who appear to have
potentially inappropriate ties to chairman and CEO Peter Huntsman and the Huntsman family
. Additionally,
we believe there is
still room for meaningful operational and financial improvement to turn Huntsman into a differentiated chemicals industry leader
–
ideally generating above-average profit margins – and to realize Huntsman's full potential and intrinsic value.”
“
We find more cause for potential concern
when reviewing the arguments Starboard has made against the other two targeted directors,
Mr. Ferrari and Dr. Beckerle, who would be
the longest-tenured independent directors remaining after this year's annual meeting, if they are re-elected
[. . .] We believe
it's
fair to question Mr. Ferrari's previous roles and whether he is capable of exercising true independence on the Huntsman b
oard
or, if necessary, holding Peter Huntsman accountable.”
“We're inclined to agree with Starboard on this
matter. Although limited grounds may exist from a technical or legal perspective where this is not a direct conflict,
given that Peter
Huntsman and his father intervened to make sure Dr. Beckerle retained the CEO role at HCI, where she earns a salary of approximately $1
million,
we consider such a show of loyalty would almost certainly impair Dr. Beckerle's ability to remain truly objective in overseeing
the performance of Peter Huntsman as CEO of the Company
and, if necessary, when questioning his judgment and holding him to account.”
On Concerns with Huntsman's Proxy Contest Entrenchment
Tactics and Why Cynthia Egan Should Be Replaced:
"
The board has also defended against this
contest in manner that is
challenging to reconcile with the best interests of shareholders
,
which in itself suggests that
more direct shareholder input would be beneficial (
particularly when Egan's role in the process is considered, as she is the lead independent
director
and is portrayed as providing the perspective of long-term institutional shareholders due to her experience as a retirement
plan executive)."
"Likewise, the board's
summary dismissal of
the dissident's request for a universal card has left questions unanswered for shareholders
."
"In any event,
there is merit in evaluating
the nominating and corporate governance committee that has implicitly signed off on this approach.
Of the nominees on ballot, the
committee's membership is limited to
Egan and Beckerle,
with the former serving as chair. Egan also serves as vice chair of the
board and as lead independent director
."
"
Egan has not always been an advocate for
the rights of shareholders in her capacity as a director
. This is evidenced by her experience on the board and as a governance
committee member of various BlackRock closed-end funds.
In these roles, she has participated in actions that
collectively amount
to a concerted attempt to disenfranchise shareholders
. These actions include unilaterally classifying the board, unilaterally
implementing a majority vote standard for contested director elections (which is tantamount to an entrenchment mechanism), ignoring a
majority-supported shareholder proposal to declassify, and unilaterally opting into coverage under a control share acquisition provision."
2
Permission to quote from the Glass Lewis report was neither sought nor obtained. Emphases added.
"Despite the additional refreshment,
the
board has adopted a defensive posture
in this proxy contest
.
An evaluation of the two continuing nominating and corporate governance
committee members, who have implicitly signed off on this approach, reveals that
the first has a concerning track record of disenfranchising
shareholders
(yet chairs the committee and is the lead independent director), while the second is subject to uncertainties about independence
– both of these directors have been targeted by the dissident.
These factors suggest an independent presence that is unquestionably
aligned with shareholders is necessary to enhance oversight
."
“Despite this turnover,
the reconfigured
board has adopted a defensive posture
in this proxy contest
.
This is on display in the board's aggressive attempts to discredit
the dissident and the dissident's nominees,
particularly Jim Gallogly – despite a largely favorable view of Gallogly among the
analyst communit
y
(Gallogly, who was appointed to the board of DuPont during that company's 2015 proxy fight with Trian, holds
the rare distinction of having been praised by both sides in a contest).
This is also on display in the board's selection of the
meeting date, and in its rejection of the dissident's request for a universal card
.”
On Concerns Surrounding Huntsman's Insufficient
and Reactive Board Refreshment Process:
“The launch of the dissident's campaign
was followed by a series of board composition and leadership changes,
which amounted to a recognition that previous refreshment
efforts had been insufficient
.
Given the timeline, it appears that the dissident deserves a portion of the credit for prompting
these changes
.”
“The most apparent concern centers on
the
dominant role that longer-tenured directors maintained
until launch of the dissident's campaign
.”
“
That the bloc of longer-tenured directors
maintained power for years after this inflection point
–
until challenged by a dissident shareholder
–
suggests
that refreshment efforts were insufficient
. This view is supported by the series of further changes made to board composition
and leadership after the dissident went public with its campaign.”
“
Ultimately, it does not appear
that the willingness of HUN to add new perspectives to the board was accompanied by a corresponding willingness to transition longer-tenured
directors off the board in a clear, deliberate, and timely manner
.”
“Similar to the concerns with the inert
approach to execution highlighted in the Operational Performance section,
the pace, type, and degree of refreshment
made after
the succession of Peter Huntsman to the board chair role
likely did not match investor expectations, which enabled the cohort of longer-tenured
directors to maintain power
.”
On Huntsman’s Share Price Underperformance:
“A valuable point for shareholders to
consider when evaluating TSR from this inflection point through the unaffected date resides in HUN's May 2018 investor day presentation.
At the time, Peter Huntsman had been board chair for nearly five months. With HUN share price trading below $35.00, management outlined
four value creation opportunities with a combined total of over $27.00 per share in estimated upside.
As suggested by the TSR figures
in the table above,
HUN was not able to capture this value, and HUN share price actually decreased
from the May 2018 investor day
through the unaffected date
.”
“
TSR was disappointing prior to the
unaffected date as
HUN failed to capture the upside in value creation opportunities articulated to shareholders
shortly after Peter
Huntsman succeeded as board chair
. TSR has since improved dramatically, in both absolute and relative terms. The turnaround is based
in recent share price outperformance, the cause of which appears to be multifactorial. While recent operational performance has likely
contributed to the shift, the fact pattern suggests that factors unrelated to execution have also been drivers,
and that the dissident
can credibly claim a portion of the credit
.”
“
This share price underperformance
is reflected in TSR over the periods commencing with and after the succession of Peter Huntsman to the board chair role
.”
On Huntsman’s Disappointing Operational
Performance:
“Bearing in mind the (0.1) percent CAGR
for adjusted EBITDA and the $60 million increase in capital expenditures, the (33.3) percent CAGR in free cash flow (after excluding a
$332.5 million arbitration award)
supports the dissident's argument that there is room for improvement in free cash flow conversion
.
Importantly, HUN indicates that a transformation of the product portfolio began in FY2017.
Despite these changes, the adjusted
EBITDA
margin decreased
0.2 percentage points from 14.8 percent in FY2017 to 14.6 percent in FY2021
.”
“In summary, the transformation since
Peter Huntsman succeeded as board chair
has not translated into improved valuation relative to peers.
In fact, HUN trades a wider
discount now than it did at the start of the period
.”
“Although HUN has recovered since the
pandemic, which appears to have adversely impacted it more than peers,
HUN is faring worse now in an absolute sense and relative to
peers than it was at the start of the period
.”
“
Operational performance since
Peter Huntsman succeeded as board chair has been disappointing
.
HUN has failed to deliver on stated targets and objectives,
and management's approach to execution has at times been undisciplined
. The board has attempted to present recent operational performance
as evidence of improvement. There are elements of truth in these statements, but only if one's perspective is limited to the short-term.
An evaluation of performance since Peter Huntsman succeeded as board chair reveals that HUN has effectively managed to simply tread water
(in some cases actually regressing). This is reflected not only in various elements of performance, but in HUN's valuation.
These factors
support the argument that management oversight needs to be enhanced
.”
On Huntsman’s History of Missed
Promises and Failed Commitments to Shareholders:
“In May 2018, HUN hosted its first investor
day with Peter Huntsman as board chair. During the presentation, management outlined four value creation opportunities, indicating that
these levers had the potential to create over $27.00 per share in additional value by the end of 2020 [. . .]
HUN was not able to
capture this value, as it failed to achieve three of the four milestones
.”
“In May 2018, HUN not only indicated
that the objective was to realize a further $1.0 billion in proceeds [from the sale of Venator], but to do so that year. Despite this
intent, HUN still owned close to half of outstanding Venator shares three years later […]
Had HUN acted in accordance with its
stated objectives on the timeframe it established for itself, the company and shareholders would have recovered approximately twice the
value gained from the 2020 sale
, inclusive of the estimated tax benefits. The board did not hold management accountable in executing
on this milestone. As a result of the undisciplined pace and overconfidence in its ability to predict future TiO2 prices (a business the
board decided to exit because of its volatility),
HUN failed to maximize shareholder value
.”
“
HUN did not succeed in increasing
adjusted EBITDA to $1.36 billion
. Though the COVID-19 pandemic and related supply chain issues were largely to blame for the 11.5
percent decrease in revenue and the 23.5 percent decrease in adjusted EBITDA in FY2020,
figures in FY2019 were
so far removed from
the target as to render it out of reach, even under normal circumstances
.”
“
HUN's messaging at the investor day
provides a valuable point of reference for shareholders evaluating recent performance
. On Feb. 15, 2022, HUN announced financial results
for the most recent quarter and year, as well as a $0.10 dividend increase (approximately 13 percent) and the expectation that FY2022
EBITDA could be at the low end of a $1.4 to $1.5 billion range (prior guidance was set at $1.4 billion). Q4 '21 adjusted EBITDA, at $349
million, was approximately 5 percent higher than consensus forecasts; this represented an adjusted EBITDA margin of 15.1 percent.
By
comparison, the Q4 '20 figure was 14.3 percent, the Q3 '21 figure was 16.2 percent, and the overall FY2021 figure was 15.9 percent
–
indicating that the margin during Q4 '21 was a move away from, rather than toward, the investor day objective
.”
Glass Lewis, in its report, also noted Huntsman’s
history of missed shareholder promises, and in addition, voiced concerns with the Company’s propensity to cherry-pick data to the
detriment of its own credibility with shareholders:
“In particular, we believe [Starboard’s]
portrayal of
missed targets from years past is more intellectually honest than the board's revisionist history
. Further,
despite Huntsman's recent record financial results,
the Company has
long been less profitable than its closest peers, lagging their
average EBITDA margin by 300-600 basis points in recent years
.”
“[D]uring this proxy contest,
the board
has been reluctant to stick to its clearly-defined performance peer group, seemingly excluding or adding additional peer companies in
its various analyses arbitrarily
,
depending on
the metric being measured, or
perhaps the result the Company and its
advisors want to show
.”
“
We believe such an approach reduces
investor confidence in the board's credibility and transparency
and we find Starboard's criticisms in this regard to be justified
.”
On Why Huntsman Shareholders May Want to Elect
Three of Starboard's Highly Qualified Nominees on the BLUE Proxy Card
:
"Therefore, it would not be unreasonable for
shareholders concerned in this particular case about the potential loss of board diversity
to also support dissident nominee Sandra
Lin
,
who has industry, executive, and public board experience
, particularly given the concerns, noted above, regarding
incumbents Beckerle, Egan, and Ferrari
."
On Why a Direct Starboard Representative is
Warranted on the Huntsman Board:
“
The board's response to the dissident's
campaign has also been concerning
,
in that the reaction is
not consistent with what shareholders should be able to expect
from the independent director
s representing them.
The board has attacked the dissident on several grounds
,
including that
the sale of GCP at nearly a 40 percent premium to its unaffected value was a failure.
As discussed above, GCP is distinguishable from
this situation in that more significant intervention was required. Likewise, the board has attacked the credibility of the dissident's
nominees, which calls into question how willing the board would be to work constructively alongside a limited dissident presence
–
such as the single seat that was reportedly offered to the dissident during potential settlement discussions.
Ultimately, the board's
response to the dissident's campaign
suggests that its view on important governance matters is not aligned with that of shareholders,
and that there continue to be concerns with independence
.
Together, these considerations suggest that a direct representative
of shareholders would be beneficial."
On Concluding Change is Warranted on the
Board:
“
The board failed to evolve in the
right direction after Peter Huntsman succeeded as board chair, and the board did not hold management accountable to the extent that shareholders
would have preferred
.”
“
Jim Gallogly will bolster the board's
independence, while adding industry and executive experience, and Jeff Smith will provide the perspective of a significant independent
shareholder
. In combination with other independent voices already on the board,
the addition of these two dissident nominees
should be sufficient to ensure independent oversight of management and ensure that the interests of shareholders are prioritized
.”
* * *
STARBOARD URGES ALL STOCKHOLDERS TO VOTE FOR
THE MOST QUALIFIED SLATE OF DIRECTORS TO DRIVE MUCH NEEDED CHANGE AT HUNTSMAN
RESTORE AND ENHANCE THE VALUE OF YOUR HUNTSMAN
INVESTMENT
PLEASE SIGN, DATE, AND MAIL THE
BLUE
PROXY CARD TODAY
Starboard’s publicly filed investor
materials and other important information regarding the Annual Meeting can be viewed at
www.shareholdersforhuntsman.com
.
If you have any questions or need further
assistance with voting your Huntsman shares, please contact Okapi Partners LLC at the phone numbers or email listed below.
Shareholders may call toll-free: (877) 629-6356
Banks and brokers call: (212) 297-0720
E-mail:
info@okapipartners.com
About Starboard Value LP
Starboard Value LP is a New York-based investment
adviser with a focused and differentiated fundamental approach to investing primarily in publicly traded U.S. companies. Starboard seeks
to invest in deeply undervalued companies and actively engage with management teams and boards of directors to identify and execute on
opportunities to unlock value for the benefit of all shareholders.
Investor
contacts:
Gavin Molinelli,
(212) 201-4828
Patrick Sullivan,
(212) 845-7947
www.starboardvalue.com
Okapi Partners
Bruce H. Goldfarb/Patrick
McHugh
(212) 297-0720
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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