Telenet rejects activist push for expert to probe possible conflicts of interest

7 November 2018 4:06pm

6 November 2018. By James Pressley.

Telenet Group Holding has rebuffed an activist investor’s proposal to appoint an expert to investigate whether the Belgian cable operator complies with rules on conflicts of interest related to its majority shareholder, Liberty Global.

Agreeing to Lucerne Capital Management’s request “would set a precedent that could take up significant time and resources of Telenet, outside of any legal framework,” the company said in a letter to the hedge fund.

“There is no situation of crisis or emergency for Telenet that could justify such a measure,” the letter said, noting that the request stemmed from Belgian rules that apply only when a company’s interests are seriously jeopardized or risk becoming so.

Lucerne declined to comment on the letter today.

Lucerne’s proposal last month to work with Telenet — jointly and voluntarily — on appointing a corporate governance specialist revived questions about the company’s ties to Liberty Global, its 56.36 percent owner.


Telenet’s board appeared to be “under constant pressure from Liberty Global and to be strong-armed into considering proposals where its interests conflict with those of Liberty Global,” said the fund, which has disclosed a 3 percent stake in the Belgian operator.

Lucerne partners Pieter Taselaar and Thijs Hovers requested a reply to their request by Nov. 5 and warned that they were prepared to take legal action if Telenet rejected the proposal.

Telenet addressed the proposed appointment of a corporate governance specialist in a five-page letter dated Nov. 5 and made public today on the investor-relations section of its website.

The letter voiced disappointment that Lucerne continued to display “(public) distrust” toward Telenet despite the two sides conducting “a constructive dialogue” through private meetings, phone conferences, letters and a shareholder meeting on Sept. 26.

Lucerne’s concerns about corporate governance “are formulated on the basis of misinterpretation and taking out of context of the answers provided by Telenet,” the letter says.

‘Artificial demands’

The proposal to voluntarily appoint a corporate governance expert is grounded in Belgian rules that allow judges, in certain rare circumstances, to appoint experts to check a company’s books, accounts and transactions. In practice, such appointments are very rare and typically occur at small and midsize businesses controlled by families, lawyers say.

Voluntarily accepting Lucerne’s proposal in this case, Telenet said, would bind its board “to accept similarly artificial demands of other stakeholders,” the letter said.

The acceptance might also expose Telenet’s board to legal challenges under market-abuse and confidentiality rules, the letter said.

Lucerne began its public campaign at Telenet with a letter dated May 8. At the time, Liberty Global was in talks to sell its cable businesses in Germany and Eastern Europe to Vodafone for 18.4 billion euros ($20.9 billion).

The agreement sparked speculation about Liberty Global using the proceeds to buy the rest of Telenet, as it attempted to do, unsuccessfully, through an offer in late 2012.

Six months later, it's clear that the patience of Telenet’s managers and board of directors is wearing thin.

“You will understand,” the letter closes, “that Telenet, the board and any of its members are required to reserve any present or future rights, including the right for reimbursement of all costs and losses incurred as a consequence of having to rebut Lucerne’s continued inaccurate interpretations and/or applications of facts and Belgian law.”

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