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Advisory firm warns Ashmore shareholders of possible takeover by CEO

Shareholder adviser group Institutional Shareholder Services, or ISS, advised Ashmore Group PLC shareholders to vote against a motion that could lead to a possible takeover attempt of the group by its CEO Mark Coombs, the Financial Times reported Oct. 15.

Ashmore has proposed a share buyback program with a waiver of tender-bid requirements for Coombs, whose 38.6% stake in the U.K. asset manager is the largest single holding. Were the company to buy back shares from shareholders other than Coombs, his stake would rise without his taking any action, ISS reportedly said.

Under the U.K. takeover code, large shareholders are supposed to offer a premium to the current share price when adding to their stakes, but Ashmore has proposed waiving that requirement for Coombs, the FT noted.

ISS said Ashmore would still be able to return capital to shareholders via dividends without the resolution being passed. The advisory firm also said the company's disclosure on pay policy was behind the market practices and therefore it recommended that shareholders vote against the company's remuneration, according to the report.

The voting will happen at the annual shareholder meeting Oct. 19, according to the FT.

Ashmore said in market filings that it understood the opposition of institutional investor bodies to such moves, but added that it included a provision in the proposal limiting any share buybacks to 5% of issued share capital. Under that limitation, Coombs' stake would take more than five years to rise above 50%, "thereby providing ... an early warning indicator of creeping control."

Rival adviser group Glass Lewis recommended voting in favor of the proposal, although it also expressed concerns that Coombs has not explicitly indicated that his stake in the company will not rise above half, the FT said. Glass Lewis said it did not believe that Coombs was planning a takeover, and "thus we do not believe this proposal should warrant shareholder concern at this time."