Crown Castle International Corp. (CCI) on Wednesday, Oct. 22, announced it was installing two new directors as part of a strategy launched in July, shortly after Elliott Management Corp. began urging the communications REIT to cut investment in fiber, hike dividends, shake up its board and adjust executive pay plans.
Crown Castle installed Tammy Jones, co-founder of a commercial real estate investment firm, and Matthew Thornton, a former COO of FedEx Corp.’s (FDX) freight division, as independent directors. It also planned to bring a third nominee, one with previous experience in the fiber industry, onto its 12-person board.
The expected three candidates will replace three incumbent directors.
Crown Castle announced in July, shortly after Elliott launched its campaign, that incumbent directors Robert Garrison, 78, Edward Hutcheson Jr., 74, and Robert McKenzie, 76, will resign at the 2021 annual meeting expected in May. In addition, Crown Castle in July issued a board retirement policy noting that it won’t nominate any director who has reached 72 years and it also issued plans for two other incumbent directors to step down in 2022.
The board shakeups emerged after Paul Singer’s activist fund on July 6 launched a campaign taking issue with the Houston-based company’s move to invest $16 billion over the past few years, including $11 billion in acquisitions since 2012, into the fiber industry. It wants the REIT to cut fiber deployment to as little as about $600 million annually in 2021.
However, Crown Castle hasn’t significantly cut back its fiber deployment, despite Elliott’s demands. CEO Jay Brown noted Wednesday that the company’s fiber solutions, together with its core cell towers and small cell towers are all integral parts of communications networks.
In an earnings release Wednesday, Crown Castle also announced an 11% increase in its dividend, as well as a plan to reduce its 2021 discretionary capital expenditures by $400 million, when compared to 2019. The company also does not expect to issue equity to fund investments in 2021.
The dividend hike and board shuffle appear to be intended to discourage Elliott Management from launching a director fight at the company’s 2021 annual meeting. The window for nominating directors at that meeting opens on Jan. 15 and closes Feb. 21.
Crown Castle executives have said investors support the company’s fiber deployment plan, but also wanted a refreshed board.
Elliott’s push to discourage invest in small cell towers is “the opposite of what we though was appropriate,” said Crown Castle CFO Daniel Schlanger in September, adding investors he spoke with were “very supportive of our position.”
Schlanger, however acknowledged Elliott’s assertion that the board was in need of a shakeup and lacked diversity.
Jones and Thornton, who are Black, step in for two of three director spots vacated by Garrison, Hutcheson and McKenzie, three white men who have been on Crown Castle’s board 15, 26 and 26 years, respectively, according to relationship mapping service BoardEx, a sister company to The Deal
“On the board refreshment point, we agree,” he said. “Our investors agreed, thought that it was time for us to do something like that”
In a related situation, The Deal has learned that Elliott Management is shifting its headquarters to West Palm Beach, Fla., from midtown Manhattan and decided to open facilities in Greenwich Conn., to make it easier for employees to work from home. The activist fund reportedly expects not to ask any employees to go back to the office until next summer, adding that “hundreds” of employees including fund founder Singer, will remain in New York.
On Wednesday, Crown Castle reported third quarter profit of $163 million, down from $242 million during the third quarter of 2019. According to FactSet, Crown Castle reported revenue of $1.486 billion, slightly below the consensus estimate of $1.507 billion.a