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Hedge fund questions Argo management, nominates 4 to board

Board of directors

Voce Capital Management LLC, a San Francisco-based hedge fund with a 5.8% stake in Argo Group International Holdings Ltd., on Monday said it has nominated four independent candidates for election to the board of directors at the company’s 2019 annual meeting.

The move comes ahead of a scheduled Feb. 27 meeting between the two companies which will now not proceed, sources close to Argo confirmed.

Voce also sent a lengthy letter to Argo shareholders questioning the company’s management, particularly in the area of expenses.

“Argo’s corporate expenses are not only shockingly high — they are also shockingly inappropriate,” the Voce letter states.

Extravagant perquisites, personal use of corporate property including company-owned aircraft and housing, and  “an overall spendthrift culture that misdirects Company assets to support the lifestyle and hobbies of the Company’s CEO at the expense of shareholders,” were just some of Voce’s specific charges, for which it points the finger directly at the Argo board.

“Argo’s Board of Directors (the “Board”) is directly responsible for this waste of corporate assets and must be held accountable for it,” Voce said in its letter.

In response, the Argo board said in a Monday statement that it “and management welcome input from all our shareholders and take into account their views.”

The Argo board’s response also pointed to “Argo’s track record of strong value creation for all shareholders … demonstrated by its leading 1, 3 and 5-year period total shareholder returns of 39%, 69% and 136%, respectively.”

Voce also took issue with the lack of company stakes held by the board, noting independent directors collectively own very little of its stock, amounting to less than 0.5% of the company’s shares outstanding shares, as well as Argo’s recent appointment of two new directors in the wake of Voce disclosing its stake with a Feb. 4, 2019, filing of a form 13D with the U.S. Securities and Exchange Commission.

“Rather than even wait to hear what we had to say, Argo unilaterally expanded its already bloated Board to 13 members, and stuffed it with two more hand-selected Directors,” prior to the scheduled Feb. 27 meeting, the Voce letter said.

“The shotgun Board appointments further illustrate its entrenchment and hostility toward the interests of shareholders,” Voce added.

Argo said it was “looking forward to continuing our dialogue with Voce, but are disappointed that Voce has decided not to engage us constructively. Instead, Voce has sent a letter to shareholders that contains a number of misleading and inaccurate statements and personally attacks the company’s CEO.”

Argo also noted that the company’s “CEO is the largest individual shareholder, and the board and executive officers as a group own beneficially approximately 4.9% of the company’s shares outstanding.”




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