Concerned Shareholders File Circular Calling for Positive Change at Sherritt International Corporation

HALIFAX, April 9, 2014 /CNW/ - Concerned Shareholders, led by Clarke Inc. ("Clarke") (TSX: CKI; CKI.DB.A), today filed a proxy circular in support of the election of three new independent and highly qualified directors (the "Shareholder Nominees") to the Board of Directors of Sherritt International Corporation ("Sherritt") at Sherritt's Annual and Special Meeting to be held on May 6, 2014 (the "Meeting").

The Circular also provides reasons to vote in favour of four Shareholder Proposals submitted earlier by the Concerned Shareholders. The complete Concerned Shareholders Information Circular can be downloaded at and

"Sherritt is led by a Board and management with no vested interest in generating returns for shareholders," said George Armoyan, President and CEO of Clarke Inc. "The only way to create meaningful value at Sherritt is to bring true representatives of the shareholders onto the Board who can take action for all shareholders. The Concerned Shareholders have already driven more positive change at Sherritt than the current Board has in years. We can accelerate that momentum with new directors."

Letter to Shareholders

The Circular includes the following letter to all shareholders of Sherritt:

Dear Fellow Sherritt Shareholders,

The incumbent Board of Directors of Sherritt has overseen more than three years of poor financial results and the destruction of well over a billion dollars of shareholder value. This must change. The incumbent Board cannot be trusted with the future of Sherritt and your investment.

The Concerned Shareholders of Sherritt, led by Clarke Inc., collectively own approximately 5.4% of Sherritt's shares and are seeking your support for the much-needed change to save Sherritt. On December 23, 2013, the Concerned Shareholders requisitioned a special meeting of Shareholders. On May 6, 2014, at the Company's Annual and Special Meeting, you will have an opportunity to vote to replace three of Sherritt's incumbent directors with three experienced, capable and independent nominees who have proven track records and who can better represent all shareholders of Sherritt. Full biographies of our nominees are on page 6 of the attached circular, but here is a summary:

  • Ashwath Mehra, a 28-year veteran of the international metals business and formerly the CEO of MRI Trading AG and Senior Partner responsible for the nickel and cobalt businesses at Glencore International AG.
  • David Wood, Chief Financial Officer of the Municipal Group of Companies, a Canadian-based multi-national construction and mining infrastructure company.
  • George Armoyan, President and CEO of Clarke, a successful entrepreneur who has taken an active role in numerous companies and led them to create significant shareholder value. Clarke is one of the largest shareholders of Sherritt and owns over 33 times more shares than the entire Board and management of Sherritt. Clarke shares your interest in maximizing value and will represent you.

It is important that you know that these are not the nominees the incumbent Board has attacked in its management information circular. The Board intentionally misled you about the nominees and also misguided you by suggesting that voting for the entrenched Board can "preserve good governance and protect the value of your investment in Sherritt". The incumbent Board made no visible effort to improve its governance or strategy until it was challenged by the Concerned Shareholders and faced the prospect of a proxy contest. Sherritt's dividend-reinvested three-year return leading up to the meeting requisition was negative 55%. Shareholders can no longer afford this Board's "protection".

Why We Are Seeking Change at Sherritt

There are two fundamental reasons the Concerned Shareholders are seeking changes to the incumbent Board:

  • The incumbent Board has destroyed shareholder value over the last three years. This is not debatable. This is a fact.
  • We have no confidence that Sherritt can regain value under the incumbent Board, which is not aligned with shareholders' interests and has demonstrated hostility to shareholder representation that would bring real improvement.

Members of the Concerned Shareholders began investing in Sherritt in May 2011 with the belief that it had investment potential provided the Board acted in the best interests of shareholders. Like you, the Concerned Shareholders have been profoundly disappointed by the Company's performance under the oversight of the incumbent Board.

Clarke has emerged as the leader of the Concerned Shareholders. Clarke is a Toronto Stock Exchange-listed investment company that invests in businesses that are underperforming and seeks to work with the management and board of those businesses to improve operations, finances and, ultimately, the company's value. Clarke is a long-term investor; the average holding period of its current investments is six years. In the three years prior to the requisition, Clarke has generated a dividend-reinvested return of 113%. Compare that to Sherritt's negative 55% return over the same period.

After continually disappointing results from Sherritt in the second and third quarters of 2013 and no visible evidence that the Board was taking any action to improve performance, Clarke provided Sherritt with a number of recommendations to promote change and improve results, including the following:

  • Align the interests of the Board and management with the interests of shareholders through changes to how - and how much - they are paid. The Board has refused to act.
  • Replace the CEO with a qualified executive who has operating experience. The Board has refused to act.
  • Address excessive costs at the corporate level and examine operating and procurement practices. The Board refused to respond until it was faced with a proxy contest. This is not Board strategy - it is the Board running for cover.
  • Focus on debt reduction, rather than purchasing new assets. Sherritt's CEO regularly advocates for new acquisitions.
  • Repurchase shares while they are trading at a significant discount to both the Company's book value and intrinsic value. The Board refused to respond until it was faced with a proxy contest. This is not Board strategy - it is vote buying.
  • Add new directors to the Board who have a vested interest in improving the value of Sherritt. The Board has rejected every Clarke representative the Concerned Shareholders put forward.

After several meetings with representatives of Sherritt, who expressed little interest in changing the status quo, Clarke decided the situation was intolerable and action must be forced on the Board. The Concerned Shareholders filed a requisition for a special meeting to change the board. In the time since, Clarke has had several meetings with directors of Sherritt in order to find an amicable agreement that could benefit all shareholders; however, these meetings have instead been marked by hostility, resistance and even duplicity from the incumbent Board.

Since the special meeting requisition, Sherritt has acceded to several of the Concerned Shareholders' recommendations and claimed them as its own. While the changes are a step in the right direction, it demonstrates that the incumbent directors are only prepared to pursue shareholder value under the threat of being replaced.

In the past four months, the Concerned Shareholders have helped to create more positive change at Sherritt than the incumbent Board has in the last three years. This needs to continue.

You Can Drive Positive Change at Sherritt

While the incumbent directors behave as if they have the ultimate authority over Sherritt, they don't. That authority is yours as a shareholder and owner of the Company. The incumbent directors may believe they have the power to refuse to accept shareholder representation. They do not. The decision over who serves on the Board is yours. The incumbent directors may think they can continue to refuse to act to enhance shareholder value.  They cannot, if you demand action.

We are asking you to vote for our three nominees and our four shareholder proposals in order to make the Board more responsible to shareholders, to place limits on Sherritt's irresponsible compensation and expense practices and to create long-term value for all shareholders.

You can do that by voting the enclosed GREEN form of proxy as follows:

  • Vote FOR the election of Ashwath Mehra, David Wood and George Armoyan to the Board.
  • WITHHOLD votes for all of Sherritt's nominees.
  • Vote FOR the adoption of each of the four shareholder proposals submitted by Clarke on behalf of the Concerned Shareholders.

You can, of course, attend the Annual and Special Meeting and vote in person but, to assure that your voice is heard and your vote is counted, we recommend you use the enclosed GREEN proxy and remind you that, in order for your proxy to be counted, it must be received no later than 5:00 p.m. (Toronto time) on May 1, 2014. Even if you have voted a blue management proxy, you have the right to change your vote by voting a GREEN proxy.

Discard the blue proxy. Vote only the GREEN proxy.

We believe you share our concern about the future of Sherritt and we thank you in advance for your support. We encourage you to read the attached circular and to contact us at 1-800-294-3174 if you have any questions or visit our website at for more information.

On behalf of the Concerned Shareholders of Sherritt International Corp.

George Armoyan

[Letter ends]

The Concerned Shareholders' Circular notes that the reasons for shareholders to drive change at Sherritt are clear and compelling:


Destruction of Shareholder Value:

The incumbent Board has overseen the loss of more than $1.4 billion in value over the three years prior to the date the Concerned Shareholders requisitioned the special meeting. The incumbent Board blames commodity prices for poor results, but the real culprits are poor operating performance, a culture of complacency, a lack of strategic direction and a lack of accountability.

  • Operating costs are up in all four business units as well as at the corporate level.
  • Production has fallen in three business units and capital allocation has been dismal.
  • The result has been a 51% decline in EBITDA, a 60% decline in operating cash flow and a negative 55% dividend reinvested return for shareholders.

Sherritt has Lost Value because the Incumbent Board and Management are not Aligned with Shareholders:

The incumbent Board and management have no "skin in the game". They own less than 0.25% of Sherritt's shares.  With virtually no investment in the Company, the incumbent Board and management have virtually nothing to lose if the Company's value declines.

This lack of aligned interest is fundamental to what is wrong at Sherritt. The incumbent Board does not have to care about what happens to your investment because the current Board is not financially affected. They hold almost no shares, their compensation is not tied to shareholder value and they are handsomely paid no matter what happens to the Company's value. Much of the failure at Sherritt can be reversed with true shareholder representation on the Board - directors who act in shareholders' interests because they are also shareholders.

The Incumbent Board and Management are Excessively Compensated for Destroying Shareholder Value:

Sherritt's Board compensation in 2013 was more than $3.4 million. That is well above the average for companies Sherritt considers its peers, and even more per non-executive director than Apple Inc., the largest public company in the world.

Incredibly, the incumbent directors receive $150,000 as compensation for travel restrictions to the United States, even though most are not actually restricted from travelling to the U.S.

Sherritt Lacks Strategic Direction and Consistent Leadership under the Incumbent Board:

Sherritt's Board has been unable to communicate any strategy to shareholders and has failed to execute on what it has communicated:

  • The incumbent Board raised Sherritt's dividend in 2012, citing return of capital as a primary goal for the Company, and then cut the dividend by 77% only 12 months later.
  • The Company sold its coal business, then bought it back, then announced that it was again selling it, resulting in an impairment of $519 million.
  • The Company stated that its oil business is a core focus, yet it has allowed oil production to decline by 33% over the last five years while a second drilling rig sits idle in Cuba.
  • In the past three years, the top executive offices at Sherritt have been in a constant state of flux. The CEO, CFO and COO (or equivalent) positions have changed hands seven times.

Strategically, there is a basic question to be asked: "Is Sherritt a holding company or an operating company?" The answer is far from clear. If Sherritt is a holding company, why does it have $99 million of annual overhead? If Sherritt is an operating company, then why does the incumbent Board think it is appropriate to not have a COO or a CEO with operating experience, and why do the Company's operations perform so poorly?

The Board Appointed - and Supports - an Unqualified and Ineffective Chief Executive Officer:

The incumbent Board appointed the CEO in January 2012 and, despite the costly blunders since then, the incumbent Board continues to support him. The CEO had no relevant operating or executive experience when he joined Sherritt as Assistant General Counsel. He had never served in a financial capacity when he was named CFO of Sherritt, a position he held for nine months before being inexplicably selected by the Board to serve as CEO.

"On-the-job-training" for the current CEO has been disastrously expensive for shareholders. The incumbent Board paid the CEO $5,004,376 in the two years since his appointment. For all that money, shareholders have received a 40% decline in the share price, a 52% drop in EBITDA, rising cash costs across all divisions, higher overhead, and a credit rating that is under review for a downgrade.

For his part, the CEO received a salary increase last year. The incumbent board is paying for the presence of a CEO when they should be paying for his performance.

The Incumbent Board has Failed to Allocate Capital Competently:

Throughout 2013, Sherritt was adamant that it intended to acquire new assets, despite a calamitous record in capital allocation. The Company has written down a total of $717 million, or $2.41 per share, in the past five years, including the coal assets, the Moa expansion and the Cuban and Malagasy power assets.  In particular:

  • The coal division that was re-acquired at a valuation of approximately $1.5 billion in 2008 and is to be sold this year for net proceeds of $741 million after environmental remediation obligations. This sale is being concluded without even attempting to meaningfully reduce operating costs, which would have maximized the value of the business and the sale price.  This cost shareholders $519 million or $1.75 per share.
  • The cost of the Ambatovy nickel project has more than doubled from its original budget to $7.2 billion and it has yet to reach full production, much less provide a return to shareholders.
  • The incumbent Board committed $110 million to exploration at the Sulawesi nickel project in Indonesia and spent $32 million on it. Even after governmental policy changes materially and adversely affected the economics of the project, the incumbent Board continued to allocate capital to the project before finally accepting it as a failed investment.
  • The Company budgeted $247 million to build the Boca de Jaruco power plant in Cuba. The actual cost was $304 million, representing a 23% cost over-run. Sherritt now runs the plant at less than 50% capacity because, amazingly, it failed to secure sufficient sources of fuel prior to construction.

The Concerned Shareholders advised the incumbent Board that it had no confidence in the ability of the Board and management to invest shareholders' money in acquisitions and should focus on internal opportunities. Since then, Sherritt says it has put lowering debt at the centre of its strategy, as it should have done long ago, before the threat of proxy contest.

The Incumbent Board has Failed to Control Costs at Sherritt:

Sherritt is a commodity producer and has no control over the price of its output. Therefore, it must focus on controlling its costs. That is simply common sense, but that has not happened at Sherritt. Instead, total overhead expense at Sherritt in 2013 increased by 17% over the previous year to almost $99 million, or 32% of EBITDA. Sherritt is carrying the overhead expenses of a much larger company. Action is required urgently.

In addition, operating costs at all divisions have increased inordinately. Over the last three years operating costs in the Metals, Oil & Gas, and Power businesses have increased 66%, 75% and 116% respectively.


Sherritt's failures call into question whether the Board, as currently composed, can be entrusted with the future of our Company.

The Concerned Shareholders have a realistic approach to improvement at Sherritt. It is built on strong and experienced new independent director nominees and a new direction that will be recommended to, and discussed with, the remaining majority of the Board.

Most of all, it is based on the principle that a board must be aligned with shareholder interests to deliver value for all shareholders.

This is common sense. This has been proven repeatedly by experience. Yet the incumbent Board continues to reject shareholder representation on the Board and other recommendations to align its interests with the interest of shareholders. A clear message from shareholders will convince the incumbent Board to accept this principle. This will allow incumbent directors and the Concerned Shareholder nominees to work together cooperatively to drive Sherritt forward for the benefit of all.

Add Knowledgeable Directors who will Act for Shareholders:

The Concerned Shareholders have nominated three outstanding and experienced individuals to serve on the nine-member Board. These nominees are committed to serving the needs of all shareholders.  The full biographies of Mr. Mehra, Mr. Wood, and Mr. Armoyan are included in the Circular and were provided in the news release issued by Clarke on April 3, 2014.

The Concerned Shareholders Can Create Value at Sherritt:

The Concerned Shareholders' nominees are committed to working constructively with the remaining incumbent Board members to solve Sherritt's problems through several initiatives detailed in the Circular but summarized as:

  • Defining the Company's strategy. Starting with the fundamental question of whether Sherritt is a holding company or an operating company. The answer drives the Company's structure, operations and value.
  • Aligning Board, management and shareholder interests. Compensation for the Board and executive management should contain a greater equity component. The Board and management should share the risks and rewards with shareholders.
  • Commencing a search for a qualified and experienced CEO. There are superior candidates for the position and the Concerned Shareholders will work with the other Board members to find the best possible person for the CEO role.
  • Establishing a proper capital allocation methodology. Sherritt must allocate capital to where it can provide the highest return for shareholders, provided it is within the Company's circle of competence. The best opportunities may lie in debt reduction, reinvestment in core assets or share repurchases.  The focus should not be on growing net asset value; it should be on growing net asset value per share.
  • Reducing excessive corporate costs. Sherritt's overhead totaled $99 million in 2013, an increase over the prior year of 17%. We will urge the Board to undertake a thorough review of all corporate costs, procurement practices and the reasons for all operating cost increases.

The Concerned Shareholders have repeatedly approached the Board with recommendations for sustainable change. Unable to mount a compelling defence of its own practices, the incumbent Board has adopted many of these changes and now puts them forward to shareholders as its own ideas. The fact is there would be no progress without the Concerned Shareholders. Sherritt's three-year dividend-reinvested return prior to the Concerned Shareholders' requisition was negative 55%. Sherritt's return since the Concerned Shareholders pushed for change and accountability is positive 20%.

The market has responded positively to the incumbent Board's talk about change, but that is all there has been - talk. The Board has not taken concrete action yet.

The Need for Real Change is Overwhelming:

The incumbent self-serving Board has destroyed the value of your investment. It has cut your dividend. It has sold your assets at significant losses. It has presided over massive cost overruns and allowed operating costs to spiral out of control. It has increased its own compensation while overseeing the loss of your investment. It has ignored its own shareholders.

Those are facts. But they are also history and history cannot be changed. What can be changed is the future of our Company, Sherritt.

George Armoyan stated: "The Sherritt Board urgently needs true shareholder representation to align the interests of the Board and management with those of the Company's owners, its shareholders. Only shareholder representation will drive the Board to action on costs, proper capital allocation and good governance."

Sherritt shareholders are advised to vote using the GREEN form of proxy that accompanies the Concerned Shareholders' Circular. They should disregard any proxy sent by Sherritt management and, even if they have voted a blue management proxy, they have the right to change their vote using a later-dated GREEN proxy. Only the last-dated proxy is counted.

In order for the GREEN proxy to be counted, it must be submitted consistent with the instructions on the proxy and must be received no later than 5:00 p.m. Toronto time on Thursday May 1, 2014.

Discard the blue proxy. Vote only the GREEN proxy for positive change at Sherritt.

Sherritt shareholders with questions can call 1-800-294-3174 or visit our website at for more information.

About the Concerned Shareholders of Sherritt

Members of the Concerned Shareholders of Sherritt have been investors in the Company since May 2011. They are led by Halifax-based Clarke Inc. which invests in a variety of private and publicly-traded businesses and participates actively where necessary to enhance performance and increase the return to shareholders. Clarke's securities trade on the Toronto Stock Exchange (CKI; CKI.DB.A); for more information about Clarke, please visit the website at

Statements Regarding Forward-Looking Information

This news release may contain forward-looking statements or forward-looking information within the meaning of applicable securities laws, including, without limitation, in respect of Clarke's and Sherritt's priorities, plans and strategies for Sherritt and Sherritt's anticipated financial and operating performance and prospects. All statements and information, other than statements of historical fact, included or incorporated by reference into this Circular are forward-looking statements and forward-looking information, including, without limitation, statements regarding activities, events or developments that Clarke expects or anticipates may occur in the future. Such forward-looking statements and information can be identified by the use of forward-looking words such as "will", "expect", "intend", "plan", "estimate", "anticipate", "believe" or "continue" or similar words and expressions or the negative thereof.

We caution readers of this news release not to place undue reliance on forward-looking statements and information contained in the news release, which are not a guarantee of performance, events or results and are subject to a number of risks, uncertainties and other factors that could cause actual performance, events or results to differ materially from those expressed or implied by such forward-looking statements or information. Sherritt's shareholders are cautioned that all forward-looking statements and information involve risks and uncertainties, including those risks and uncertainties detailed in Sherritt's continuous disclosure and other filings with applicable Canadian securities regulatory authorities, copies of which are available on SEDAR at We urge you to carefully consider those factors.

The forward-looking statements and information contained in this news release are expressly qualified in their entirety by this cautionary statement. The forward-looking statements and information included in this news release are made as of the date hereof and Clarke undertakes no obligation to publicly update such forward-looking statements or information to reflect new information, subsequent events or otherwise, except as required by applicable laws.

Additional Information

Sherritt has announced that it will hold its annual meeting of shareholders on May 6, 2014. The Concerned Shareholders' nominees will be considered for election at that meeting. The Concerned Shareholders filed a Circular on April 9, 2014, together with a GREEN proxy or voting instruction form. SHAREHOLDERS OF SHERRITT ARE URGED TO READ THE CIRCULAR CAREFULLY BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors and shareholders will be able to obtain free copies of the Circular and any amendments or supplements thereto and further proxy circulars at no charge on SEDAR at In addition, shareholders will also be able to obtain free copies of the proxy circular and other relevant documents by calling the Concerned Shareholders' proxy solicitor, CST Phoenix Advisors at 1-866-822-1237.

Information in Support of Public Broadcast Solicitation

The Concerned Shareholders led by Clarke are relying on the exemption under section 9.2(4) of National Instrument 51-102 - Continuous Disclosure Obligations to make this public broadcast solicitation. The following information is provided in accordance with corporate and securities laws applicable to public broadcast solicitations.

This solicitation is being made by or on behalf of the Concerned Shareholders led by Clarke and not by or on behalf of the management of Sherritt.

Sherritt's principal and head office is located at 1133 Yonge Street, Toronto, Ontario M4T 2Y7.

The Concerned Shareholders have filed an information circular dated April 8, 2014 containing the information required by Form 51-102F5 - Information Circular in respect of the Shareholder Nominees. The Circular is available on Sherritt's company profile on SEDAR at and at, and is also being mailed to shareholders of Sherritt.

Any proxies solicited, including in connection with a meeting, may be solicited by or on behalf of Clarke, including by professional proxy solicitors which may be retained by Clarke from time to time, and such proxies may be solicited by way of public broadcast, including through press releases, speeches or publications, as well as by mail, telephone, e-mail or other electronic means or in person or by any other manner permitted under applicable laws.

Clarke has also retained CST Phoenix Advisors ("Phoenix") as its shareholder and proxy advisor. Phoenix's responsibilities principally include advising Clarke on governance best practices, where applicable, liaising with proxy advisory firms, developing and implementing shareholder communication and engagement strategies, and advising with respect to meeting and proxy protocol. Phoenix is also responsible for the solicitation of retail shareholders and other strategic advice. Pursuant to the agreement with Phoenix, for its solicitation services, Phoenix will receive a fee up to $450,000, plus disbursements and a telephone call fee.

All costs incurred for any solicitation will be borne by Clarke.

A shareholder has the right to revoke a proxy under subsection 110(4) of the Business Corporations Act (Ontario). A registered holder of common shares of Sherritt ("Shares") that gives a proxy may revoke it: (a) by completing and signing a valid proxy bearing a later date and returning it in accordance with the instructions contained in the form of proxy to be provided by Clarke, or as otherwise provided in the information circular from Clarke, once made available to shareholders; (b) by depositing an instrument in writing executed by the shareholder or by the shareholder's attorney authorized in writing, as the case may be: (i) at the same address where the original form of proxy was delivered at any time up to and including the last business day preceding the day the Meeting or any adjournment or postponement of the Meeting is to be held, or (ii) with the chairman of the Meeting prior to its commencement on the day of the Meeting or any adjournment or postponement of the Meeting; or (c) in any other manner permitted by law.

A non-registered holder of Shares will be entitled to revoke a form of proxy or voting instruction form given to an intermediary at any time by written notice to the intermediary in accordance with the instructions given to the non-registered holder by its intermediary. It should be noted that revocation of proxies or voting instructions by a non-registered holder can take several days or even longer to complete and, accordingly, any such revocation should be completed well in advance of the deadline prescribed in the form of proxy or voting instruction form to ensure it is given effect in respect of the Meeting. 

To the knowledge of the Concerned Shareholders, neither the Concerned Shareholders nor any of their managers, directors or officers, or any associates or affiliates of the foregoing, nor any of the Concerned Shareholders' nominees, or their respective associates or affiliates, has: (i) any material interest, direct or indirect, in any transaction since the beginning of Sherritt's most recently completed financial year or in any proposed transaction that has materially affected or would materially affect Sherritt or any of its subsidiaries; or (ii) any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter currently known to be acted upon at the meeting of Sherritt shareholders other than the election of directors.

SOURCE: Clarke Inc.

For further information:

Susy Monteiro      
CST Phoenix Advisors     

Dustin Haw, Vice President, Investments
Clarke Inc.

John Lute
Lute & Company

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890