PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT — PREPARED IN ANTICIPATION OF LITIGATION
CALDERWOOD & HARKNESS LLP 787 Seventh Avenue, New York, NY 10019 25 Bishopsgate, London EC2N 3AR, United Kingdom
MEMORANDUM
TO: Board of Directors, Aurelius Global Media Group PLC
FROM: Nathaniel Bower, Colette Whitman, Audrey Zhou, and Brendan Walsh — Calderwood & Harkness LLP
DATE: April 12, 2024
RE: Survey of Permissible Defensive Measures Available to the Board in Response to the Corvus Peak Capital Partners LP Activist Campaign
MATTER NO.: 1017-00002
CLASSIFICATION: Attorney-Client Privileged / Attorney Work Product
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I. Executive Summary
This memorandum surveys the full range of defensive measures legally available to the Board of Directors (the "Board") of Aurelius Global Media Group PLC ("AGMG" or the "Company") in responding to the activist campaign launched by Corvus Peak Capital Partners LP ("Corvus Peak"), and assesses each measure under the applicable Delaware law framework. This memorandum is intended to provide the Board with a comprehensive, action-oriented guide to its options, together with our recommendations as to which measures should be pursued, which should be held in reserve, and which should be avoided.
Background. Corvus Peak is a Delaware limited partnership with approximately $7.2 billion in assets under management. It currently holds approximately 8.7% of AGMG's outstanding common shares, representing approximately 35,896,200 of 412,600,000 shares outstanding, as disclosed in its amended Schedule 13D filed with the Securities and Exchange Commission on February 26, 2024. Corvus Peak has nominated three director candidates for election at the Company's 2024 Annual General Meeting (the "AGM"), currently scheduled for June 7, 2024. Those nominees are:
• Malcolm Trask (age 58), former Chief Executive Officer of Archway Digital Holdings Inc., where he served from 2015 to 2022;
• Vanessa Loring (age 44), Managing Director at Corvus Peak Capital Partners LP, where she leads the fund's media and telecommunications investment practice; and
• Dr. Raymond Chu (age 61), former President of Helix Media Networks Inc., where he served from 2011 to 2020 and oversaw the company's transition to digital-first distribution.
This campaign occurs against the backdrop of the unexpected resignation of AGMG's Chief Executive Officer, Marcus Vane, on March 8, 2024, and the Board's subsequent designation of Chief Operating Officer Priya Nair-Whitfield as Interim Chief Executive Officer. The convergence of these events — a leadership vacuum coinciding with an activist challenge to board composition — presents a complex governance situation requiring careful legal analysis and strategic judgment.
Related Memoranda. This memorandum should be read in conjunction with four prior Calderwood & Harkness memoranda prepared in connection with this matter:
(a) Board Fiduciary Duties in CEO Succession (March 25, 2024), which analyzed the fiduciary duties applicable to the Board's conduct of the CEO search process;
(b) Interim CEO Designation — Fiduciary Considerations (March 28, 2024), which evaluated the procedural and substantive fiduciary considerations surrounding the designation of Priya Nair-Whitfield as Interim CEO;
(c) Advance Notice Bylaw Compliance Review (March 5, 2024), which assessed the timeliness and procedural compliance of Corvus Peak's director nominations under the Company's existing advance notice provisions; and
(d) Poison Pill / Shareholder Rights Plan Analysis (April 8, 2024), which provided a detailed analysis of the legality, advisability, and market implications of adopting a shareholder rights plan in the current circumstances.
Summary of Conclusions. While several defensive measures are legally permissible in the abstract, the Board's ability to deploy any particular measure is constrained by the Unocal proportionality standard and, in certain cases, the Blasius enhanced scrutiny standard applicable when board action is directed primarily at the shareholder franchise. In our assessment, the Board's optimal approach is a calibrated, multi-pronged strategy centered on the following elements:
1. Enhanced shareholder engagement — a proactive outreach campaign targeting AGMG's institutional shareholder base to articulate the Board's strategic vision, defend the integrity of the CEO succession process, and address Corvus Peak's specific criticisms;
2. A credible strategic alternatives review — engagement of a reputable financial advisor to conduct a genuine evaluation of value-maximizing alternatives, publicly announced, which serves the dual purpose of responding to shareholder concerns about value creation and providing a business justification for continuity of the incumbent board through the review period;
3. Proactive settlement exploration — a parallel track of negotiations with Corvus Peak, through the Special Committee, to explore the possibility of a consensual resolution that seats one or two Corvus nominees in exchange for a standstill commitment and governance safeguards; and
4. Maintained optionality — keeping a "shadow pill" available for rapid deployment should Corvus Peak's ownership stake increase materially, signaling acquisition intent beyond the scope of the current proxy contest.
We caution the Board against aggressive structural defenses — including adoption of a shareholder rights plan at the current ownership level, board expansion or vacancy-filling during the pendency of the contest, dilutive stock issuances, or bylaw amendments targeting the pending nominations — that could be perceived as disproportionate, as interfering with the shareholder franchise, or as motivated by entrenchment rather than legitimate corporate purposes. Such measures would expose the Board to significant litigation risk, damage its credibility with institutional shareholders and proxy advisory firms, and likely prove counterproductive to the Board's objectives.
The analysis that follows examines each available measure in detail.
II. Legal Framework: Unocal / Unitrin Proportionality Standard
Before surveying the specific defensive measures available to the Board, it is essential to establish the legal framework that will govern judicial review of any such measures. This Section sets forth the applicable standards of review under Delaware law, which is the governing law for AGMG's internal affairs as a Delaware-incorporated entity.
A. Overview of *Unocal Corp. v. Mesa Petroleum Co.*
The foundational standard governing a board's adoption of defensive measures in response to a perceived threat was established by the Delaware Supreme Court in Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985). Unocal applies an enhanced judicial scrutiny standard — intermediate between the deferential business judgment rule and the exacting entire-fairness standard — whenever a board takes action in response to a perceived threat to corporate policy and effectiveness. The rationale for enhanced scrutiny is the "omnipresent specter" of board self-interest when directors act to defend against threats that may also threaten their own positions.
Under Unocal, the analysis proceeds in two prongs:
Prong 1 — Threat Identification. The board must demonstrate that it had reasonable grounds for believing that a danger to corporate policy and effectiveness existed. To satisfy this prong, the directors must show that they acted in good faith and after reasonable investigation. The nature of the threat is critical to the analysis: the Delaware courts have identified a spectrum of threats that may justify defensive action, ranging from structurally coercive tender offers at the high end to mere policy disagreements at the low end.
In the present situation, the threat is Corvus Peak's proxy contest seeking to replace three incumbent directors at the upcoming AGM, combined with the timing disruption that this contest imposes on the Board's ongoing CEO succession process. The Board would articulate this threat as follows: the contested election of Corvus Peak's nominees, during the pendency of a CEO search that is critical to the Company's strategic direction, risks destabilizing the Board's oversight of a process that requires continuity, institutional knowledge, and independence from any single shareholder's agenda. The departure of Marcus Vane created a leadership vacuum that the Board is in the process of addressing through a deliberate and independent search process; the injection of Corvus-affiliated directors at this juncture could compromise the independence and integrity of that process.
This threat characterization is credible, but the Board should be mindful that Delaware courts have been skeptical of boards that characterize ordinary proxy contests as existential threats. A proxy contest for three seats on a ten-seat board is a routine exercise of the shareholder franchise, and the Court of Chancery will not readily accept the proposition that such a contest, by itself, constitutes a cognizable threat to corporate policy and effectiveness. The Board's threat narrative is strongest when anchored in the specific circumstances — the coincidence of the CEO transition, the questions surrounding the independence of Corvus Peak's nominees, and the potential disruption to a defined and ongoing strategic process.
Prong 2 — Proportionality. Even if the board satisfies the first prong by demonstrating a reasonable perception of threat, the defensive measure adopted must be reasonable in relation to the threat posed. This is the proportionality requirement. The measure must not be coercive or preclusive of the shareholder franchise, and it must fall within a "range of reasonableness." The Delaware Supreme Court has emphasized that this is not a binary test but rather a spectrum: the more severe the threat, the wider the range of permissible responses; the milder the threat, the narrower the range.
Critically, the proportionality inquiry is context-specific. A measure that would be proportionate in the face of a coercive, two-tier tender offer might be grossly disproportionate in the context of a proxy contest for minority board representation. The Board should evaluate each potential defensive measure against the specific threat articulated above and ask whether a reasonable, informed, disinterested board could conclude that the measure falls within the range of reasonable responses to that threat.
B. *Unitrin Inc. v. American General Corp.* Refinements
The Delaware Supreme Court refined the Unocal proportionality analysis in Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995). Unitrin clarified that the second prong of the Unocal analysis involves a two-step inquiry:
First, the court asks whether the defensive measure is either "coercive" or "preclusive." A measure is coercive if it forces shareholders to accept the board's preferred outcome — for example, by creating conditions under which shareholders have no meaningful choice but to vote for the incumbent slate. A measure is preclusive if it makes a successful proxy contest or tender offer "mathematically impossible or realistically unattainable." If the measure is either coercive or preclusive, it fails the proportionality test and is invalid as a matter of law, regardless of the severity of the perceived threat.
Second, if the measure is neither coercive nor preclusive, the court applies the "range of reasonableness" test, asking whether the measure falls within the band of responses that a reasonable board could adopt in response to the identified threat. This is a deferential standard — not as deferential as the business judgment rule, but more deferential than entire fairness — and a board that has identified a legitimate threat and adopted a non-coercive, non-preclusive response will generally receive the benefit of the doubt.
The Unitrin refinement is particularly important in the proxy contest context. A defensive measure that makes it realistically unattainable for an activist to win a proxy contest — for example, by issuing sufficient shares to a friendly party to ensure that the activist's nominees cannot achieve plurality support — would be found preclusive and struck down. A measure that does not preclude success but merely makes success more difficult may survive scrutiny as falling within the range of reasonableness, provided it is supported by a legitimate corporate purpose.
C. *Blasius Industries, Inc. v. Atlas Corp.* Enhanced Scrutiny
A distinct and more demanding standard applies when the primary purpose of a board's action is to interfere with the shareholder franchise. In Blasius Industries, Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988), the Delaware Court of Chancery held that when a board acts "for the primary purpose of impeding the exercise of stockholder voting power," the board must demonstrate a "compelling justification" for its action. This is a significantly higher standard than the Unocal proportionality test and is rarely satisfied.
Blasius scrutiny applies in situations such as:
(a) expanding the board and filling newly created seats during the pendency of a proxy contest, with the effect of diluting the activist's voting influence;
(b) manipulating the date, time, location, or procedural requirements of a shareholders' meeting to impede shareholder participation or to advantage the incumbent slate;
(c) adopting bylaw amendments or governance changes directed at disqualifying specific nominees or imposing retroactive requirements on pending nominations; and
(d) taking any action whose primary purpose, as inferred from the timing, context, and effect, is to tilt the electoral playing field in favor of the incumbent board.
The Blasius standard has been described as creating a "very high barrier" for boards to clear. The Delaware Supreme Court has acknowledged tension between the Unocal and Blasius frameworks and has suggested that Unocal is the primary standard in most contested situations, with Blasius's "compelling justification" requirement serving as a supplementary consideration when franchise-impeding motives are implicated. See Mercier v. Inter-Tel (Del.), Inc., 929 A.2d 786 (Del. Ch. 2007). Nevertheless, as a practical matter, any defensive measure that directly impedes the shareholder vote will face intense judicial scrutiny, and the Board should proceed on the assumption that the Blasius standard effectively prohibits franchise-interfering actions absent extraordinary circumstances not present here.
D. Application to the AGMG Situation
The foregoing legal standards apply to AGMG as follows:
Governing Law. AGMG is incorporated in the State of Delaware. The Delaware General Corporation Law ("DGCL") governs the Company's internal affairs, including the powers and duties of the Board, the rights of shareholders, and the procedures for corporate governance actions. The Company's Amended and Restated Bylaws (effective March 22, 2022) (the "Bylaws") and Restated Certificate of Incorporation (originally filed with the Delaware Secretary of State on September 14, 2009; last restated March 22, 2022) (the "Certificate") define the specific structural governance parameters within which the Board operates.
Declassified Board. AGMG's board is fully declassified, following a shareholder-approved declassification in 2021. All directors stand for election annually at each annual meeting. This is a significant consideration for the defensive analysis because a classified board — in which only a fraction of directors stand for election in any given year — is itself a powerful defensive mechanism that insulates the board from a single-election takeover attempt. The absence of a classified board means that Corvus Peak could, in theory, replace a majority of the Board in a single election cycle if it expanded its campaign, and that the current three-nominee campaign, while limited in scope, represents a meaningful potential shift in board composition in a single vote.
Plurality Voting in Contested Elections. Under the Bylaws, director elections are governed by a majority-of-votes-cast standard in uncontested elections. However, in contested elections — defined as elections in which the number of nominees exceeds the number of seats to be filled — the Bylaws provide for plurality voting. Because Corvus Peak's nomination of three additional director candidates triggers the contested election provision, the directors receiving the highest number of votes cast will be elected, regardless of whether any director receives a majority of votes. This means that Corvus Peak's nominees could be elected by a plurality, which lowers the threshold for success in the proxy contest relative to a majority-vote standard.
Exclusive Forum Provision. Section 11.1 of the Bylaws designates the Court of Chancery of the State of Delaware as the exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of the Company to the Company or the Company's shareholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Certificate, or the Bylaws, and (iv) any action asserting a claim governed by the internal affairs doctrine. Accordingly, any litigation challenging defensive measures adopted by the Board — or any claim brought by Corvus Peak challenging Board actions — would be heard in the Court of Chancery, a court with deep expertise in corporate governance disputes and a well-developed body of precedent applying the Unocal, Unitrin, and Blasius standards described above.
These structural features of AGMG's governance architecture inform the analysis of each specific defensive measure in the following Section.
III. Survey of Available Defensive Measures
This Section examines each potential defensive measure available to the Board, assessing its legal permissibility, practical effectiveness, strategic implications, and our recommendation. The measures are presented in order of aggressiveness, from the most structurally defensive to the most collaborative.
A. Shareholder Rights Plan ("Poison Pill")
1. Description. A shareholder rights plan — commonly known as a "poison pill" — is a board-adopted rights agreement pursuant to which the Company issues to all existing shareholders of record one right per share of common stock, entitling each right holder to purchase additional shares at a substantial discount if any single shareholder (or group of shareholders acting in concert) acquires shares in excess of a specified ownership threshold, typically set between 10% and 15% of outstanding shares. The effect of the pill is to massively dilute any shareholder that crosses the threshold without Board approval, thereby making hostile accumulation of a controlling block economically infeasible.
A rights plan is adopted by the Board unilaterally, without shareholder approval, pursuant to the Board's authority under the DGCL to issue rights and options. The Board also considered a "shadow pill" — a rights plan fully drafted and approved in principle by the Board, held in reserve for immediate adoption if triggered by an escalation in Corvus Peak's accumulation activity, but not formally adopted or publicly disclosed unless and until such escalation occurs.
2. Prior Board Action
On April 10, 2024, the Board resolved not to adopt a shareholder rights plan at this time. This decision was made on the recommendation of Calderwood & Harkness, as set forth in detail in our Poison Pill / Shareholder Rights Plan Analysis memorandum dated April 8, 2024. The Board's resolution expressly preserved the Board's authority to reconsider adoption at a future date should circumstances materially change — specifically, should Corvus Peak or any other shareholder increase its ownership stake to a level that suggests an acquisition or creeping-control intent beyond the scope of the current proxy contest.
3. *Unocal* Analysis
Threat Identification. Corvus Peak currently holds 8.7% of AGMG's outstanding common shares, well below the level at which a rights plan trigger is typically set. At this ownership level, Corvus Peak does not pose a "creeping control" threat in the traditional sense — it cannot exercise negative or affirmative control over the Company through its shareholding alone, and there is no evidence in its Schedule 13D filings or public statements that it intends to acquire control of the Company through open-market purchases. Corvus Peak's stated objective is to elect three directors at the AGM, not to acquire the Company. A rights plan is designed to address accumulation threats — situations in which a hostile acquirer is amassing shares toward a control position — rather than proxy contests seeking minority board representation.
Proportionality. A rights plan adopted in the current circumstances — where the activist holds 8.7% of outstanding shares, is not seeking to acquire control, and is engaged solely in a proxy contest for three of ten board seats — would face significant proportionality challenges under Unocal. Delaware courts have upheld rights plans where there is a genuine creeping-control threat or a coercive acquisition attempt, but the case law is far less supportive of pill adoption in a proxy-contest-only scenario. The risk is that a court would find the pill either preclusive — in that it prevents Corvus Peak from gaining additional shareholder support by purchasing shares from willing sellers — or disproportionate to the threat, which is a governance contest rather than a control contest.
Moreover, the practical and reputational costs of pill adoption are substantial. Cobalt Ridge Solutions ("ISS") and Westmark Solutions ("Tarrant Partners LLC"), the two dominant proxy advisory firms, would almost certainly view the adoption of a poison pill in a proxy-contest-only scenario as a negative governance signal. ISS's voting guidelines provide for a case-by-case evaluation of rights plans, but the guidelines express a strong presumption against adoption absent a demonstrated takeover threat, and ISS has historically recommended against boards that adopt pills in response to proxy contests. Tarrant Partners LLC's policy is even more categorical, generally recommending votes against directors who adopt pills without shareholder ratification. The adoption of a pill would therefore likely push ISS and Tarrant Partners LLC toward recommending in favor of the Corvus Peak slate, materially increasing the probability that the activist prevails in the proxy contest — the exact outcome the Board seeks to avoid.
4. Recommendation. We confirm and reaffirm the Board's April 10, 2024 decision not to adopt a shareholder rights plan at this time. The pill remains available as a "break glass" measure — and we recommend maintaining the shadow pill on a ready-to-deploy basis — but deployment at the current 8.7% ownership level, in a proxy-contest-only scenario, is inadvisable for both legal and strategic reasons. We recommend that the Board revisit this question if and only if Corvus Peak materially increases its ownership stake (e.g., crosses the 12% or 15% level), at which point the threat calculus would shift meaningfully and a rights plan could be justified as a proportionate response to a genuine accumulation threat.
B. Bylaw Amendments
1. Description. Under Section 109 of the DGCL and Article X of the Bylaws, the Board has the power to adopt, amend, or repeal the Bylaws, subject to certain limitations contained in the Certificate and subject at all times to the Board's fiduciary duties. Potential bylaw amendments that have been considered in the activist-defense context include: (a) tightening advance notice requirements for shareholder nominations, (b) adopting or strengthening director qualification provisions, (c) modifying committee appointment procedures, (d) adjusting quorum requirements, and (e) expanding disclosure requirements for nominating shareholders.
2. Advance Notice Bylaw Enforcement (Existing Provisions)
AGMG's current advance notice provisions, set forth in Section 2.4 of the Bylaws, require that shareholder nominations of director candidates be delivered to the Secretary of the Company no earlier than 120 days and no later than 90 days before the first anniversary of the preceding year's annual meeting of shareholders. The 2023 Annual General Meeting was held on June 9, 2023. Accordingly, the advance notice window for the 2024 AGM opened on February 10, 2024 (120 days prior to June 9, 2024), and closed on March 11, 2024 (90 days prior to June 9, 2024).
Corvus Peak's nomination package was delivered to the Office of the Secretary of AGMG on March 1, 2024, which falls squarely within the permissible window. Calderwood & Harkness conducted a comprehensive review of the timeliness and procedural compliance of Corvus Peak's nominations, as detailed in our Advance Notice Bylaw Compliance Review memorandum dated March 5, 2024. That review examined not only the timeliness of the submission but also the substantive adequacy of the required disclosures, including: (i) the backgrounds, qualifications, and prior directorships of each nominee; (ii) the ownership information for Corvus Peak and its affiliates, including derivative positions and voting arrangements; (iii) the relationships among the nominees and between the nominees and Corvus Peak; and (iv) the representations and consents required by the Bylaws. Our March 5 memorandum concluded that Corvus Peak's nominations satisfied all procedural and substantive requirements of the advance notice provisions.
As a consequence, challenging the timeliness or procedural compliance of Corvus Peak's nominations is not a viable defensive strategy. Any such challenge would be rejected by the Court of Chancery on the basis of the clear factual record, and the attempt itself would be viewed by shareholders, proxy advisory firms, and the media as a bad-faith effort to avoid a fair contest.
3. Prospective Bylaw Amendments
Several categories of prospective bylaw amendments have been considered:
Enhanced Director Qualification Requirements. The Board could amend the Bylaws to require that all director nominees possess specific qualifications — for example, a minimum number of years of media industry experience, prior service on a governance or audit committee of a public company, or independence from any shareholder holding 5% or more of the Company's outstanding shares. Such requirements, if in place prior to the nomination window, could have the effect of disqualifying certain nominees who lack the specified qualifications.
However, the adoption of such requirements mid-contest — after Corvus Peak has already submitted its nominations and announced its slate — presents severe legal risks. An amendment that appears designed to disqualify specific identified nominees, adopted after those nominations are known, is precisely the type of franchise-interfering action that triggers Blasius enhanced scrutiny. The Court of Chancery would almost certainly infer that the primary purpose of the amendment was to impede the shareholder franchise, and the Board would be required to demonstrate a "compelling justification" — a standard it is extremely unlikely to meet in these circumstances. Furthermore, even if the Board could articulate a legitimate governance rationale for the qualification requirements (e.g., ensuring that directors bring relevant industry expertise), the timing would undermine that rationale, as it would be clear that the amendment was adopted in response to the pending nominations rather than as a proactive governance improvement.
Modified Meeting Procedures. The Board could adjust the date, location, or format of the 2024 AGM. For example, the Board could postpone the AGM to a later date to create additional time for its CEO search or strategic alternatives review, or change the meeting location to one less convenient for Corvus Peak's supporters, or adopt a virtual-only meeting format that could be perceived as limiting shareholder participation.
Any such modification would be viewed through the lens of the pending proxy contest. Moving the AGM date from June 7 to a later date — absent a compelling business justification unrelated to the contest — would be scrutinized under both Unocal and Blasius. While boards have some latitude to adjust meeting dates for legitimate scheduling reasons, the coincidence of a date change with a pending proxy contest creates a strong inference that the change is intended to benefit the incumbent slate. Delaware courts have invalidated meeting-date changes where the evidence suggests a primary purpose of impeding the shareholder franchise. See, e.g., Aprahamian v. HBO & Co., 531 A.2d 1204 (Del. Ch. 1987).
Expanded Information Requirements for Nominees. The Board could amend the Bylaws to require nominating shareholders to provide additional disclosures — for example, detailed information regarding their derivatives positions, short interests, hedging arrangements, voting agreements, and any plans or proposals they may have for the Company if their nominees are elected. Such requirements serve the legitimate governance interest of ensuring that shareholders have full information about the activist's economic interests and intentions.
Nevertheless, the timing of adoption is again the critical issue. If such requirements are adopted after Corvus Peak has already submitted its nominations, the Board would need to determine whether the requirements apply retroactively to the pending nominations or only prospectively. Retroactive application to an already-submitted nomination — requiring Corvus Peak to supplement its submission with additional disclosures not required at the time of submission — would be legally vulnerable and would be characterized by Corvus Peak as a procedural trap designed to derail its nominations on a technicality. Prospective-only application would have no effect on the pending contest but could be useful for future proxy seasons.
4. *Unocal* / *Blasius* Analysis
The overarching analytical framework for bylaw amendments in the proxy contest context is as follows:
Enforcement of existing, pre-contest bylaw provisions is generally permissible, and indeed expected, so long as enforcement is consistent, non-discriminatory, and applied in the same manner to all shareholders. The Board is entitled — and has a duty — to enforce its own governance rules. However, as noted above, Corvus Peak's nominations comply with existing requirements, and selective or pretextual enforcement of otherwise satisfied provisions would itself constitute a breach of duty.
Adoption of new bylaw provisions targeting specific pending nominations will trigger Blasius enhanced scrutiny, requiring the Board to demonstrate a "compelling justification." The Board is highly unlikely to meet this standard given that the contest is already underway, the nominations have already been submitted and validated, and the AGM is less than two months away. Any court examining such amendments would focus heavily on the timing and context, and the inference that the amendments were directed at impeding the Corvus Peak nominations would be difficult to rebut.
5. Recommendation. We strongly advise the Board not to adopt new bylaw amendments directed at the pending proxy contest. The legal risks under both Unocal and Blasius are prohibitive, and the reputational and strategic costs are equally significant. The Board should continue to enforce existing advance notice provisions as applicable but should acknowledge, both internally and in its communications with shareholders, that Corvus Peak's nominations satisfy current requirements and that the Company welcomes the shareholder franchise process.
Any governance-enhancing bylaw amendments that the Board wishes to consider — including enhanced director qualification standards, expanded nominee disclosure requirements, or updated meeting procedures — should be tabled for post-AGM consideration by the reconstituted board, at which time they can be adopted without the taint of mid-contest defensive intent.
C. Board Expansion / Strategic Appointments
1. Description. Under the Bylaws and the Certificate, the Board has the authority to fix the number of directors constituting the full Board and to fill vacancies (including newly created directorships resulting from an increase in the authorized number of directors) by the affirmative vote of a majority of the directors then in office. The Board could therefore expand its size and appoint additional directors aligned with the incumbent majority's strategic vision, with the effect of diluting the impact of Corvus Peak's three nominees if they are elected at the AGM.
The current Board consists of ten authorized seats, nine of which are occupied following the resignation of Marcus Vane on March 8, 2024. The Vane vacancy has not been filled. If the Board were to expand its size — for example, from ten to thirteen seats — and fill the three newly created seats (plus the existing Vane vacancy) with directors aligned with the incumbent majority, the result would be a thirteen-member board with twelve management-aligned directors and, at most, one existing director potentially sympathetic to Corvus Peak's position. Even if all three Corvus Peak nominees were elected at the AGM (replacing three incumbents in a plurality vote), the activist's representation would be diluted to three of thirteen seats — less than one-quarter of the board — rather than three of ten.
2. *Unocal* / *Blasius* Analysis
Board expansion during a pending proxy contest is the paradigmatic Blasius scenario. Indeed, Blasius Industries, Inc. v. Atlas Corp. itself involved precisely this fact pattern: a board that expanded its size and filled the newly created seats in order to dilute an activist's voting influence. The Court of Chancery invalidated the expansion and appointments, holding that the board's primary purpose was to impede the shareholder franchise and that no "compelling justification" had been demonstrated.
The reasoning of Blasius would apply with full force to any board expansion undertaken by the AGMG Board in the current circumstances. The proximity of the June 7 AGM, the pendency of the Corvus Peak proxy contest, and the absence of any business-related justification for expanding the Board at this particular moment would lead any court to conclude that the expansion was undertaken for the primary purpose of entrenching the incumbent directors and diluting the influence of the shareholder vote. The Board would be required to demonstrate a "compelling justification" for the expansion, a standard that it could not meet on these facts.
Even filling the existing Vane vacancy — which does not involve an expansion of the board's authorized size — would invite intense scrutiny in the current context. While the Board has the authority to fill vacancies under the Bylaws, and while filling a vacancy created by a resignation is ordinarily an unexceptionable act of governance, the timing and context matter enormously. Filling the vacancy less than two months before the AGM, while a proxy contest is pending, with a director who would be expected to vote with the incumbent majority, would be viewed by the Court of Chancery — and by shareholders and proxy advisory firms — as an effort to tilt the electoral balance. The court would evaluate whether the primary purpose of the appointment was to impede the franchise, and the circumstantial evidence would support such an inference.
3. Recommendation. We strongly advise the Board against expanding the authorized number of directors or filling the Vane vacancy prior to the AGM. Any such action would be perceived as an act of entrenchment, would invite immediate litigation in the Court of Chancery — where the Board would face the daunting "compelling justification" standard — and would severely damage the Board's credibility with institutional shareholders and proxy advisory firms at the most critical juncture of the proxy contest. The Vane vacancy should remain unfilled until after the AGM, at which point the reconstituted board can address it in a non-contested context.
D. White Squire / Friendly Shareholder Strategy
1. Description. A "white squire" strategy involves placing a significant block of newly issued shares with a friendly investor — typically a strategic partner, an affiliated entity, or a long-term institutional investor — who is expected to vote in support of the management slate. This can be accomplished through a private placement, a directed public offering, or a PIPE (private investment in public equity) transaction. The strategic rationale is to create a counterweight to Corvus Peak's 8.7% block by increasing the pool of management-supportive shares, thereby diluting Corvus Peak's percentage ownership and its voting influence at the AGM.
2. Key Shareholders — Current Landscape
To assess the feasibility and necessity of a white squire strategy, it is useful to survey AGMG's current ownership landscape. The following table summarizes the Company's known significant shareholders as of the most recent available filings:
These five holders collectively account for approximately 27.7% of outstanding shares. The remaining approximately 72.3% is held by a dispersed base of institutional investors, index funds, retail shareholders, and other holders.
3. *Unocal* Analysis
A dilutive stock issuance to a friendly third party during a pending proxy contest is among the most heavily scrutinized defensive measures under Delaware law. Such issuances sit at the intersection of the Unocal proportionality standard and the Blasius franchise-protection doctrine, because a share issuance that dilutes an activist's voting power directly impedes the activist's ability to prevail in the proxy contest.
Delaware courts evaluating a white squire transaction will scrutinize whether the issuance serves a legitimate corporate purpose — such as raising capital for a genuine business need, cementing a strategic partnership, or funding an acquisition — or whether the primary purpose is to entrench the incumbent board by manipulating the shareholder base. The burden is on the Board to demonstrate the former, and the circumstantial evidence will be weighed heavily.
In AGMG's case, the absence of a genuine capital-raising justification is the central obstacle. The Company reported fiscal year 2023 revenue of approximately $4.37 billion and EBITDA of approximately $812 million. While we are not privy to the Company's detailed cash flow projections or capital expenditure plans, the Company has not disclosed any liquidity constraints, covenant compliance concerns, or imminent capital needs that would necessitate an equity issuance at this time. At AGMG's current market capitalization of approximately $8.65 billion (based on a share price of approximately $20.97 per share as of April 11, 2024), any issuance large enough to meaningfully dilute Corvus Peak's 8.7% block would be correspondingly large — for example, an issuance of 25 million shares (approximately 6% of outstanding) would raise approximately $524 million and dilute Corvus Peak to approximately 8.2%, a marginal shift that would likely not alter the proxy contest outcome.
Even if the issuance were structured as a strategic investment tied to a specific business initiative — such as accelerating the build-out of the Luminos streaming platform, financing an identified acquisition target, or recapitalizing a specific business segment — the timing of the issuance during a pending proxy contest would invite skepticism. A court would ask why the capital raise is necessary now, why it could not be deferred until after the AGM, and why the chosen investor is expected to be management-supportive. Answers to these questions that suggest the primary purpose is to influence the proxy vote, rather than to serve a genuine business need, would lead to invalidation of the issuance.
4. Recommendation. A white squire strategy is not recommended in the current circumstances. The absence of a genuine, articulable capital-raising justification, combined with the pendency of the proxy contest, makes such an issuance legally perilous and strategically counterproductive. Any dilutive share issuance would provide Corvus Peak with compelling litigation ammunition — including the ability to seek injunctive relief in the Court of Chancery, potentially on an expedited basis — and would supply Corvus Peak with a powerful public narrative of board entrenchment that would resonate with institutional shareholders and proxy advisory firms. The risks far outweigh the marginal benefits.
E. Strategic Alternatives Announcement
1. Description. The Board can announce a formal review of strategic alternatives — a process in which the Board, aided by an independent financial advisor, evaluates a range of potential transactions and strategic options to maximize shareholder value. Such a review may encompass a potential sale of the Company as a whole, the divestiture of one or more business segments, a leveraged recapitalization or special dividend, significant share repurchases, strategic partnerships or joint ventures, or other value-creation initiatives. A strategic alternatives review serves a dual purpose in the activist-defense context: it signals the Board's responsiveness to shareholder concerns about value creation, and it creates a credible business justification for asking shareholders to maintain the incumbent board through the completion of the review process.
2. Factual Background
On April 22, 2024, the Board engaged Stonebridge Crane & Co. ("Stonebridge") as financial advisor to conduct a comprehensive evaluation of strategic alternatives for AGMG. The engagement is led by Anil Kapoor-Mehta, Managing Director of Stonebridge's Financial Advisory Group, and is supported by a team of senior bankers with deep expertise in the media and entertainment sector. The engagement terms include a monthly retainer of $250,000 and a transaction fee of 0.25% of enterprise value if a change-of-control transaction is consummated as a result of the review process.
We note for the Board's records that this memorandum was prepared prior to the public announcement of the Stonebridge engagement, and the analysis contained herein informed the Board's decision to retain Stonebridge and undertake the strategic alternatives review. The engagement letter was executed on April 22, 2024, and the public announcement is expected to coincide with the filing of the Company's definitive proxy statement.
3. *Unocal* Analysis
A strategic alternatives review is generally well-received by Delaware courts as a proportionate and appropriate response to shareholder activism. The review signals that the Board is taking seriously the activist's contention that the Company is undervalued and is actively exploring ways to unlock value for all shareholders. It does not interfere with the shareholder franchise — shareholders remain free to vote for whichever slate they prefer at the AGM — but it provides an informational basis for shareholders to conclude that the incumbent Board is capable of and committed to value maximization.
The credibility of the review is critical. The Board must ensure that the review is genuine — conducted by a reputable, independent financial advisor with a defined scope and timeline — and not merely a pretext for delay or a talking point for the proxy contest. A "sham" review that is announced with fanfare but never meaningfully pursued would itself expose the Board to fiduciary liability, as it would constitute a misrepresentation to shareholders intended to influence the proxy vote. Moreover, if a court were to conclude that the strategic alternatives review was adopted solely to create a narrative advantage in the proxy contest, the court could view it as a defensive measure subject to Unocal scrutiny, and the lack of genuine substance behind the review would weigh against a finding of proportionality.
If the review leads to the identification of a transaction that would result in a change of control of the Company — such as a sale or merger — the Board's fiduciary duties would shift under Revlon, Inc. v. MacAndrews & Forbaci Holdings, Inc., 506 A.2d 173 (Del. 1986). Under Revlon, once a change of control becomes inevitable, the Board's sole obligation is to seek the highest reasonably available price for shareholders. The Board should be aware that initiating a strategic alternatives review creates the possibility that Revlon duties may attach if the review leads to a sale process, and should structure the review accordingly.
4. Strategic Considerations
AGMG's business is organized into four operating segments, each with distinct revenue profiles, growth trajectories, and valuation characteristics:
(a) Streaming & Digital Content — $1,835.4 million in revenue (42% of total FY 2023 revenue of $4.37 billion). This segment, anchored by the Luminos streaming platform, represents AGMG's highest-growth business and commands the highest valuation multiples among the Company's segments based on comparables analysis.
(b) Live Entertainment & Events — $1,048.8 million in revenue (24% of total). This segment encompasses AGMG's concert, festival, and live-event properties, which generate significant cash flow but are subject to cyclical demand patterns and capacity constraints.
(c) E-Commerce & Merchandising — $830.3 million in revenue (19% of total). This segment includes AGMG's direct-to-consumer merchandise and licensing business, which benefits from synergies with the content and entertainment segments.
(d) Advertising & Brand Partnerships — $655.5 million in revenue (15% of total). This segment includes traditional and programmatic advertising revenues across AGMG's owned media properties.
The segmented structure of AGMG's business suggests that the strategic alternatives review should include a conglomerate-discount analysis, evaluating whether certain divisions would command a premium valuation if operated independently or sold to sector-specific acquirers. It is a common contention of activist investors that diversified media conglomerates trade at a discount to the sum of their parts, and a rigorous sum-of-the-parts analysis would enable the Board to either rebut or acknowledge this contention with data.
The Company's current implied enterprise value-to-EBITDA multiple of approximately 10.7× ($8.65 billion enterprise value ÷ $812 million EBITDA) suggests potential undervaluation relative to media-sector comparables, particularly in the streaming subsector where comparables trade at materially higher multiples. This valuation gap is one of Corvus Peak's central arguments for board change, and the strategic alternatives review provides the Board with a framework for addressing it — either by demonstrating that the gap is closing as the Luminos platform scales, or by identifying specific value-creation transactions that the incumbent Board is best positioned to execute.
A public announcement of the review provides a credible narrative for institutional shareholders who may be sympathetic to Corvus Peak's value-creation thesis but who could be persuaded to retain the incumbent Board if they believe a genuine value-maximization process is underway and that the incumbent directors — with their institutional knowledge of the Company's operations, strategic relationships, and content pipeline — are better positioned to oversee such a process than a reconstituted board with activist-nominated directors who may have different priorities.
5. Recommendation. The strategic alternatives review is recommended as a core component of the Board's integrated defensive strategy. The Board has already taken the critical step of engaging a reputable financial advisor, and should proceed to announce the review publicly at the earliest strategically appropriate moment — ideally in connection with the filing of the definitive proxy statement. The review should have a defined scope (encompassing the full range of alternatives, from a whole-company sale to segment divestitures to capital-return alternatives) and a credible timeline (neither artificially compressed to suggest haste nor indefinitely extended to suggest pretext). The review should be genuine and should not be conditioned on or terminated by the outcome of the proxy contest — it should proceed regardless of whether the management slate or the Corvus Peak nominees prevail, thereby demonstrating the Board's good faith commitment to value maximization for all shareholders.
F. Enhanced Shareholder Engagement Campaign
1. Description. The Board can undertake a proactive, intensive shareholder engagement campaign — direct outreach to AGMG's institutional shareholder base to articulate the Board's strategic vision, defend the integrity of the ongoing CEO succession process, respond to Corvus Peak's specific criticisms, and make the affirmative case for the management slate. This engagement includes direct meetings and calls with the largest institutional holders, participation in governance roadshows, publication of supplemental proxy materials, and targeted communications to the proxy advisory firms. Enhanced shareholder engagement is the most fundamental and legally defensible of all defensive strategies: it operates within the shareholder franchise rather than against it, relies on persuasion rather than structural impediments, and is entirely consistent with the Board's fiduciary duties.
2. Current Engagement Infrastructure
The Board has already established the operational infrastructure for a comprehensive engagement campaign:
Proxy Solicitor. On February 28, 2024, the Company engaged Citrine Advisory Group Inc. ("Citrine") as its proxy solicitor for the management slate. The engagement is led by Sandra Eriksson, Managing Director, who has extensive experience in contested proxy solicitations involving media-sector companies. Citrine will manage the day-to-day mechanics of the solicitation, including shareholder identification and targeting, vote tracking and projections, call campaigns, and logistics for Board-shareholder meetings.
Proxy Statement. AGMG filed its preliminary proxy statement on Schedule 14A with the SEC on April 5, 2024. The filing is currently subject to SEC staff review and comment, and the Company expects to file its definitive proxy statement in early May 2024 (filed May 3, 2024). The definitive proxy statement will serve as the formal soliciting document for the management slate and will set forth the Board's case for re-election of the incumbent directors.
Key Institutional Holders to Target. Based on current ownership data and strategic assessment, the following institutional holders represent the highest-priority engagement targets:
(a) Thorne Capital Management LP (6.3%, approximately 25,993,800 shares) — a Boston-based passive long-only fund managed by Portfolio Manager Oliver Thorne. Thorne Capital has been a significant AGMG shareholder for approximately four years and has historically voted in support of management recommendations. Thorne Capital has not publicly declared its position in the proxy contest, but its voting history suggests a management-supportive disposition. Direct engagement with Oliver Thorne is critical to securing this block early.
(b) Ridgeway Asset Management Ltd. (5.1%, approximately 21,042,600 shares) — a London-based traditional asset manager. The Head of Governance, Fiona Ashcroft, has engaged with AGMG management on governance matters in the past and has expressed views that suggest a constructive but independent disposition. Ridgeway's position is uncertain, and the outcome may depend on the quality and specificity of the Board's engagement with Ashcroft's governance team. The Board should offer a direct meeting with independent directors, preferably including the Chair of the Special Committee, Tobias Kessler.
(c) Windermere Pension Trust (4.4%, approximately 18,154,400 shares) — a US public pension fund. Chief Investment Officer Bernard Napier has expressed concerns about board refreshment in prior communications with the Company, suggesting that Windermere may be sympathetic to at least some elements of Corvus Peak's critique. The Board's engagement strategy for Windermere should emphasize the concrete steps the Board has already taken (declassification, majority voting, strategic alternatives review) and should acknowledge the legitimacy of refreshment concerns while arguing that the Corvus Peak nominees are not the optimal vehicle for addressing them.
These three holders collectively control approximately 15.8% of outstanding shares, representing approximately 65.2 million shares. Their collective voting decision may well determine the outcome of the proxy contest. Beyond these three, the Board should also conduct a broader engagement effort targeting holders in the 1%–4% range, index fund governance teams (including Crestline Capital Management, Glenrock Investment Management, and Dunmore Asset Management), and retail shareholder channels.
3. *Unocal* Analysis
Enhanced shareholder engagement is universally recognized as a proportionate and appropriate defensive response to an activist campaign. It does not implicate Blasius concerns because it operates within, rather than against, the shareholder franchise: the Board is not impeding shareholders' ability to vote for whichever slate they prefer, but rather seeking to persuade shareholders through the provision of information and the articulation of a compelling case. The shareholder franchise depends on the availability of information, and a board that engages actively with its shareholders to present its perspective is fulfilling, not undermining, the franchise.
The Board's use of corporate resources for proxy solicitation — including the costs of the Citrine engagement, the preparation and distribution of proxy materials, and the travel and time of directors and officers — is permissible under Delaware law, subject to the obligation that all communications be truthful, not misleading, and in compliance with SEC proxy rules (Regulation 14A under the Securities Exchange Act of 1934, as amended). AGMG's proxy materials have been prepared in compliance with Regulation 14A and have been reviewed by Calderwood & Harkness for legal sufficiency.
4. Messaging Framework
The engagement campaign should be organized around four interconnected themes:
Theme 1: CEO Succession Process Integrity. The Board should emphasize its commitment to conducting a fair, open, and rigorous CEO search, guided by the independent executive search firm Hargrove Tate Partners LLC (lead consultant: Christine Aldridge), with compensation benchmarking provided by Brackenridge Howard Associates Inc. (lead consultant: Miriam Estabrook). The Board should highlight the procedural safeguards implemented by the Special Committee (chaired by Tobias Kessler, with members Lucinda Farrow-Grant and Dr. Anwen Llewellyn), including the separation of the search process from the proxy contest, the use of independent advisors, and the defined criteria for CEO candidates.
The Board should address Corvus Peak's criticism of the Priya Nair-Whitfield interim designation directly, noting that the designation was made by unanimous Board vote following a deliberate evaluation of internal and external interim options, and that Nair-Whitfield's appointment as Interim CEO does not predetermine the outcome of the permanent CEO search. The Board should emphasize that the search process is ongoing, that a shortlist of external candidates is under review, and that the Board expects to announce a permanent CEO appointment on a timeline consistent with the Company's strategic needs.
Theme 2: Board Qualifications and Refreshment. The Board should present the qualifications, experience, and specific contributions of the incumbent directors at risk in the proxy contest. The Board should acknowledge the legitimate interest of shareholders in board refreshment — and point to the Board's track record of governance improvements, including the 2021 declassification, the adoption of majority voting in uncontested elections, the elimination of the poison pill, and the proactive engagement with shareholders on governance matters — while arguing that wholesale replacement of three directors during a CEO transition introduces unnecessary instability and risks disrupting the strategic continuity that the Company needs at this critical juncture.
Theme 3: Strategic Vision and Value Creation. The Board should present a forward-looking strategic narrative that addresses the concerns underlying Corvus Peak's campaign. This should include: the Luminos streaming platform's subscriber growth trajectory, cross-segment revenue synergies, the Company's capital allocation priorities, the strategic alternatives review, and the Board's commitment to closing the valuation gap identified by Corvus Peak and other shareholders. The Board should present concrete metrics and targets where possible, avoiding vague generalities that would be perceived as defensive posturing.
Theme 4: Concerns About Corvus Peak's Nominees. The Board should raise, in measured and factual terms, legitimate concerns about the independence and qualifications of Corvus Peak's nominees. Two specific points warrant attention:
(a) Vanessa Loring is a Managing Director at Corvus Peak Capital Partners LP itself. If seated on the AGMG Board, she would serve simultaneously as a fiduciary of the Company and as an employee of the Company's most prominent activist shareholder. This dual role raises significant independence concerns: Loring would be expected to exercise independent judgment in the best interests of all shareholders, but her professional obligations and compensation structure at Corvus Peak create inherent conflicts. The Board should note that ISS and Tarrant Partners LLC guidelines generally view fund-affiliated directors with skepticism for this reason.
(b) The relationship between external CEO candidate Jonathan Hale and Corvus Peak founder Damien Solberg — specifically, their shared board service at Keystone Digital Ventures Ltd. — raises questions about the independence and objectivity of Corvus Peak's agenda. If Corvus Peak's ultimate objective is to install Hale as CEO, and if Hale has a pre-existing relationship with Solberg, then the proxy contest may be less about board refreshment than about installing a management team aligned with a single shareholder's preferences. The Board should present this concern carefully, supported by facts rather than speculation, and should avoid overstating the significance of the relationship.
5. Proxy Advisory Firm Engagement
Pre-recommendation meetings with ISS and Tarrant Partners LLC are critical to the outcome of the proxy contest. These firms influence a substantial proportion of institutional shareholder votes — estimates vary, but ISS and Tarrant Partners LLC recommendations are widely followed by index funds and passive investors, and a negative recommendation can shift vote totals by 15–20% or more.
AGMG should schedule meetings with the ISS and Tarrant Partners LLC analyst teams as early as possible — ideally within two weeks of filing the definitive proxy statement — to present the Board's case. The Board should prepare a comprehensive presentation addressing:
(a) The strategic alternatives review and its defined timeline;
(b) The CEO search process, including the role of the Special Committee and the engagement of independent advis