TIDMCCEP
RNS Number : 6002L
Coca-Cola Europacific Partners plc
16 May 2022
Coca-Cola Europacific Partners plc (CCEP or the Company)
16 May 2022
Dear Shareholder of Coca-Cola Europacific Partners plc:
We are asking for your support in voting "FOR" all resolutions,
as recommended by the Board of Directors, at our upcoming 2022
Annual General Meeting on 27 May 2022.
We have recently received certain proxy advisory services
reports from Glass, Lewis & Co. (Glass Lewis) and Institutional
Shareholder Services (ISS). While Glass Lewis recommend a "FOR"
vote in respect of each recommendation, ISS recommend voting
"AGAINST" Resolution 2 (Approval of the Directors' Remuneration
Report), Resolution 23 (Waiver of mandatory offer provisions set
out in Rule 9 of the Takeover Code) and Resolutions 3 (regarding
the re-election of Manolo Arroyo) and Resolution 15 (regarding the
re-election of Mario Rotllant Solá). Consequently, we believe it is
important to provide additional context regarding these resolutions
beyond that in our Notice of Meeting.
Resolution 2 (Approval of the Directors' Remuneration
Report)
The report from Glass, Lewis & Co. (Glass Lewis) recommends
a vote "FOR" Resolution 2 while Institutional Shareholder Services
(ISS) recommends a vote "AGAINST".
The report from ISS recommends a vote "AGAINST" Resolution 2 and
states:
-- The Committee exercised discretion by determining a vesting
level of 45 percent of maximum for the FY2019 LTIP awards despite a
formulaic outcome of zero. This use of discretion is not in line
with UK best practice.
-- The impact of discretion has been significant, with the
vested LTIP equivalent to 2.35 times the CEO's salary and
constituting 36 percent of his single-total figure for FY2021.
On the other hand, the report from Glass Lewis recommends a vote
"FOR" and concluded that:
-- "We recognise the positive shareholder and employee
experience in recent years despite the impact of the COVID-19
pandemic. In addition, we acknowledge the limited use of Government
support schemes over the period. As such, while somewhat concerned
by a discretionary payout under the LTI for the second year
running, we believe shareholders can be reasonably satisfied that
final outcomes were broadly in line with Company performance and
the wider stakeholder experience over the period. Further, we
acknowledge the committee's rationale for this use of discretion
and recognise its value with respect to the ongoing incentivisation
of executives. Consequently, we do not believe that this issue
necessarily warrants shareholder action at this time. Nonetheless,
we will continue to monitor the utilisation of discretion moving
forward, and expect the committee to continue to justify outcomes
in the context of broader company performance and the wider
stakeholder experience more generally."
For the Remuneration Committee, a key challenge was to ensure
that remuneration outcomes for our people continued to reflect our
underlying philosophy. In particular, incentive schemes should
deliver outcomes which align with business performance (in the
context of COVID-19) and appropriately reflect the experiences of
shareholders and wider stakeholders, whilst also continuing to act
as an incentive to engage our people to deliver the best possible
results. All of our incentive schemes utilise stretching
performance targets, set at the start of the relevant period and
are designed to drive performance in the context of prevailing
expectations for the business. At the same time, in line with best
practice, our schemes all include discretionary provisions which
allow the Committee to adjust the formulaic result to ensure that
the outcome delivered to participants is a fair and appropriate
reflection of performance over the period.
More generally the Remuneration Committee is confident that the
discretion applied to the CEO's 2019 LTIP was appropriate
reflecting the range of factors outlined in the Statement from the
Remuneration Committee Chairman on pages 92-93 of the 2021
Integrated Report and in the Annual Report on Remuneration on pages
98-99 of the 2021 Integrated Report. This also includes detail on
the application of discretionary provisions by the Committee in
previous years. It should be noted that the Committee has exercised
discretionary provisions to reduce incentive outcomes below the
formulaic result in two of the four financial years since CCEP's
listing, and to increase incentive outcomes only once (under the
2018 LTIP, as reported last year, to fairly reward performance
through the global pandemic). We recognise that the application of
upward discretion is relatively unusual in the UK market, however
2021 presented a truly exceptional set of circumstances and we are
happy to discuss this further with you.
The CCEP Board and management firmly believe the remuneration
decisions made during the year were in the best interests of
shareholders, aligned incentive outcomes for all participants to
reflect performance through the COVID-19 crisis and enabled CCEP to
continue to deliver long-term shareholder value. Accordingly, the
Board and management of CCEP recommend voting "FOR" Resolution
2.
Resolution 23 (Waiver of mandatory offer provisions set out in
Rule 9 of the Takeover Code)
The report from Glass, Lewis & Co. (Glass Lewis) recommends
a vote "FOR" Resolution 23. The report from Institutional
Shareholder Services (ISS) recommends a vote "AGAINST" Resolution
23. Both Glass Lewis and ISS have recommended voting "FOR"
Resolutions 27 and 28 (Authorities to purchase own shares).
Resolution 23 is a standing item at each Annual General Meeting
of the Company to enable CCEP to give effect to Resolutions 27 and
28. Therefore, a share repurchase cannot occur unless Resolution 23
is approved and a vote "AGAINST" Resolution 23 will have the same
effect as a vote "AGAINST" Resolutions 27 and 28.
The report from Glass Lewis states:
-- "We believe the terms of this proposal are reasonable. The
Takeover Code was instituted as a shareholder safeguard in the
event that a major shareholder sought a larger stake in the
Company, possibly to the detriment of other shareholders.
-- In this case, we note that following a repurchase of shares
or exercising of options, the concert party may increase their
ownership stake in the Company but may not gain control of it
without triggering a full takeover bid. Further, we note that the
waiver will not apply to an acquisition of ordinary shares.
-- We do not believe that this proposal is connected with any
sort of takeover attempt by this party, and thus, we do not believe
this proposal should warrant shareholder concern at this time. We
will, however, monitor the concert party's beneficial ownership in
the event that a takeover attempt becomes more likely."
On the other hand, ISS recommends voting "AGAINST" Resolution 23
based on the application of its standard policy as a result of
undefined "concerns over creeping control". This fails to take into
account the purpose of Resolution 23 and Olive Partners, S.A.'s
(Olive) stated intentions.
Rule 9 of the Takeover Code applies when any entity holds 30% or
more of the voting rights of a company. When a company purchases
its own voting shares, any resulting increase in the percentage of
shares carrying voting rights will be an acquisition for the
purpose of Rule 9. CCEP currently has one shareholder, Olive, which
owns approximately 36.4% of our outstanding shares and so any share
repurchase would automatically trigger Rule 9 of the Takeover Code
and result in an obligation on Olive to make a general offer to
shareholders for all the remaining equity share capital of CCEP.
Therefore, the intention of Resolution 23 is to enable CCEP to make
share repurchases without triggering any obligation on Olive to
make a general offer for the Company.
In the Notice of Meeting, Olive has confirmed that it has no
intention of changing its approach with respect to CCEP as a result
of any increase in its shareholding due to any share repurchase. It
has no intention to seek any change to the general nature or any
other aspect of the Company's business. Given Olive's stated
position, we believe that any concerns over "creeping control" are
therefore unfounded.
As noted above, a share repurchase will not occur unless
Resolution 23 is approved.
The CCEP Board and management firmly believe these resolutions
are in the best interests of shareholders as they provide the
ability to return cash to shareholders, enabling CCEP to continue
to deliver long-term shareholder value. Accordingly, the Board and
management of CCEP recommend voting "FOR" Resolutions 23, 27 and
28, consistent with the recommendation of Glass Lewis.
Resolution 3 (re-election of Manolo Arroyo) and Resolution 15
(re-election of Mario Rotllant Solá)
The report issued by Glass Lewis recommends voting "FOR"
Resolution 3 (the re-election of Manolo Arroyo) and Resolution 15
(the re-election of Mario Rotllant Solá). The report generated by
ISS notes that its policy requires remuneration committees to be
comprised solely of independent directors. It therefore recommends
a vote "AGAINST" the re-election of Mr Arroyo and Mr Rotllant Solá
as non-independent members of CCEP's Remuneration Committee.
The CCEP Board and the Remuneration Committee Chairman,
Christine Cross, are of the opinion that the re-elections of Mr
Arroyo and Mr Rotllant Solá is appropriate because:
-- the terms of reference of the Remuneration Committee
stipulate that it must be composed of a majority of INEDs,
including for quorum requirements;
-- the Remuneration Committee comprises a majority of
Independent Non-executive Directors (INEDs), notwithstanding the
presence of Mr Arroyo and Mr Rotllant Solá; and
-- Mr Arroyo and Mr Rotllant Solá are appointed representatives
of the Company's two largest shareholders - it is natural that
these shareholders would want a say on the remuneration of senior
executives and there is no conflict of interest with other
shareholders.
The CCEP Board and management firmly believe this resolution is
in the best interests of shareholders and recommend voting "FOR"
Resolutions 3 and 15, consistent with the recommendation of Glass
Lewis.
We would be glad to discuss the our recommendations in relation
to Resolutions 2, 3, 15 and 23 further with you, should you wish.
If you have any questions, or need assistance in submitting your
proxy to vote your shares, please contact us at
shareholders@ccep.com.
Thank you for your support.
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