Textainer rewards distress investors
• Trencor minority shareholders lambast US unit for generous executive payments despite lacklustre performance and no dividend
Trencor minority shareholders are up in arms about the payment of generous shortand long-term incentives to executives of 48%held US-listed Textainer following years of sustained poor performances.
Trencor minority shareholders are up in arms about the payment of generous short- and long-term incentives to executives of 48%-held US-listed Textainer following years of sustained poor performances.
On Friday the Textainer share price fell after the release of disappointing quarterly results to end-December 2017. Although the Textainer figures were up on the comparative period in 2016 they fell far short of the expectations of analysts, knocking the share price to $16 from over $20. On Monday Trencor shed 2.93% to close at R42.70. Textainer accounts for 77% of Trencor’s net asset value with cash accounting for an additional 12%.
Trencor minority shareholder Chris Logan said during the review quarter Textainer management did nothing more than catch the tail end of the dramatic recovery in the container industry and was still operating well below its competitors.
“Textainer is trading below its net asset value unlike its competitors which are at healthy premiums. It pays no dividends and over the last two years it has either made losses or earned negligible returns on equity.”
The company’s current return on equity is 6% having plummeted from a high of 30% in 2011 when it was the largest and most profitable container group in the world. Despite the lacklustre performance Logan said Textainer paid out generous short- and long-term incentives to its executives. He said the executives were sheltered from hostile shareholders by the Trencor control structure and the existence of “poison pill” provisions in the company’s bylaws.
Textainer, which is incorporated in Bermuda, has disclosed in filings with the US authorities that its bylaws “contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors”.
The antitakeover provisions could impede the ability of minority shareholders to benefit from a change in control or to change management and the board of directors. They could also restrict shareholders from bringing legal action against the firm’s officers and directors.
Trencor chairman Hennie van der Merwe said the board saw no risk or danger in the bylaws. “The Textainer board consists of independent directors who will do what is in the best interests of the company. If the board wasn’t operating in the company’s best interests we would do something about it.”
He dismissed complaints about the payment of incentives saying it was the result of a formula, which smoothed the payment of rewards over time.
On the plans to reclassify the firm as an “investment entity”, Van der Merwe said Trencor was preparing a circular it hoped to present to shareholders for approval within the next few months. The move was part of a bid to avoid the long delays and hefty costs associated with reporting the Textainer results.
Trencor is required to convert the US GAAP (generally accepted accounting principles) results produced by Textainer into IFRS (International Financial Reporting Standards).