BOOTS CAPITAL HIGHLIGHTS CROWN CASTLE'S SIGNIFICANT DESTRUCTION OF SHAREHOLDER VALUE AND FAILED OPERATIONAL STRATEGY DUE TO INEFFECTIVE LEADERSHIP
Urges Shareholders to Vote the GOLD Proxy Card "FOR"
Files Definitive Proxy Materials and Mails Letter to Crown Castle Shareholders
Launches www.RebootCrownCastle.com
In connection with the filing of definitive proxy materials,
The full text of the letter being mailed is below.
To Crown Castle Shareholders:
You deserve better. For more than a decade, you and all
As a fellow shareholder in
The facts speak plainly and loudly. Look at the chart below, which compares Crown Castle Total Shareholder Return (TSR) relative to the overall market and its two primary tower-company competitors – American Tower Corp. and SBA Communications Corp.
Table 1: Total Shareholder Returns (TSR) 1
Actual TSR Performance |
1-Year |
2-Year |
3-Year |
5-Year |
7-year |
10-Year |
CCI |
-10 % |
-39 % |
-18 % |
28 % |
73 % |
127 % |
AMT |
5 % |
-22 % |
4 % |
53 % |
139 % |
234 % |
SBAC |
-8 % |
-33 % |
-7 % |
63 % |
156 % |
194 % |
S&P 500 |
24 % |
0.08 % |
27 % |
90 % |
113 % |
158 % |
|
||||||
CCI's Relative TSR |
1-Year |
2-Year |
3-Year |
5-Year |
7-year |
10-Year |
AMT |
-292 % |
-82 % |
-542 % |
-47 % |
-47 % |
-46 % |
SBAC |
-26 % |
-19 % |
-153 % |
-56 % |
-53 % |
-34 % |
S&P 500 |
-142 % |
-51,630 % |
-168 % |
-69 % |
-35 % |
-19 % |
Unsurprisingly,
Table 2: Total Shareholder Returns (TSR) of Directors 2
Directors |
Tenure |
CCI's Relative TSR |
CCI's Relative TSR |
|
10.2 years |
-44 % |
-28 % |
|
16.7 years |
-43 % |
-53 % |
|
21.7 years |
-35 % |
-54 % |
|
6.2 years |
-56 % |
-37 % |
|
8.9 years |
-46 % |
-28 % |
2020 Directors (including |
3.4 years |
-542 % |
-153 % |
|
0.7 years |
-36 % |
-21 % |
In
A TRACK RECORD OF FAILED STEWARDSHIP, CORPORATE GOVERNANCE, AND EXECUTION
The decision to file our proxy solicitation was only made after considering the feedback and views of many large institutional shareholders. Apart from overwhelming frustration with
1. Lack of relevant skillsets
Until just a few months ago, not one independent director on the Board had tower company operating experience. Now, the closest they come to meeting this criterion is one independent director that served as CFO of a tower company. Only one independent director has even been a public-company CEO. And that was for a bank.
The current Board's lack of tower company experience has exacerbated the impact of its failed management and operational strategy. It was easy to mask such shortcomings during a period of low interest rates, as tower companies delivered yield when there was precious little available to investors. But with rates much higher, the stresses for REIT management teams are also higher.
2. Failure of strategic oversight
3. Excessive executive turnover and leadership turmoil
The Board has failed in one of its most essential governance duties: Overseeing a stable change in important leadership roles. Since acquiring the fiber assets, more than a dozen senior executives across the Company's fiber acquisitions have resigned, and within the last three years the two EVP/COO leading the Company's tower segment departed. In
We believe this turmoil has affected overall employee morale and productivity. We have spoken to more than a dozen current and former employees who say they have lost faith in the Company.
Signs of operational dysfunction are rife: Most recently, the Company took the extreme decision of taking to trial one of its most important customers –
Given the high turnover and long-standing instability, the appointment of
4. Lack of accountability
There is inadequate accountability for directors on the Crown Castle Board, most notably those who have presided over a decade-plus of miserable performance by the Company, its investments, and its stock price. This same Board rewarded its two most recent CEOs,
In connection with Elliott's first campaign in 2020, the Company appointed three new directors while facing pressure to institute ROIC-pegged compensation and a strategic review of fiber – neither of those things happened. The Company's performance continued to deteriorate, as demonstrated by the Company's TSR since then – negative 542% compared to AMT and negative 153% compared to SBAC. Nonetheless, these directors, as well as many of the directors that oversaw a decade-plus of value destruction, remain on the Board today.
These are symptoms of an entitled and unaccountable culture. We thus believe it is time to replace three of the Company's longest serving directors –
5. Entrenchment
The incumbent Board has not observed basic shareholder protections. In
Entering into this agreement with Elliott – prior to the Company's window for other shareholders to submit nominations – calls into question whether the Board puts the security of its seats ahead of its responsibility to shareholders.
The closing stock price of
6. Refusing to engage constructively to resolve the proxy contest
While and after presenting our proposal to the Board and its advisors, we received limited questions, mostly from the Company's advisors. Since that time, the Board has failed to meaningfully engage with us, and has not requested to review the diligence materials that informed our plan, including the sale of fiber and potential tax benefits.
Furthermore, after we made our initial nomination submissions on a confidential basis to the Board, the Board interviewed each of our nominees. We believe that these interviews were effectively a pretense. They were structured as two 30-minute interviews of two nominees at the same time. Their conclusion to reject all of our nominees on the basis of lack of "expertise and experience" did not seem like a good faith judgment, given the unrivaled tower industry backgrounds of our nominees.
Then, in a
The Board's lack of disclosure and entrenchment behavior carried through to the supposed "fresh look" review period offered to the Boots nominees by
However, it soon became clear that the Board was not interested in engaging in good faith: On
7. False Statements about the Boots Proposal
Even though the Board has not engaged with us to review the diligence materials underlying our proposal, the Company recently issued a press release questioning two components of our plan 1) the number of buyers and financing sources who took part in our process and 2) the legitimacy of possible tax benefits we have highlighted.
There are 25 prospective buyers and financing sources who signed our NDA. This includes 3 strategic acquirors, 14 infrastructure/private equity firms and 8 financing sources. These buyers and financing sources represent blue chip, highly qualified market participants capable of executing a $10+ billion carve-out transaction. We told this to the Board directly in our meeting.
These entities are not precluded from working with the Company. They are precluded from disclosing the nature of their relationship with Boots. Therefore, the Company is in no position to allege that these buyers and financing sources have not reached out to them as a result of these restrictions. Moreover, it is plausible that these parties have not reached out to the Company because they do not believe in the existing Board's conviction or ability to execute a fiber sale. This consideration is likely a component of what led these buyers and financing sources to engage with us and not the Company in the first place. We have offered to sign a separate NDA with the Company so we could begin the process of gaining the relevant permissions in order for us to share all of this information with the Board. But the Company has refused to take this step.
As with any large transaction, developing an effective tax strategy is complicated, but crucial to obtaining the best possible outcome. We have extensively analyzed the proposed transaction and developed various alternatives to address the significant tax issues the Company will face upon a sale of the fiber business. We presented the results of our work to the Board, yet the Board had very few questions about the tax considerations of our plan or about the contents of our plan generally. The Company's overly simplistic response that "
Reflexively falling back upon the ability to make extraordinary distributions to shareholders (which are fully taxable to them) rather than developing viable strategies that allow proceeds to be used to repay debt, fund stock repurchases and/or reinvest in the Company's core business (without tax to either the Company or its shareholders) certainly does not reflect how other publicly traded REITs (or any well-managed businesses) operate. Boots has identified a number of alternative approaches to manage the taxable income associated with a sale of the fiber business and has offered on more than one occasion to discuss those strategies. Those alternative strategies are not limited to a transaction that closes in 2024 and Boots has never recommended moving forward with "reckless urgency" as the Company alleges; instead, Boots has developed a number of alternatives that allow the Company to move forward with appropriate urgency.
Our philosophy has been to engage however we can to help the Company. That is why we had our tax advisors in attendance during our
BOOTS CAPITAL'S NOMINEES HAVE A CLEAR, DETAILED, AND ACTIONABLE PLAN TO TURN CROWN CASTLE'S BUSINESS AROUND
The Boots nominees have been analyzing and preparing a plan for
In short, the Board has not put forth a comprehensive plan, and yet it remains arrogant enough to publicly criticize our plan while privately refusing to engage with our materials in earnest, such that it could act with an informed opinion.
The fiber review committee has been in place since December, yet no comprehensive plan has been put forward for shareholders. Even after producing its definitive proxy statement,
In fact, the Company's recent disclosures proudly boast of the financial analysis conducted by its advisors – the same work we completed, aided by a major, internationally recognized consulting firm, and offered to share with the Company four months ago.
We have spent considerable resources over the last eight months to build a detailed, comprehensive strategic plan to solve
-
Accelerate the Sale of
Crown Castle's Fiber Business: We go only where the facts take us and what shareholders have indicated they would like to see happen. And right now, the facts show that a separation ofCrown Castle's fiber unit – including its small cells assets – is essential for our intended value-creating path. These business lines are projected by the Company to chew through an additional$1.4 billion in capital in 2024. If historical performance is any indicator, this CapEx will also struggle to exceed the Company's cost of capital.
Putting these businesses in the right hands allowsCrown Castle to be a pure-play tower company whose comparable peers trade for 25 times EBITDA, compared to the Company's current multiple of 18 times. Rather than heed this urgent and justifiable warning, the Board has instead decided to gamble with even more shareholder chips by delaying and criticizing our plan instead of taking action. Two investment banks are now performing their costly and redundant work rather than leveraging the work we had already done. All the while, time is of the essence. -
Reboot
Crown Castle as aPure-Play Tower Company : The Company needs well-rounded knowledgeable industry veterans who not only understand operations and finance but have the ability to be strategic and innovative. It's time to get back to basics and run the Company with a real entrepreneurial and operational mindset.
That means becoming more efficient and aligning the ratio of employees to towers to meet or exceed industry benchmarks. It also means utilizing new technologies to digitize the asset base and automate workflows so that the same information is being shared across the enterprise requiring fewer resources and saving time and money. And it means rewriting incentive plans – asMr. Miller did atCrown Castle and as Chairman of the Compensation Committee at publicly-tradedAffiliated Computer Services Inc. to provide clear goals and rewards. - Revamp and Stabilize Crown Castle Leadership: Adding our nominees fills the Board's current void of industry-specific experience, and further imbues it with energy, accountability and entrepreneurship. We seek to end the 'brain drain' of executive departures and improve employee morale (just read one employee website – www.thelayoff.com/crown-castle-international -- to get a flavor for the decay of culture and morale). Our nominees have the necessary industry connections to help support and fill key positions at the Company as needed to kick-start the rebuild of the Company and its culture.
The Company will argue that there have already been recent changes to the Crown Castle Board. But what is needed is not just new Board members – the Company needs the right Board members with the deep experience to fix both
BOOTS CAPITAL'S NOMINEES HAVE DEEP TOWERS EXPERIENCE, ENTREPRENEURIAL ENERGY, AND LEADERSHIP CREDIBILITY NECESSARY TO REBOOT CROWN CASTLE
Our nominees have over 50 combined years of leadership in the towers space.
For more information about our nominees' experience and credentials, please visit www.RebootCrownCastle.com.
Our nominees have the experience, knowledge, and credible plan to change this Company for the better following a decade of marked underperformance with no accountability from leadership. Now is the moment to have your voice heard and to protect your investment.
WE URGE YOU TO VOTE "FOR" ON THE GOLD PROXY CARD TODAY IN SUPPORT OF OUR FOUR HIGHLY-QUALIFIED NOMINEES
We are asking for your support to help us create long-term, sustainable value at
Please vote "FOR"
You can vote by Internet or by signing and dating the enclosed GOLD proxy card or GOLD voting instruction form and mailing it in the postage paid envelope provided. We urge you NOT to vote using any white proxy card or voting instruction form you receive from
If you have any questions about how to vote your shares, please contact our proxy solicitor, Morrow Sodali, by telephone 1-800-662-5200 or 203-658-9400 or email at Boots@info.morrowsodali.com.
We thank you for your support.
Sincerely,
Ted Miller Chuck Green David Wheeler
INVESTOR AND MEDIA CONTACTS
Investors:
By Phone: 1-800-662-5200 or 203-658-9400
By Email: Boots@info.morrowsodali.com
Media:
By Phone: 212-257-4170
By Email: bootscapital@gasthalter.com
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The information herein contains "forward-looking statements." Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, words such as "may," "will," "expects," "believes," "anticipates," "plans," "estimates," "projects," "potential," "targets," "forecasts," "seeks," "could," "should" or the negative of such terms or other variations on such terms or comparable terminology. Similarly, statements that describe the Participants' (as defined below) objectives, plans or goals are forward-looking. Forward-looking statements are subject to various risks and uncertainties and assumptions. There can be no assurance that any idea or assumption herein is, or will be proven, correct. If one or more of the risks or uncertainties materialize, or if the underlying assumptions of
Certain statements and information included herein have been sourced from third parties.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
The participants in the proxy solicitation are Boots Parallel 1, LP,
IMPORTANT INFORMATION AND WHERE TO FIND IT
BOOTS CAPITAL STRONGLY ADVISES ALL STOCKHOLDERS OF CROWN CASTLE TO READ THE DEFINITIVE PROXY STATEMENT, ANY AMENDMENTS OR SUPPLEMENTS TO SUCH DEFINITIVE PROXY STATEMENT, AND OTHER PROXY MATERIALS FILED BY BOOTS CAPITAL AS THEY CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS ARE AVAILABLE AT NO CHARGE ON THE
Information about the Participants and a description of their direct or indirect interests by security holdings or otherwise can be found in the Definitive Proxy Statement.
_____________________ |
1
As used throughout, "direct peers" refers to AMT and SBAC, identified by the Company as competitors in its Annual Report on Form 10-K for the fiscal year ended |
2
Source: FactSet. Data as of |
3
Source: FactSet. |
4 Source for weighted-average cost of capital: FactSet. |
5 Source: CCI Proxy Statements. |
6
See Transcript of Oral Argument at 91:15-24, 92:1, Delaware Action ( |
SOURCE