Hill International, a US construction consultancy which generated about half of its revenues from the Middle East last year, has fended off a potential revolt by activist shareholders to sell the company.
Investors accepted the board’s recommendation to vote down resolutions by shareholder Bulldog Investors to replace two board directors and appoint an investment bank to advise on selling a part of or the entire business.
Bulldog Investors began its advocacy after Hill International directors unanimously rejected an initial buyout offer from the private equity firm DC Capital Partners in May.
On May 4, DC Capital offered US$5.50 a share for the New York-listed project management and construction claims company, a 40 per cent premium to its share price on May 1.
DC Capital was planning to privatise the company and merge it with Michael Baker International, an engineering company it owned.
DC Capital said it was concerned about Hill International’s “disproportionate exposure to the Middle East”, where the consultancy has been owed payments in recent years because of stalled or abandoned projects in Libya. Last year, Hill International earned 47 per cent of its $640.3 million of revenues from the Middle East, where it is working on major projects such as the new metro systems in Doha and Riyadh, new airports at Muscat and Salalah, and the Dubai Parks and Resorts project.
This year, it has secured contracts from Adnoc-owned Zakum Development Company to manage infrastructure improvements on Zirku island as part of a major oil and gas development, and manage the building of eight interlocking towers at a $300m development in Cairo known as The Gate.
DC Capital also accused Hill International’s management of lacking “sufficient fiscal discipline to maximise shareholder value”, as the consultancy made a full-year loss of $10.9m last year.
Bulldog Investors tabled its resolutions after Hill International’s management rejected DC Capital’s offer and produced a plan to mount a “poison pill” defence to stage a massive share issue if any bidders build an equity stake of more than 15 per cent.
After fending off a prospective shareholder revolt last Friday, David Richter, Hill International’s president and chief executive, whose family owns about 25 per cent of the company, said he was “honoured and grateful” that the board had received shareholders’ backing for its recommendations.
“We acknowledge, however, that many of our stockholders have voiced their concerns to us regarding various corporate governance and board independence issues, and we plan to continue the constructive dialogue that we have developed over the past few months in order to address and resolve these,” said Mr Richter.
He said the issues the company intended to address were solely regarding corporate governance, adding that its strategic direction was never challenged and it would maintain that.
“Our commitment to the Middle East construction market is unwavering,” said Mr Richter.
Hill International employs 4,600 professionals in 100 offices worldwide.
Its second-quarter net profit rose surged 190 per cent to $4.4m from $1.5m for the same period last year, as revenue rose 13.8 per cent year-on-year to $181.6m.
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