Milton family raises governance issues at New Millennium

Tata Steel owns 26% stake in the Canadian company

The Milton family, which owns seven per cent stake in New Millennium Iron Corp of Canada, has sought a shareholders' meeting in March this year to replace six directors of the company with four of its nominees, saying the firm will go bankrupt owing to corporate governance issues. The Milton family has not asked for the removal of Tata Steel nominees, who own 26 per cent stake.

The family said based on its unsolicited discussions with other shareholders having more than 10 per cent of the outstanding shares, it had no choice but to seek this change in the management. "While we have numerous concerns, our biggest concern is the failed strategic direction of the company which follows a plan that, in the board's own view, will mean the company will be insolvent in the near-term. This is simply not acceptable. The shocking erosion of shareholder value is ample evidence of the problems with the strategic plan that is being pursued by the management and the board," it said.
 

THE OFFER

• The Milton family said it would cut operational expenses of the firm dramatically, while maintaining key relationships and preserving value
• It also asked shareholders to replace the six directors with its own four nominees

When contacted, a Tata Steel spokesperson declined to comment. Tata Steel had made provision of Rs 338.3 crore on account of investment exposure in New Millennium Iron Corp for FY15, according to its 2015 annual report.

In its own plan presented to the shareholders, the Milton family said it would cut operational expenses of the company dramatically, while maintaining key relationships and preserving value. "The cuts will start with the management and board compensation, which will be dramatically reduced, and in so doing we will propose that no cash compensation be paid to our nominees on the board," it said while asking to replace the six directors with its own four nominees. It also claimed support from 20 per cent of New Millennium shareholders.

However, in a notice posted on its website, New Millennium blamed the falling iron ore prices and weak Chinese demand for its sagging financial health.

The family said since the management and the board only holds 1.17 per cent of the issued and outstanding shares in the aggregate, it is not surprising they are focused on compensation rather than the long-term value of the company. "The company has raised over $110 million in the past six years and has very little to show for it. It is time to reverse course and develop and implement a new strategy based on cash preservation and the protection of the company's assets and relationships," it said.

The company must significantly reduce its cash outflows, including the exorbitant compensation paid to its management, until such time that the value of the company's core assets can be enhanced. In addition, the company should also consider whether other opportunities should be pursued to enhance value for New Millennium's stakeholders.