Ashford Hospitality Prime (NYSE:AHP) has won the endorsements of two proxy advisory firms regarding the upcoming vote on company management. Both Glass-Lewis and Egan-Jones stepped forward to recommend that shareholders vote FOR existing AHP management.
This comes on the heels of a federal court ruling that Sessa Capital did not follow the rules required to submit individuals as nominees for the AHP board.
Proxy advisory firms offer second opinions and expert analysis for shareholders who lack the kind of resources necessary to dig deep into a company’s management structure.
There was another development that occurred simultaneously with these events. Just before the federal court ruling, AHP offered (again) to sit down with Sessa Capital and hash out their differences. The May 17 letter to John Petry of Sessa Capital said, in part:
“When requested by Judge David Godbey last Wednesday to resolve our disputes by agreement, your attorney responded that we have only put forth “a ridiculous settlement proposal,” and that he doesn’t believe “settlement is even conceivable here.” In response to further encouragement by Judge Godbey that the parties engage a mediator and delay the annual meeting to facilitate mediation, your attorney advised the court that such an approach would be “counterproductive” and that “Sessa has no confidence” that Ashford Prime “will participate in good faith in settlement discussions. Nothing could be further from the truth. ”
What’s significant about this letter, especially given the revelations in the litigation discovery process, is that it confirms that the behavior of Sessa Capital only makes sense if they intended to sell the company immediately upon gaining control of the board.
Simply put, when a federal judge tells you to try and settle, you try and settle. If Sessa Capital truly wanted to “reform” management practices, then it would have at least sat down and discussed the issues. Were Ashford Prime in any way flexible, they would grant two new independent board seats to Sessa Capital, so it literally had a seat at the table. One suspects that Ashford Prime would have done exactly that. Give Sessa Capital a voice. Let them air their concerns and have a say.
Ashford Prime telegraphed that exact intent in the letter. “As you may know, typically a ‘market’ settlement in these types of disputes is the appointment of two additional board members in which the activist has had a say. We hope you will move off of your intransigent position of a majority of directors, which gives Sessa, with only an 8% stake, full control of the company.”
The other parts of the proposal offered to create a Special Committee for Advisor Transactions, of which one seat would include the new director. Since Sessa Capital has problems with the company’s Advisor, and the committee would have the power to “improve the terms of the advisory agreement”, one would ask, “What is Sessa Capital’s problem?”
Ashford Prime even offered the settlement after the judge’s ruling.
With 10 days remaining until the Annual Meeting, it seems unlikely that anything will change for Sessa Capital. That’s great for shareholders. Sessa Capital clearly wanted to only sell the company, likely for far less than it is worth.