Growing trend of investor participation – Entain appoints activist investor Sandler to Board

Lea Hogg 6 months ago
Growing trend of investor participation – Entain appoints activist investor Sandler to Board

As activist investors continue to play an influential role in corporate governance and operations, the appointment of Ricky Sandler (in photo above), to Entain’s board demonstrates the evolving dynamics in the relationship between companies and stakeholders. The growing trend of activist hedge funds and investors intervening in corporate affairs appears to be reshaping the way businesses make strategic decisions and address the concerns of their shareholders.

Increase in Entain’s stock

Despite recent financial scrutiny and challenges, including a share price decline and a substantial £585 million ($737.4 million) fine related to past dealings in Turkey, Entain’s stock has shown resilience. The announcement of the Relationship Agreement with Eminence Capital and Ricky Sandler has positively impacted investor sentiment, reflected in a 3 percent increase in Entain’s stock. This uptick suggests that investors perceive the strategic moves outlined in the agreement, including the appointment of Ricky Sandler and the collaborative efforts with Eminence, as favorable steps for the company’s future trajectory. The market response underscores the dynamic nature of Entain’s position, with stakeholders expressing confidence in the potential positive outcomes stemming from this strategic collaboration.

Sandler disapproved financing of STS acquisition

Ladbrokes owner Entain has recently appointed activist investor Ricky Sandler to its board. Sandler, known for advocating changes in business strategies, particularly urged Entain to reconsider its stake in a major US joint venture.

Entain disclosed that Sandler would serve on both its capital allocation committee and governance committee. Furthermore, the company is set to collaborate with Sandler’s firm, Eminence Capital, to identify an additional director to join Entain’s board.

This decision carries implications for those seeking a transformation in Entain’s practices. Sandler had previously voiced concerns about the company’s approach, criticizing its decision to issue new shares to fund takeovers.

In a letter to the board in June, he expressed bewilderment over the move, stating, “Funding them [acquisitions] with highly undervalued equity is an empire-building, shareholder value-destroying strategy.”

Entain, best known for its ownership of Ladbrokes and Coral, among other brands, faced scrutiny last summer when it announced the acquisition of STS Holding, a Polish sports-betting company, for approximately £750 million. The financing of this deal through the issuance of new shares, equivalent to about 8 percent of the company This drew disapproval not only from Sandler, but from many others.

Creating value for shareholders

Over the past year, Entain’s shares have declined by around a quarter, prompting the departure of Chief Executive Jette Nygaard-Andersen last month. Chairman Barry Gibson, expressing optimism about Sandler’s appointment, stated, “Ricky has a deep knowledge of our business and a firm belief in the quality of our operations and substantial growth opportunities.”

Sandler echoed this sentiment as he elaborated on Entain’s strength as a business with market-leading brands, a unique technology platform, and advantageous positions globally. He expressed anticipation in collaborating with fellow directors to propel Entain toward long-term success and create enduring value for its shareholders.

Entain’s agreement with Sandler
The agreement between Entain and Ricky Sandler takes effect today. His appointment will last for three years, subject to annual re-election.

Entain and Sandler will collaborate to identify an additional non-executive director agreeable to both parties.Termination of the agreement may occur under specific circumstances, including regulatory approval issues, Eminence (Ricky Sandler’s company), ceasing to hold shares, breaches of the agreement, or certain actions related to competing businesses. The parties have agreed to mutual non-disparagement provisions concerning public statements.

Eminence commits not to acquire more than an 8 percent interest in Entain’s shares, with restrictions on certain public actions. Confidentiality obligations and compliance with applicable laws, especially regarding inside information, are emphasized. Eminence has pledged to adhere to relevant laws.

This agreement outlines the terms of collaboration, governance, and shareholding restrictions between Entain, Eminence, and Ricky Sandler, with a focus on transparency, compliance, and strategic alignment for a mutually beneficial relationship.

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