The proxy fight launched by Sessa Capital to take over control of Ashford Hospitality Prime (NYSE:AHP) appears to have been put to death by a federal judge.
In a lawsuit decision between Sessa Capital and AHP, the judge implicitly determined what I have been saying all along: that Sessa Capital had no actual strategic plan for AHP, that it’s only intent was to quickly sell the company, and that it didn’t even follow the board nomination rules properly.
The Judge’s language is worth a read.
“The Security Exchange Act of 1934 requires potential nominees to “[d]escribe any plans or proposals” that would result in a sale or transfer of material assets, any extraordinary corporate transaction, any other material change to the corporate structure, or any similar action.”
On the one hand, Sessa Capital said they had no strategic plan for AHP. They claimed that in order to be in compliance with the law. That first opened them up to criticism, which I provided, that if they had no plan, then how could they possibly be better than current management? Furthermore, I surmised, if there was no plan, the only obvious course of action was that they were intending a sale. I wrote that there had been plenty of indications that this was their intent.
The Judge wasn’t fooled, either.
“The Sessa candidates claim that they have no plans for Ashford Prime if they take control of the board, and they refused to provide any substantive answers to questions about their plans.”
Ah ha! But then came discovery, and look what was found:
“They maintain this position despite the existence of correspondence that reveals discussions at Sessa about how to amend Ashford Prime’s bylaws and stop acquisitions…and details of a “gameplan” for selling the company. For example, during a phone call between Petry and the Sessa candidates, [nominee] Livingston stated that he “would be interested in what would be the gameplan after election.” Petry responded by explaining that he would want to maximize value, and in today’s environment that would mean having a “real and fair sale process.”
AHP realized there was something wrong with the answers Sessa Capital provided in their nomination questionnaire, and returned it for being deficient, offering Sessa Capital to amend it. Sessa refused.
“The board apparently does not believe that a sophisticated hedge fund would engage in expensive litigation and a difficult proxy contest without any plans for the company after it seized control. In light of the evidence supporting the board’s contention that Sessa has plans for Ashford Prime after it assumes control of the board, the board could rationally believe the Sessa candidates had a plan they refused to disclose in their questionnaires and thus were ineligible.”
And so the Judge granted an injunction against the proxy fight. Sessa Capital will appeal, but the case seems pretty airtight.
What did we learn?
1) I was right. Multiple times. You can find out a lot from publicly available information and using common sense.
2) Sessa Capital played a professional’s game like amateurs.