The largest proxy advisor in the world supports Cellnex in the first general meeting of shareholders of the ‘Patuano era’ although with objections to the remuneration of the leadership headed by the CEO. The American ‘proxy Advisory’ ISS recommends voting in favor of all the points that will be analyzed at the meeting that will take place at the end of this month. It launches a notice about the incentive plan for the period between 2024 and 2026, questioning the “response capacity” of the board of the telecommunications infrastructure manager in the face of the significant rejection of the minorities expressed at last year’s meeting.
This notice is made within the framework of the advisory (non-binding) vote on the remuneration report for the 2023 financial year, which marked the replacement at the head of the company with the replacement of Tobías Martínez as CEO by Marco Patuano. But although he emphasizes a potential “misalignment” in the conditions and variables of the plan, he insists that it does not seem “convenient” to vote against this point given that Patuano has been in office for “less than a year,” as is reflected in his report. “The maximum opportunity of the controversial incentive plan has not yet materialized,” he adds. That is, it gives you margin until 2026, which will be when that charge becomes effective.
This same argument regarding the short time that Patuano has been in office is also used by the vote advisor to defend that the imbalance “in relative terms” in this incentive is not enough to oppose. Of course, ISS remembers that approximately 57.9% of minority shareholders did not approve the company’s remuneration policy at the 2023 meeting – the total votes against were 35% -.
The key to this rejection was the maximum remuneration cap: 183% of the annual fixed remuneration and a maximum of 610% annualized if “overcompliance” with the objectives set out in the plan was reached. That is, this ceiling would be 1,118% of Patuano’s fixed remuneration, “similar to that of the previous CEO who was highly contested by shareholders in 2022.” The internal response has not led the company to make any modification to the plan “in the short term.” And this, according to ISS, “questions the council’s responsiveness to minority concerns.”
This remuneration report includes the bonus that was assigned to Patuano upon his arrival and that is supported by ISS, which highlights that it has been prorated over time and based on performance. This payment has its origins in the renunciation of receiving a series of incentives of which he was a beneficiary in his previous company. To compensate, he was granted a “special incentive” that would correspond to the expected value of the money he gave up. Specifically, it involved 1.05 million euros that were paid last March and 64,747 shares with a market value of 2.47 million euros in June 203 (38.2 euros per share). These will be delivered on the third anniversary of his appointment, that is, in June 2026.
On the other hand, ISS also supports the re-election as proprietary director of Alexandra Reich, representing the GIC fund, which holds 7% and is the third largest shareholder after Edizione (9.9%) and TCI (9.3%). This analysis highlights that the group’s highest decision-making body remains at 13 positions, which is below the 15 maximum recommended by the National Securities Market Commission (CNMV), with 69% independent members and a 54% women. Along with this point, the accounts will also be approved and the board will be authorized to approve increasing the capital by up to 50% one or more times during the next five years or to issue convertible bonds and other financial figures.
New stage
The telecommunications infrastructure manager formally began a new stage at the beginning of March that took its first steps at the end of 2022. The new strategic plan puts black and white on this change of route, focusing more on organic growth and Financial optimization with which to reduce debt. This “reduction in operational complexity” will lead to an improvement in profitability and an increase in cash flow until it surpasses the barrier of 1,100 million euros in 2027, which will allow shareholder remuneration to skyrocket through dividends (a minimum of 500 million euros per year from 2026).
These forecasts put on the table at the Investor Day at the beginning of March had a first boost: the debt rating agency S&P improved the grade to ‘investment grade’, something that was expected for the second part of this year 2024 The firm moved towards a “greater commitment” to reducing net liabilities to a ratio of between 5 and 6 times the gross operating result (Ebitda). In this way, it paves the way for the refinancing of the more than 3,500 million euros in maturities that it faces in 2025 and 2026.
