Prudential's M & G Fund Offers Directors on Methanex's Board

M & G Investments, the UK fund manager of Prudential Insurance Company, has appointed four directors to the Methanex Board of Directors in its first ever campaign of activism.

M & G, Methanex's largest shareholder with a 16.5% stake, threatened last week to take action against the Canadian chemicals company in a letter to its board of directors. The fund argued that there were corporate governance issues at Methanex and that new directors needed to be recruited. Six of the current twelve have been on the board for more than a decade, said M & G. The fund manager has been involved in Methanox since 2007.

The fund has challenged Methanex's plans to build a third methanol plant in Geismar, Louisiana, without a partner, which M & G says is likely to lose its value if the price of methanol goes down.

The plan would limit the company's ability to pay dividends and buy back shares by putting excessive leverage on the balance sheet, said the fund.

"More recently, M & G has tried to engage constructively with management and the board around the Geismar 3 project, but we believe that our concerns are simply ignored in this case and that the problem is so serious that it threatens all of our investment in Methanex, "fund manager M & G. Stuart Rhodes wrote Monday in a letter to shareholders.

"We were particularly troubled by the fact that in one of our conversations with the chairman of the board, we were actually told that if we were unhappy with the way the company is run, we should sell our shares or fight the management, "added Rhodes.

The campaign highlights the growing trend of beginning activists and the increased willingness of active traditional badet managers to take a public stance against holding companies when they believe that change is not happening fast enough or that their private openings are ignored.

The fund manager stated that the appointment of directors was a decision "not taken lightly" and "that we believe we have no other choice".

M & G, which manages about $ 350 billion, nominated Lawrence Cunningham, Paul Dobson, Patrice Merrin and Kevin Rodgers.

"We are concerned that independent directors on the board do not have enough control over financial supervision to maintain financial discipline in a relatively indebted company in a cyclical business," said Mr. Rhodes.

The high number of long-time board members "raises the question of whether, over time, these directors can actually be expected to maintain their independence and continue to face the challenges of The direction".