November 25, 2019 / 8:40 PM / 2 months ago

Activist investor presses Valaris for broader changes, plans on special meeting

BOSTON, Nov 25 (Reuters) - Hedge fund Luminus Management said on Monday that it plans to call a special shareholder meeting at Valaris PLC and press for broader improvements at the offshore contract drilling services company which promised its own changes two weeks ago.

Valaris' stock price surged 12% on Monday to trade at $4.40 after Luminus publicly called on the company to improve operations, refresh the board and shore up governance.

The hedge fund also wants management to "take a holistic and balanced approach to managing (it's) capital structure, with a specific focus on ensuring liquidity, pushing out debt maturities and effectively monetizing debt discounts," according to a regulatory filing.

Monday's demands are far broader than earlier requests when the hedge fund pushed for changes to the company's balance sheet, including a push to sell bonds in order to pay out a $2.5 billion special dividend. There was no mention of the special dividend in Monday's filing.

Luminus now owns 18.7% of Valaris and has enough shares to meet the threshold to call an extraordinary general meeting. A few months ago, Luminus owned a 4.5% stake in Valaris.

The additional buying began earlier this month, only hours after the company laid out plans to try and push up its share price.

Management promised an additional $100 million in cost cuts and changes to the board, announcing that three directors would end up stepping off. It has hired search firm Egon Zehnder to help find a second independent director with significant capital markets expertise.

The two sides agreed to a standstill, which prohibited the hedge fund from buying more shares, in early September but the agreement expired in late October when the company rejected the hedge fund's settlement proposal, the filing said. Some restrictions still remain, and the hedge fund is not permitted to own an economic stake of 20% or more.

Luminus, which invests more than $2.5 billion for clients in energy and power investments, has delivered an average return of 11.8% a year since its launch in 2002. It has had only one year of losses during the financial crisis.

Reporting by Svea Herbst-Bayliss; Editing by Cynthia Osterman

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