Asserts That Nam Tai’s Contradictory
and Reactionary Response to IsZo Delivering Special Meeting
Requests From Holders of More Than 40% of Shares is Further
Validation That Wholesale Change is Needed
Delivers Overview of Slate’s Strategy for
Improving Governance, Installing Quality Local Management,
Maintaining a Disciplined Capital Allocation Approach and Focusing
on Existing Projects
Reiterates That the Right Leadership Team
and Plan can Unlock the Value of Nam Tai’s Current Assets, Which
the Company’s Valuation Estimates Suggest is up to $40/Share
Urges Nam Tai to Promptly Schedule the
Special Meeting Rather Than Waste Time Trying to Convince
Shareholders That the Kaisa-Controlled Board is Acting in Their
Interests
IsZo Capital Management LP (together with its affiliates,
“IsZo”), a significant long-term shareholder of Nam Tai Property
Inc. (NYSE: NTP) (“Nam Tai” or the “Company”) with beneficial
ownership of approximately 10% of the Company’s outstanding shares,
today issued a letter to shareholders in connection with its
efforts to convene a meeting of Nam Tai shareholders (the “Special
Meeting”). IsZo recently announced that it delivered to Nam Tai
verified requests to convene the Special Meeting from holders of
more than 40% of the Company’s outstanding shares (well in excess
of the 30% required to convene the Special Meeting). The Special
Meeting will provide shareholders an opportunity to reconstitute
Nam Tai’s Board of Directors by removing a majority of the
incumbent directors and installing six highly-qualified and
independent individuals: Michael Cricenti, Cindy Chen Delano, Bo
Hu, Louis Leung, Paula J. Poskon and Jeffrey Tuder.
IsZo also wants to take this opportunity to urge Nam Tai to
respect the will of shareholders and promptly schedule the Special
Meeting. In addition to the fact that a critical mass of
shareholders has requested the Special Meeting, the market has
expressed significant enthusiasm for change at Nam Tai since IsZo
first initiated its campaign earlier this year. The Company’s share
price has appreciated approximately 2.5x since our first letter on
May 27, 2020.
The full text of today’s letter is available at www.FixNTP.com
and included below.
Dear Fellow Shareholders,
IsZo Capital Management LP (together with its affiliates,
“IsZo”) believes the actions and public communications issued by
Nam Tai Property Inc. (“Nam Tai” or the “Company”) in recent months
collectively represent a clear indication that meaningful change is
urgently needed in the boardroom. We believe it is important for
shareholders to understand that a Board of Directors (the “Board”)
controlled by allies of Kaisa Group Holdings Limited (“Kaisa”)
cannot be trusted and that IsZo’s slate of director candidates is
offering a superior strategic vision.
We believe it is quite notable that one business day after IsZo
delivered to Nam Tai verified requests to convene a meeting of
shareholders (the “Special Meeting”) from holders of more than 40%
of the Company’s outstanding shares, the Company announced that
Chief Executive Officer and Chairman Ying Chi Kwok was immediately
resigning from his positions. This recent announcement followed Nam
Tai’s August 5th proclamation that “Mr. Kwok has made
significant progress driving value for shareholders” despite a
-56.85% total shareholder return (“TSR”) over his tenure.1
Shareholders should recognize that Nam Tai’s announcement
pertaining to Mr. Kwok’s departure is only the latest in a string
of contradictions and misrepresentations that the Company has
disseminated. While Nam Tai will now likely claim that it is
embracing shareholder feedback and taking steps to enhance value,
we question how any shareholder can have faith in what remains a
Kaisa-controlled Board. We contend the Company’s recent
communications, including its August 5th press release, feature a
litany of misleading statements that completely impugn the Board’s
credibility, including:
- We question how Nam Tai claims to be “implementing
differentiated strategies to promote business growth and create
value for shareholders.” The reality is Nam Tai’s strategies
have produced negative TSR over every relevant time horizon,
including one-year (-58.96%), three-year (-43.75%) and five-year
(-9.68%) periods.2 Material share price appreciation only began
this year following IsZo’s public engagement in the spring.
- We assert that Nam Tai’s commitment to “integrity and good
corporate governance” is an empty one. In our view, Nam Tai’s
leadership undermines the meaning of the word “integrity” when it
fails to engage with shareholders, buries material disclosures –
such as the Dongguan City investment – in one line of a lengthy
regulatory filing and packs the Board with individuals connected to
Kaisa.
- We believe Nam Tai has brazenly ignored shareholder feedback
by touting its focus on “project diversification.” It is
abundantly clear that investors are incensed by the Company’s
opaquely-communicated investment in Dongguan City and vehemently
oppose the allocation of capital to any new projects, especially
while the Company’s shares trade at a staggering discount to
intrinsic value.
- We find it absurd that Nam Tai claims its linkage with Kaisa
creates a favorable “reputational and branding effect” for the
business. Kaisa has a well-documented and highly-publicized
record of defaulting on financial obligations, mistreating
investors and facing legal issues in the People’s Republic of
China.
Nam Tai’s lack of credibility and disregard for shareholders’
interests to date only reinforces the urgent need to convene the
Special Meeting. We urge the Company to avoid
stalling or manufacturing unnecessary delays by promptly scheduling
the Special Meeting that a critical mass of shareholders –
including one of the Company’s own Board members – has
demanded.
ISZO’S SLATE OF DIRECTOR CANDIDATES HAS THE
RIGHT STRATEGY FOR UNLOCKING THE SIGNIFICANT UPSIDE VALUE TRAPPED
WITHIN NAM TAI’S SHARES
IsZo appreciates the fact that shareholders have been receptive
to our calls for change. The market’s enthusiasm is evidenced by
the fact that Nam Tai’s shares have
appreciated approximately 2.5x since our first public communication
in May of this year. As we now await the Special Meeting,
IsZo believes it is important for shareholders to know that its
slate of director candidates has spent considerable time working
together to assess Nam Tai’s assets, corporate governance, investor
communication and disclosure practices, and approach to allocating
capital and managing its project portfolio. Given that our slate
includes individuals with significant experience working within
China’s real estate sector, we have also been able to closely
analyze the markets in which Nam Tai is currently developing
properties.
Our slate’s disciplined strategy focuses on realizing the
intrinsic value of Nam Tai’s current portfolio – which the Company
has failed to properly emphasize – prior to committing any
additional capital to new investments and continuing to spread the
Company’s resources thin. By installing IsZo’s six director
candidates and positioning a refreshed Board to implement a
structured plan, we believe the intrinsic value of Nam Tai’s
existing projects can finally be unlocked. Nam Tai’s most recent
valuation reports imply that its project portfolio is worth up to
$40 per share, which is approximately 4x the Company’s current
share price.
Prior to releasing a comprehensive and more detailed
presentation ahead of the Special Meeting, we want to share an
overview of the key points anchoring our slate’s strategy:
- Improving corporate governance and enhancing the Board’s
alignment with shareholders. Upon being appointed to the Board,
our slate plans to nominate an aligned, experienced and
integrity-rich individual to serve as Chairman. Our slate also
intends to establish a three-member strategic oversight committee,
inclusive of Bo Hu, Louis Leung and Jeffrey Tuder, to lead a 60-day
assessment of the business and help direct major corporate
decision-making during the period in which newly-appointed local
management team members are transitioning into their roles. Each
director serving on the Board’s strategic oversight committee would
bring unique and valuable expertise, ranging from Chinese real
estate experience to capital allocation acumen to property
management knowhow. It is also critical to highlight that all six
members of IsZo’s slate pledge to align themselves with
shareholders by taking at least 75% of their Board compensation in
the form of shares rather than cash.
- Installing a proven, high-caliber management team based in
China. Thanks to our director candidates’ diverse experience
operating in China and working at global private equity firms that
frequently recruit portfolio company management teams, they have
already initiated discussions with exceptional individuals capable
of holding senior executive roles at Nam Tai. IsZo is confident
that its slate will have firm, confidential commitments in the
near-term from a prospective chief executive officer, general
counsel and other senior executives. We have also selected a
top-tier executive recruitment firm to help identify the best
available real estate talent in mainland China if any roles cannot
be filled through our slate’s network. Our slate feels that it is
essential for Nam Tai’s management team members to live and operate
in China, so they can be actively involved in overseeing project
development matters.
- Retaining local advisors to support project-level continuity
in Shenzhen and Dongguan. Based on our director candidates’
proactive evaluation of the Shenzhen and Dongguan projects, they
have a strong understanding of the operational, legal and
regulatory considerations associated with a change in control of
the Board. Our slate plans to preserve project-level continuity
across Nam Tai’s portfolio by empowering and further incentivizing
development teams and retaining experienced advisors in each
jurisdiction to engage with local governments and ensure compliance
with all laws and jurisdictional rules. IsZo has already worked
with its slate to identify top local regulatory affairs and legal
consultants in Shenzhen and Dongguan.
- Establishing a disciplined capital allocation approach.
Shareholders deserve to understand Nam Tai’s capital allocation
philosophy and no longer be surprised by large, poorly-disclosed
investments. Our slate plans to establish and communicate a
conservative capital allocation framework that prioritizes the
retention of cash in the near-term. As Nam Tai begins to realize
the value of its projects, the reconstituted Board would likely
seek to return capital to long-suffering shareholders in the form
of buy-backs or dividends. It is critical for Nam Tai to rebuild
its cash position and regain the trust of its shareholder base
prior to investing in another project – beyond the four it
currently has – over the long-term.
- Commencing a credible strategic review of the current
project portfolio. Once a reconstituted Board and fresh
management team have been installed at Nam Tai, it will be
necessary to test legacy assumptions held by Kaisa insiders. Our
slate believes it has an obligation to conduct a strategic review
of Nam Tai’s portfolio and assess potential strategic alternatives
for all four properties under development. There may be previously
unexplored avenues, such as joint ventures or partial or full asset
sales, that can accelerate the realization of value and lower risk
to shareholders. Our slate of directors has already commenced
confidential discussions with local brokers and financial advisors
to aid the Board in this prospective process. We believe a credible
strategic review at Nam Tai requires a refreshed Board that is no
longer hindered by Kaisa’s influence.
Although this is just a high-level summary of our slate’s
strategy, we believe it should be clear that a well-structured and
targeted plan is in shareholders’ best interests. There is no
reason to allow the Kaisa-controlled Board to continue wasting
shareholders’ capital when the Company has failed to deliver any
meaningful value to date. In our view, Kaisa-affiliated insiders
have proven themselves either incapable or unwilling to represent
the best interests of all
shareholders. We are pleased that our fellow shareholders recognize
that they deserve better as demonstrated by the overwhelming
support to call the Special Meeting.
THE SPECIAL MEETING WILL EMPOWER
SHAREHOLDERS TO REMOVE AND REPLACE KAISA ALLIES AND INSIDERS ON THE
BOARD
We urge shareholders to reject Nam Tai’s appeal to give the
Board more time to prioritize its own interests, and view the
Company’s defensive and reactionary changes as nothing more than
ploys to benefit Kaisa. It should be clear based on the extremely
strong market reaction to IsZo’s efforts in recent days and months
that many shareholders support the prospect of board-level change
at Nam Tai. IsZo hopes this enthusiasm continues to grow now that
our slate has provided an overview of a clear and viable
strategy.
IsZo also wants to note at this time that we firmly believe it
is in the best interests of Nam Tai to maintain a degree of
boardroom continuity and retain two incumbent directors with strong
institutional knowledge and unimpeached integrity. To that end, our
director candidates are very excited by the prospect of working
with Peter Kellogg and Mark Waslen to relentlessly pursue the
results that shareholders deserve.
In closing, Iszo wants to stress that it is a long-term investor
– one that is 100% committed to acting as a catalyst for
meaningful, value-enhancing change at Nam Tai. We will not be
deterred by the Kaisa-controlled Board’s groundless attacks or any
additional maneuvers it may be planning. IsZo
is not going anywhere.
Sincerely,
Brian Sheehy IsZo Capital Management LP
Shareholders interested in learning more about
the Special Meeting process should contact IsZo’s solicitor,
Saratoga Proxy Consulting, at info@saratogaproxy.com or (212)
257-1311. We also encourage shareholders to learn more about our
slate and its analysis of Nam Tai at www.FixNTP.com.
1 TSR figure accounts for dividends reinvested and runs from the
close of trading on January 29, 2018 (the day Mr. Kwok was
appointed Chief Executive Officer) to the close of trading on May
26, 2020 (the day before IsZo issued its first public communication
to shareholders). 2 TSR figures account for dividends reinvested
and run through the close of trading on May 26, 2020 (the day
before IsZo issued its first public communication to
shareholders).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200918005270/en/
For Investors:
Saratoga Proxy Consulting LLC John Ferguson / Joe Mills,
212-257-1311 jferguson@saratogaproxy.com /
jmills@saratogaproxy.com
For Media: Profile Greg Marose / Charlotte Kiaie, 347-343-2999
gmarose@profileadvisors.com / ckiaie@profileadvisors.com
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