Property News · July 28, 2016

Hill International executive try to fend off activist investor


A construction management firm overseeing the Riyadh Metro project is caught in a battle with an activist shareholder seeking to remove its chairman amid claims of weak performance and governance. Hill International’s chief executive, David Richter, has written to shareholders ahead of the company’s annual general meeting urging them to vote down a proposal to remove his father, Irvin, who is the chairman of the company, and two other board directors that has been tabled by the activist shareholder Bulldog Investors.Hill International is a US project management company that earns most of its revenue in the Middle East. The company has 16 offices in 13 countries in the Mena region, from where it generated 48 per cent of the US$631 million it earned in consulting fees last year. According to the US trade title Engineering News Record, it is the biggest independently owned construction management firm in the world. Its current work includes the Riy­adh Metro; airport extensions in Jeddah, Muscat and Salalah; and phase one of Dubai Parks and Resorts’ theme park project.In a letter to shareholders published on Monday, David Richter said that a vote to retain the three directors Bulldog is looking to replace – Irvin Richter, Steve Kramer and Gary Maz­zucco – was “absolutely critical to the continued success of the company”.He defended its financial performance, which he said had “significantly improved” last year following a push to remove $21m of overheads from the business. It declared a net profit of $6.9m, compared with a $6.1m loss a year earlier. Mr Richter said that this had been achieved despite the fall in oil prices and more than $8.7m in one-off costs. He also said that many of its competitors posted heavy losses.”Do we believe this turn­around was a major accomplishment? Yes, we do,” he said. He added that net profit for the first quarter of this year increased by 107 per cent when compared with the final quarter of last year, and said the alternative directors Bulldog Investors were proposing for its board were not sufficiently qualified. He argued that Bulldog Investors had no strategic plan for the company, other than to remove him as the chief executive.Bulldog Investors had earlier written to the company’s shareholders criticising its financial performance and its governance. It argued that shareholders had not seen the benefit of the $21m cost reduction cited by David Richter. It said selling, general and administrative expenses increased by $24.1m last year, equating to 38 per cent of the company’s overall revenue – up from 35 per cent two years earlier. It argued that David Richter was overpaid, with the $3.6m he earned in total compensation last year representing 53 per cent of Hill International’s net profit last year. It also criticised the company for dismissing two approaches from the private equity fund DC Capital Partners – one valuing Hill at $5.50 per share in December, and a second at $4.75 per share in May. At close on Wednesday, Hill’s shares were trading at $4.32.Nobody from Bulldog Investors was available for comment. However, after publication of Hill’s letter, Bulldog’s general partner Phil Goldstein replied to David Richter criticising Hill’s board directors.He cited a decision taken in 2014 when Irvin Richter stepped down as chief executive to offer him a contract as chairman on a salary of $1.2m “that does not require [him] to perform any specific duties” as an example of weak corporate governance.”The simple truth is that the directors that rubber-stamped such an outrageous giveaway should be replaced with truly independent directors,” Mr Goldstein said.The general meeting is due to take place on August 11.mfahy@thenational.aeFollow The National’s Business section on Twitter

Source : thenational.ae
Read more…Hill International executive try to fend off activist investor

You may also like...