TAM Capital Management Sends Open Letter To the Boards of Directors of Loews Corporation and Boardwalk Partners LP
08 Maio 2018 - 1:04PM
Business Wire
TAM Capital Management, one of the largest minority shareholders
in Boardwalk Pipeline Partners, LP (NYSE: BWP) released the
following open letter to the Boards of Directors Loews Corporation
(NYSE: L) and Boardwalk Pipeline Partners, LP
May 8, 2018Boards of DirectorsLoews Corporation & Boardwalk
Partners LP667 Madison AvenueNew York, NY 10065
Dear Members of the Boards of Directors:
I write to express my outrage at the recent actions of the Loews
Corporation, led by the members of the Tisch family who serve on
its board, to artificially depress the stock price of Boardwalk
Partners LP. These efforts appear to be a brazen attempt to effect
a buyout of the company for a fraction of its fair value and in
contravention of terms and intent of the Master Limited Partnership
agreement. As one of Boardwalk’s largest minority unitholders, I am
shocked and deeply disappointed at the manner in which Loews and
its leadership are treating their fellow shareholders and limited
partners, and I call upon them to immediately take action to
rectify the situation they have created.
Nearly two months ago, on March 15, the Federal Energy
Regulatory Commission issued a series of orders designed to address
the allowance for income taxes in cost-of-service rates for natural
gas and oil pipeline companies. These orders are not expected to
have any effect on Boardwalk’s existing business, and just four
days after they were issued, Boardwalk publicly told unitholders
“Boardwalk Does Not Expect FERC's Proposed Policy Revisions To Have
A Material Impact On Revenues.” Neither Boardwalk nor Loews
disclosed any basis to infer that the FERC orders may trigger a
right allowing the General Partner to purchase all outstanding MLP
units.
But on April 30, a month and a half after Boardwalk assured the
market that the FERC orders would have no effect on its business,
Loews abruptly announced that it thought the FERC orders would have
a material adverse effect on its business—not now, but five years
from now, in 2023. Loews further told investors that this revised
outlook triggered a contractual right buried in the Boardwalk MLP
agreement that allowed Loews Corporation—Boardwalk’s majority
unitholder and general partner—to buy the company’s minority shares
for the average closing price of Boardwalk’s stock over the last
180 trading days. Loews did not say whether it would actually
exercise this right—rather, it said only that Loews was “strongly
considering” the option and would make a decision by the end of
2018.
Instead of announcing a buyout, Lowes inserted the possibility
of a future buyout as a means to cap the price at which the MLP
units could trade, while giving Loews and its leadership an ongoing
option to complete the buyout whenever the price of the MLP units
declined to an acceptable level. The reaction from the market was
predictable: in the week after the announcement, Boardwalk’s stock
price plunged over 16% (falling from $11.04 to $9.26) as the fear
of Loews exercising its call option at some uncertain date at some
uncertain price led investors to scramble to get out of the stock.
Meanwhile, as minority unitholders suffer, the crisis that Loews
has improperly manufactured has been working to its own benefit.
Every day that Boardwalk’s stock price falls, Loews’s option—which
is based on the historical trading price—becomes cheaper to
exercise. By refusing to clarify its intentions, Loews has created
a death spiral for Boardwalk’s stock.
The timing of Loews’s announcement is no coincidence.
Boardwalk’s stock has historically traded at over $38 per share,
and was trading at over $18 per share in the last year. Over the
last several months, however, Boardwalk’s stock has hovered in the
low teens at historic lows. When Loews announced its position on
the effect of FERC orders on April 30, it could have exercised its
option to buy minority unitholders out for at a minimum $13.15 per
share.
Boardwalk’s stock has been rapidly sinking, such that with each
passing day minority unitholders will get less for their shares
whenever the call option is ultimately exercised. By artificially
depressing Boardwalk’s stock price in this way, Loews is acting in
clear contravention of the MLP agreement, which is designed to
protect minority unitholders by ensuring that they receive an
unaffected price—based on the last 180 trading days—for their units
if the call option is exercised. Loews cannot circumvent this
contractual protection by threatening to exercise the option,
artificially driving down the stock price, and using the
manufactured decline in the stock price to exercise the call on the
cheap. Lowes’ conduct contravenes the parties’ manifested intent to
provide unitholders a payment based on an unaffected price. At a
minimum, Boardwalk and Lowes breached both the MLP agreement and
the implied covenant of good faith and fair dealing.
I write to you today because there is still time for Loews and
the members of the Tisch family who serve on its board to restore
their reputations for fair dealing and avoid legal action. If Loews
believes that it has the right to exercise the call option in the
MLP agreement, it should immediately commit to doing so at an
unaffected price of at a minimum $13.15 per share. If, however,
Loews does not intend to exercise this right, it should promptly
commit to not exercising this right in the future to remove the
overhang that it has created in Boardwalk’s stock. Alternatively,
it should publicly commit to converting Boardwalk to a
C-Corporation to offer certainty that the company is not affected
by the FERC orders either now or in the future and to allow all
unitholders to benefit from its future prospects. It is my sincere
hope that Loews and its leadership will commit to acting fairly and
protecting the interests of all of Boardwalk’s unitholders
I request a response to this letter in the next five calendar
days, and reserve all rights to take further action as needed. . In
the event an amicable resolution is not feasible, I have retained
Bernstein Litowitz Berger & Grossmann LLP as a precaution if
needed to protect my clients interests.
Sincerely,
Tsachy MishalPresidentTAM Capital Management63 Crane Rd
NorthStamford, CT 06902
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version on businesswire.com: https://www.businesswire.com/news/home/20180508006231/en/
TAM Capital Management:tm@tamcm.comorLegal:Bernstein Litowitz
& Grossmann LLPMark Lebovitch, 212-554-1519
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