PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
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 8, 2024
RE: Analysis of Proposed Shareholder Rights Plan ("Poison Pill") — Defensibility Under Delaware Law
MATTER NO.: 1017-00002
I. Executive Summary
The Board of Directors of Aurelius Global Media Group PLC (the "Board") has asked Calderwood & Harkness LLP ("Calderwood & Harkness" or "we") to evaluate whether Aurelius Global Media Group PLC ("AGMG" or the "Company") should adopt a shareholder rights plan — commonly referred to as a "poison pill" — in response to the activist campaign by Corvus Peak Capital Partners LP ("Corvus Peak"). This memorandum sets forth our analysis of the legal defensibility of such a plan under Delaware law, the practical and reputational consequences of adoption in the current proxy contest environment, and our recommendation to the Board.
Corvus Peak currently holds 8.7% of AGMG's outstanding common shares, representing approximately 35,896,200 of the Company's 412,600,000 shares of common stock outstanding. This stake was most recently disclosed in Corvus Peak's amended Schedule 13D filed with the Securities and Exchange Commission (the "SEC") on February 26, 2024. Corvus Peak's beneficial ownership interest represents a significant minority position but falls well short of a controlling stake.
In addition to its equity accumulation, Corvus Peak has nominated three director candidates — Malcolm Trask, Vanessa Loring, and Dr. Raymond Chu — for election at the Company's 2024 Annual General Meeting of Shareholders (the "2024 AGM"), which is currently scheduled for June 7, 2024. Corvus Peak filed its preliminary proxy statement with the SEC on April 1, 2024, and has engaged Falconer Strauss LLC as its proxy solicitor, indicating a well-resourced and committed campaign.
After careful analysis of the applicable Delaware law, the current factual circumstances, and the expected reactions of proxy advisory firms and key institutional shareholders, Calderwood & Harkness recommends against the adoption of a shareholder rights plan at this time. Our recommendation rests on the following principal grounds:
First, Corvus Peak's 8.7% stake does not constitute a "creeping control" threat sufficient to justify a rights plan under the proportionality framework established by the Delaware Supreme Court in Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), and refined in Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995). There is no evidence that Corvus Peak intends to accumulate shares toward a control position, and its amended Schedule 13D expressly describes its purpose as seeking board representation and influencing strategic direction — not acquiring control of the Company.
Second, Corvus Peak's campaign takes the form of a proxy contest for board seats, not a hostile tender offer or a creeping acquisition strategy. A poison pill is designed to deter the accumulation of shares in furtherance of an unsolicited takeover; it is ill-suited to address the type of activist engagement the Company currently faces. Deploying a rights plan in the context of a proxy contest, rather than a takeover bid, creates a substantial risk that a reviewing court would characterize the measure as an entrenchment tactic rather than a legitimate defensive response.
Third, adoption of a rights plan would almost certainly trigger negative voting recommendations from Cobalt Ridge Solutions ("ISS") and Northpoint Systems ("Tarrant Partners LLC"), the two leading proxy advisory firms. In the contested election environment of the June 7 AGM, such negative recommendations would materially and perhaps fatally damage the Board's ability to prevail in the proxy contest and retain its preferred slate of directors.
Fourth, the Board has adequate alternative defensive measures available to it — including enhanced shareholder engagement, strategic communications, enforcement of advance notice bylaw provisions, and other proportionate responses — that do not carry the legal and reputational risks associated with a rights plan. These alternative measures are addressed separately in our forthcoming April 12, 2024 memorandum on Defensive Measures Available to the Board.
We note for the record that the Board considered this analysis at its meeting on April 10, 2024, and resolved not to adopt a rights plan at this time, as memorialized in a separate Board resolution of even date. We believe that decision is well-supported by the legal and practical considerations set forth herein and establishes a sound fiduciary record.
II. Background and Context
A. AGMG Corporate Profile
Aurelius Global Media Group PLC is a global media and entertainment conglomerate incorporated under the laws of the State of Delaware and registered as an overseas company in England and Wales. The Company is dual-listed: its common shares trade on the New York Stock Exchange under the ticker symbol "AGMG" and on the premium segment of the Official List of the Financial Conduct Authority ("FCA") and the London Stock Exchange Main Market under the ticker symbol "AGMG.L." The Company's principal executive offices are located at 14 Sceptre Row, London EC2V 7QN, United Kingdom. Its registered agent in the State of Delaware is Pinnacle Corporate Services Inc., 1209 Orange Street, Wilmington, Delaware 19801.
As of March 1, 2024, AGMG's market capitalization was approximately £6.82 billion (approximately $8.65 billion at an exchange rate of $1.2683 per pound sterling). For the fiscal year ended December 31, 2023, AGMG reported consolidated revenue of $4.37 billion and adjusted EBITDA of $812 million, reflecting an EBITDA margin of approximately 18.6%. The Company employs approximately 23,400 individuals worldwide across its operations in North America, Europe, and the Asia-Pacific region.
AGMG's business is organized into four operating segments:
(i) Streaming & Digital Content, which accounted for approximately 42% of FY 2023 revenue ($1,835.4 million) and includes the Company's flagship AGMG+ streaming platform, digital content licensing, and original content production operations;
(ii) Live Entertainment & Events, which accounted for approximately 24% of FY 2023 revenue ($1,048.8 million) and includes the Company's live concert and festival properties, touring exhibitions, and experiential entertainment venues;
(iii) E-Commerce & Merchandising, which accounted for approximately 19% of FY 2023 revenue ($830.3 million) and includes the Company's direct-to-consumer merchandise platforms, licensing and royalty operations, and digital marketplace interests; and
(iv) Advertising & Brand Partnerships, which accounted for approximately 15% of FY 2023 revenue ($655.5 million) and includes the Company's advertising sales operations across its owned media properties, branded content partnerships, and sponsorship arrangements.
AGMG's Certificate of Incorporation was originally filed with the Delaware Secretary of State on September 14, 2009 (Delaware File No. 4827193; EIN 26-4831097). The Company's governing instruments have been amended from time to time, most recently through the Restated Certificate of Incorporation and Amended & Restated Bylaws, each effective as of March 22, 2022. Of particular relevance to this analysis, the Board was declassified in 2021, and since that time all directors have stood for election on an annual basis. The Company does not currently have a shareholder rights plan in effect.
B. Corvus Peak's Stake and Campaign
Corvus Peak Capital Partners LP is a Delaware limited partnership, with Corvus Peak Management LLC serving as its general partner. The firm was founded by Damien Solberg, who serves as its Founding Partner and Chief Investment Officer. The portfolio manager responsible for Corvus Peak's campaign with respect to AGMG is Erin Nakamura. Corvus Peak manages approximately $7.2 billion in assets under management and has a well-established track record of shareholder activism, having conducted public campaigns at several other companies in the media and technology sectors over the past five years.
Corvus Peak's involvement with AGMG has developed rapidly. On January 18, 2024, Corvus Peak filed an initial Schedule 13D with the SEC, disclosing beneficial ownership of approximately 6.1% of the Company's outstanding common shares. On February 26, 2024, Corvus Peak filed an amended Schedule 13D (Amendment No. 1), disclosing that it had increased its position to approximately 8.7% — representing approximately 35,896,200 shares of common stock — at an average cost basis of $20.97 per share. This implies a total capital commitment of approximately $752.8 million, underscoring the significance of Corvus Peak's investment and the depth of its commitment to the campaign.
The escalation of Corvus Peak's engagement has proceeded in a series of clearly delineated steps:
• February 12, 2024: Corvus Peak delivered a demand letter to the Board requesting (i) the appointment of two new independent directors acceptable to Corvus Peak, (ii) a comprehensive strategic review of AGMG's business portfolio and capital allocation, and (iii) adoption of a formal CEO succession plan.
• February 26, 2024: Concurrently with the filing of its amended Schedule 13D, Corvus Peak publicly announced its intention to nominate three director candidates for election at the 2024 AGM.
• March 1, 2024: Corvus Peak formally submitted its director nominations to the Company, naming Malcolm Trask (age 58, former Chief Executive Officer of Archway Digital Holdings Inc.), Vanessa Loring (age 44, Managing Director at Corvus Peak), and Dr. Raymond Chu (age 61, former President of Helix Media Networks Inc.) as its nominees. These nominations were timely submitted within the advance notice window prescribed by the Company's Amended & Restated Bylaws, which opened on February 10, 2024, and closed on March 11, 2024.
• April 1, 2024: Corvus Peak filed its preliminary proxy statement on Schedule 14A with the SEC, formally initiating the contested solicitation.
Corvus Peak is represented by outside counsel Blackthorn Howell & Crane LLP, with lead partner Dominic Sayer directing the legal aspects of the campaign. Corvus Peak has also retained Falconer Strauss LLC as its proxy solicitor, with lead contact Derek Huang.
C. CEO Succession Context
The activist campaign unfolds against the backdrop of a leadership transition at AGMG. Marcus Vane resigned as Chief Executive Officer, effective March 8, 2024. The Board designated Priya Nair-Whitfield, the Company's Chief Operating Officer and an Executive Director, as Interim CEO pending the completion of a permanent CEO search.
On March 18, 2024, the Board formed a Special Committee of independent directors, consisting of Tobias Kessler (Chair), Lucinda Farrow-Grant, and Dr. Anwen Llewellyn. The Special Committee was tasked with overseeing two parallel workstreams: (i) the permanent CEO succession process, and (ii) the Board's response to the Corvus Peak activist campaign. The Board separately retained the executive search firm Hargrove Tate Partners LLC (lead partner: Christine Aldridge) on March 15, 2024, to conduct a comprehensive search for a permanent CEO. We understand that both an internal candidate — Interim CEO Nair-Whitfield — and at least one significant external candidate, Jonathan Hale, are under active consideration.
The contested CEO succession intensifies the activist dynamics surrounding the Company and has heightened market and investor attention. Corvus Peak's public messaging has focused heavily on governance failures relating to CEO succession planning, and its demand letter of February 12, 2024, specifically cited the absence of a formal succession plan as a governance deficiency. Notwithstanding these dynamics, the pendency of a CEO search does not independently justify the adoption of a rights plan. The threat, if any, arising from the CEO succession is a governance and management challenge, not the type of creeping control or hostile acquisition threat that a rights plan is designed to address.
D. Current Shareholder Base
The composition of AGMG's shareholder base is a critical factor in both the legal analysis of a potential rights plan and the practical dynamics of the upcoming proxy contest. Based on the most recent beneficial ownership filings, publicly available data, and information provided to us by management and by Citrine Advisory Group Inc. (the Company's proxy solicitor), the major holders of AGMG common stock are as follows:
No other shareholder is known to hold in excess of 4% of the outstanding common stock. The shareholder base is dispersed and predominantly institutional. This dispersion is relevant because it means that the outcome of the proxy contest will be determined by the votes of unaffiliated institutional holders — many of whom rely heavily on ISS and Tarrant Partners LLC recommendations — rather than by any single large block. The absence of a controlling or dominant shareholder also undermines any argument that a rights plan is needed to prevent a shift in control through accumulation, as there is no existing control block to protect.
E. Engagement Context
Calderwood & Harkness LLP was engaged by the Board on March 12, 2024, to serve as independent governance counsel in connection with the Board's response to the Corvus Peak activist campaign and related matters. Our engagement is distinct from and independent of the Company's standing relationship with Ashworth Velmoran LLP (lead partner: Martin Cho), which has served as AGMG's primary outside legal counsel since 2015. We note that Corvus Peak has characterized Ashworth Velmoran as "management-aligned" in its public communications, and the Board's decision to retain independent governance counsel was made in part to address this perception and to ensure that the Board's deliberations are informed by counsel whose independence is beyond question.
AGMG management separately engaged Citrine Advisory Group Inc. (Managing Director: Sandra Eriksson) on February 28, 2024, as the Company's proxy solicitor for the 2024 AGM and the contested election. Citrine has been instrumental in providing shareholder intelligence and will play a central role in the Company's solicitation campaign.
III. Legal Framework — Delaware Shareholder Rights Plans
A. Overview of the Poison Pill Mechanism
A shareholder rights plan, or "poison pill," is a defensive mechanism through which a corporation issues rights as a dividend to all shareholders of record. In a standard "flip-in" plan, these rights entitle holders — other than the triggering acquiror — to purchase additional shares of the company's common stock (or, in some formulations, preferred stock convertible into common stock) at a steep discount to the prevailing market price if an acquiror crosses a specified ownership threshold. That threshold is typically set between 10% and 20% of the outstanding shares, depending on the circumstances of the particular company and the nature of the perceived threat.
The economic consequence of the rights becoming exercisable is severe dilution of the triggering acquiror's ownership stake. The dilutive effect renders the completion of a hostile acquisition prohibitively expensive, as the acquiror's proportionate interest in the corporation would be dramatically reduced upon the exercise of rights by all other shareholders. In practical terms, no rational acquiror would proceed with an unsolicited acquisition if a rights plan is in place, because the dilutive cost of triggering the pill would vastly exceed any premium the acquiror might otherwise pay. For this reason, poison pills operate as a powerful deterrent, effectively forcing any potential acquiror to negotiate with the board of directors rather than proceed unilaterally.
Rights plans serve two principal defensive functions: (i) deterring hostile tender offers by making them economically irrational for the bidder, and (ii) deterring "creeping accumulations" of control through open-market purchases and privately negotiated block transactions, which might otherwise allow an acquiror to amass a controlling or near-controlling position without offering a premium to all shareholders.
In addition to the standard, publicly adopted rights plan, boards of directors sometimes consider a "shadow pill" — a rights plan that is fully drafted and adopted by board resolution but not publicly announced or implemented. The shadow pill is held "on the shelf," ready for rapid deployment if a creeping accumulation or hostile bid materializes. The purported advantage of a shadow pill is that it provides the board with rapid-response capability without triggering the immediate adverse reaction from proxy advisory firms and institutional investors that typically accompanies a publicly announced plan. However, as discussed in Section VI below, shadow pills carry their own risks, including the risk of discovery and the associated disclosure obligations.
The Board previously considered a shadow pill approach, and accordingly, this memorandum evaluates both an immediately effective plan and a shelf plan.
B. *Moran v. Household International, Inc.* (Del. 1985)
The seminal Delaware Supreme Court decision upholding the facial validity of poison pills is Moran v. Household International, Inc., 500 A.2d 1346 (Del. 1985). In Moran, the Delaware Supreme Court held that a board of directors has the authority to adopt a shareholder rights plan without prior shareholder approval, grounded in the board's general powers under Sections 141 and 157 of the Delaware General Corporation Law (the "DGCL"). Section 141(a) vests the management of the business and affairs of a Delaware corporation in the board of directors, and Section 157 authorizes the board to issue rights entitling holders to purchase shares of the corporation's capital stock on such terms and conditions as the board may fix.
The Moran court emphasized that the validity of a rights plan must be evaluated in two stages: first, as a matter of the board's statutory authority, and second, in the context of any future application of the plan, under the fiduciary duty standards applicable to defensive measures. The court made clear that while the board has the power to adopt a rights plan in advance of any specific threat, the exercise of that power in response to a particular threat would be subject to enhanced scrutiny under the framework established in Unocal Corp. v. Mesa Petroleum Co., discussed immediately below.
Moran is thus the foundation of the board's authority to adopt a rights plan, but it does not provide a blank check. The fiduciary constraints on the exercise of that authority — particularly in the context of a specific activist challenge — are significant and must be carefully evaluated.
C. *Unocal Corp. v. Mesa Petroleum Co.* (Del. 1985)
Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), established the framework for enhanced judicial scrutiny of defensive measures adopted by a board of directors in response to a perceived threat to corporate policy and effectiveness. Under the Unocal standard, a board's adoption of a defensive measure is reviewed under a two-part test:
First (Threshold Inquiry — Threat Identification): The board must demonstrate that it had reasonable grounds for believing that a cognizable threat to corporate policy and effectiveness existed. In satisfying this prong, the board's good faith and reasonable investigation are examined, including its reliance on the advice of outside legal and financial advisors. The burden is on the directors to show that, after a reasonable investigation, they determined in good faith that a threat was present.
Second (Proportionality Inquiry): The defensive measure adopted must be reasonable in relation to the threat posed. This is not a simple balancing test; the board must demonstrate that its response is neither preclusive nor coercive — that is, the measure must not foreclose the possibility of a successful proxy contest or tender offer, and it must not force shareholders to accept a particular outcome against their will.
The Unocal framework reflects the Delaware judiciary's recognition that boards of directors face an "omnipresent specter" of self-interest when responding to threats that could result in the removal of incumbent directors or the loss of their board positions. Enhanced scrutiny is designed to ensure that defensive measures are genuinely aimed at protecting the corporation and its shareholders, rather than entrenching the incumbent board.
Under Unocal, the nature and severity of the threat are critical variables. A full-blown hostile tender offer at an inadequate price, for example, presents a qualitatively different — and more serious — threat than a minority shareholder's proxy contest for a limited number of board seats. The proportionality inquiry is correspondingly calibrated: a robust defensive response may be justified in the face of a coercive, structurally inadequate tender offer, but the same response may be grossly disproportionate when deployed against an activist campaign that seeks only to elect a minority of directors.
D. *Unitrin, Inc. v. American General Corp.* (Del. 1995)
In Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995), the Delaware Supreme Court refined the proportionality prong of the Unocal analysis and clarified the standards by which a reviewing court should assess whether a defensive measure falls within an acceptable range of board responses. The Unitrin court articulated two categories of responses that would fail proportionality review:
(a) Coercive measures: A defensive measure is coercive if it forces shareholders to accept a particular outcome against their will or deprives them of a meaningful choice. For example, a defensive measure that effectively compels shareholders to support the incumbent slate by threatening adverse economic consequences for supporting the dissident slate would be deemed coercive.
(b) Preclusive measures: A defensive measure is preclusive if it renders a successful proxy contest or tender offer "mathematically impossible or realistically unattainable." A measure that, as a practical matter, eliminates the possibility of a challenge to the incumbent board, regardless of the merits of that challenge, is preclusive.
If a defensive measure is neither coercive nor preclusive, the Unitrin court held that the measure falls within the "range of reasonableness" — a deferential standard under which the court will not substitute its judgment for that of the board, provided the board's decision was the product of a reasonable process and reflects a good-faith assessment of the threat. However, even a measure that is technically not preclusive or coercive may still fail the range-of-reasonableness analysis if it is disproportionate to the identified threat.
The Unitrin framework is especially relevant here because the Board's consideration of a rights plan must be evaluated against the backdrop of a proxy contest — a context in which the risk of preclusivity and coerciveness is measured differently than in the context of a hostile tender offer.
E. *Blasius Industries, Inc. v. Atlas Corp.* (Del. Ch. 1988)
A distinct and particularly demanding standard of review applies when a board takes action with the primary purpose of interfering with the shareholder franchise — the right of shareholders to vote and to elect directors. 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 effectiveness of a shareholder vote, the board bears the burden of demonstrating a "compelling justification" for its action. This is an extremely high standard — significantly more demanding than the Unocal proportionality test — and one that boards rarely satisfy.
The Blasius standard is of central importance to the present analysis. Corvus Peak's campaign is fundamentally a proxy contest — an exercise of the shareholder franchise. Corvus Peak is not attempting to acquire control of the Company through open-market purchases or a tender offer; it is seeking to elect three directors to the Board through the ballot box. In this context, any defensive measure that could be characterized as having the primary purpose of blunting the effectiveness of Corvus Peak's proxy contest — or of deterring other shareholders from supporting the Corvus Peak slate — would be subject to Blasius enhanced scrutiny. A rights plan adopted in the midst of a contested proxy solicitation, where the activist is not pursuing a control transaction, fits squarely within the Blasius paradigm.
If the Blasius standard is triggered, the Board would bear the burden of demonstrating a "compelling justification" for the adoption of the rights plan — a burden that, in the words of Chancellor Allen in Blasius, is "quite onerous" and is "not combatable by showing the board acted in good faith." The risk that a reviewing court would apply Blasius rather than Unocal is, in our judgment, substantial, and it significantly increases the litigation risk associated with the adoption of a rights plan in the present circumstances.
F. *Yucaipa American Alliance Fund II, L.P. v. Riggio* (Del. Ch. 2010) and Related Cases
Delaware courts have generally been skeptical of poison pills deployed at low ownership thresholds in the context of activist proxy campaigns, as distinct from hostile takeover bids. In Yucaipa American Alliance Fund II, L.P. v. Riggio, 1 A.3d 310 (Del. Ch. 2010), the Court of Chancery scrutinized the use of a rights plan by the board of Barnes & Noble, Inc. to limit an activist shareholder's accumulation during a proxy contest. The court's analysis emphasized the distinction between an activist's use of the ballot box and an acquiror's accumulation of shares toward control, and expressed concern about the potential for a rights plan to serve an entrenchment function in the proxy contest context.
More broadly, the Delaware judiciary has recognized that a rights plan adopted with a trigger set at or near an activist's current stake level — for example, a 10% trigger when the activist already holds 8.7% — invites particularly heightened scrutiny. Such a trigger effectively caps the activist's ownership at its current level, which could be perceived as an attempt to prevent the activist from further demonstrating its commitment to the company's shareholders or from acquiring additional shares in the open market as part of its investment thesis. The closer the trigger is set to the activist's current holding, the more likely a reviewing court is to conclude that the pill was adopted not in response to a genuine creeping control threat, but rather as a targeted measure to hamper the activist's campaign.
G. *Third Point LLC v. Ruprecht* (Del. Ch. 2014)
In Third Point LLC v. Ruprecht, No. 9469-VCP, 2014 WL 1922029 (Del. Ch. May 2, 2014), the Court of Chancery sustained the validity of a rights plan with a relatively low trigger threshold — in that case, a 10% trigger — but only in circumstances where the board presented credible evidence of a genuine threat of creeping control. The court emphasized the narrowly tailored nature of the pill and the fact that the activist in question had demonstrated a pattern of rapid accumulation that, if continued, could have resulted in de facto control of the company without a premium being paid to all shareholders.
The Third Point decision is sometimes cited as authority for the proposition that a low-trigger pill can survive enhanced scrutiny. However, the factual predicate for that holding is materially distinguishable from the present case. In Third Point, there was concrete evidence that the activist was accumulating shares at a pace consistent with a march toward control; the court was persuaded that absent the pill, the activist could have achieved a controlling or near-controlling position through open-market purchases. Here, by contrast, Corvus Peak holds 8.7% of AGMG's outstanding shares and has not disclosed any intention to acquire control. Its amended Schedule 13D expressly describes its purpose in terms of board representation and strategic influence, not control acquisition. The rate of accumulation — from 6.1% to 8.7% over approximately five weeks — represents the build-out of a significant minority position, not a trajectory toward control in a company with over 412 million shares outstanding and a market capitalization in excess of $8.6 billion.
We do not believe that Third Point provides a reliable basis for concluding that a rights plan would be sustained in the present circumstances.
IV. Application to AGMG's Current Situation
A. Threat Identification Analysis
The threshold inquiry under Unocal requires the Board to identify a cognizable threat to corporate policy and effectiveness. We address below the three potential threat theories that could be advanced in support of a rights plan and explain why, in our judgment, none of them supports adoption.
1. Nature of Corvus Peak's Campaign. The most fundamental obstacle to the adoption of a rights plan is the nature of Corvus Peak's campaign itself. Corvus Peak is pursuing a proxy contest for the election of three director candidates at the 2024 AGM. This is an exercise of the shareholder franchise — the most basic and constitutionally protected right of shareholders under Delaware corporate law. It is not a hostile tender offer. It is not a creeping acquisition toward a control position. It is not a "two-tier, front-loaded" coercive bid of the type that gave rise to the Unocal framework in the first instance.
Corvus Peak's amended Schedule 13D, filed February 26, 2024, describes the purpose of its investment in the following terms: Corvus Peak acquired its shares "for investment purposes" and "to seek to engage with the Board and management of [AGMG] to discuss changes that [Corvus Peak] believes are necessary to enhance long-term shareholder value, including the election of director nominees who will bring fresh perspectives to the Board, the implementation of a comprehensive strategic review, and the adoption of a formal CEO succession plan." The amended 13D does not disclose any plan or proposal to acquire control of the Company, whether through additional open-market purchases, privately negotiated transactions, tender offers, or any other means.
In the absence of a hostile bid or a disclosed intent to acquire control, the Board would be hard-pressed to satisfy Unocal's threshold requirement that a cognizable threat to corporate policy and effectiveness exists. A proxy contest, standing alone, is not the type of threat that justifies a rights plan; indeed, it is the mechanism by which shareholders hold boards accountable.
2. Assessment of "Creeping Control" Threat. The Board might argue that Corvus Peak's rapid accumulation from 6.1% to 8.7% over the five-week period from January 18 to February 26, 2024 — representing the acquisition of approximately 10,725,600 additional shares — suggests a trajectory toward creeping control that a rights plan is designed to arrest. We have carefully considered this argument and conclude that it is not well-supported by the facts.
An 8.7% position in a company with 412,600,000 shares outstanding and a market capitalization of approximately $8.65 billion does not threaten creeping control. Even if Corvus Peak were to continue accumulating shares at the same rate, it would take many months for its position to approach anything resembling a controlling stake — and the filing obligations under Sections 13(d) and 16 of the Securities Exchange Act of 1934, as well as the HSR Act notification requirements, would provide the Board with ample advance notice of any such accumulation. Moreover, AGMG's shareholder base is dispersed and predominantly institutional; there is no concentrated block that Corvus Peak could combine with its own holdings to achieve de facto control.
Three specific features of AGMG's governance structure further undermine the creeping control argument:
(a) Declassified Board: Since 2021, all of AGMG's directors stand for election annually. In a classified board structure, an activist might need to accumulate a larger stake over multiple election cycles to achieve board control; the annual election of all directors means that even a relatively small but well-organized shareholder can exercise meaningful influence through the ballot box without acquiring a controlling stake. The declassification of the Board, which was itself a governance improvement, paradoxically reduces the utility of a rights plan as a defensive tool.
(b) Absence of a Controlling Shareholder: No single shareholder or group of shareholders controls AGMG. The largest holder is Corvus Peak at 8.7%, and no other holder exceeds 6.3%. In this environment, "control" is exercised through the annual election process, not through share accumulation.
(c) Majority Voting Standard (with Plurality Carve-Out): Under AGMG's Amended & Restated Bylaws, directors are elected by a majority of the votes cast in uncontested elections, with the standard shifting to plurality in contested elections. This means that in the upcoming contested election, the candidates receiving the most votes will be elected, regardless of whether they receive a majority. The voting standard is a function of the bylaws, not of any shareholder's stock ownership, and a rights plan does not affect the voting standard.
Finally, there is no evidence of any coordinated accumulation by Corvus Peak with other shareholders that would aggregate to a quasi-control position. Corvus Peak's amended Schedule 13D does not disclose any agreements, arrangements, or understandings with other holders for the purpose of acquiring, holding, or voting AGMG shares. While it is possible that Corvus Peak may seek to build informal alliances with other institutional holders in the proxy contest, such alliances would take the form of voting support, not coordinated share purchases.
3. Absence of a Hostile Takeover Bid. No tender offer has been made for the Company's shares, and no such offer has been publicly contemplated by any party. While the Board separately engaged Stonebridge Crane & Co. (lead banker: Anil Kapoor-Mehta) on April 22, 2024, to evaluate strategic alternatives, this engagement was a Board-initiated process undertaken as part of the Board's own fiduciary analysis of the Company's long-term strategic direction. It was not precipitated by any unsolicited acquisition proposal or hostile bid.
In the absence of a hostile tender offer — the paradigmatic threat for which poison pills were designed — the adoption of a rights plan lacks its most compelling justification. The Board could, of course, reserve the right to adopt a pill in the future should a hostile bid materialize; indeed, as discussed in Section VI, a "shadow pill" approach was considered for precisely this purpose. But the current threat landscape does not support the adoption of an effective plan at this time.
B. Proportionality Analysis — Unocal/Unitrin Framework
Even if the Board could articulate a cognizable threat under the first prong of Unocal, the adoption of a rights plan would face significant obstacles under the proportionality inquiry — the second prong of the Unocal analysis, as refined by Unitrin.
1. Would a Rights Plan Be Preclusive?. A rights plan with a trigger at 10–15% would not technically preclude a proxy contest by Corvus Peak. A proxy contest is waged through the solicitation of shareholder votes, not through the accumulation of shares above a specified ownership threshold. Corvus Peak can conduct its proxy contest, solicit proxies, and elect its director nominees to the Board without ever acquiring a single additional share of AGMG common stock beyond its current 8.7% position. The pill, in other words, does not prevent Corvus Peak from doing the very thing it is attempting to do.
However, the concept of preclusivity is not limited to mathematical impossibility. Under Unitrin, a measure is also preclusive if it makes a successful challenge "realistically unattainable." A pill adopted in the context of a proxy contest — rather than in response to a takeover bid — sends a powerful signal to the market and to the Company's institutional shareholders. It signals that the Board is willing to deploy aggressive defensive measures to resist shareholder pressure, which may cause institutional shareholders to question whether the Board is acting in the best interests of all shareholders or is instead seeking to entrench itself. In this indirect but meaningful sense, a pill could operate to undermine the effectiveness of Corvus Peak's proxy contest, even if it does not technically preclude it.
2. Would a Rights Plan Be Coercive?. A rights plan does not directly coerce shareholder voting behavior in a proxy contest. Unlike a coercive tender offer, which may pressure shareholders into tendering their shares to avoid being "frozen out" at a lower price, a rights plan does not alter the economic consequences of a shareholder's voting decision. A shareholder who votes for the Corvus Peak slate is not penalized, and a shareholder who votes for the Company's slate is not rewarded.
That said, the adoption of a rights plan in the midst of a contested election could create what might be described as a "chilling atmosphere" that indirectly impedes the exercise of the shareholder franchise. The message implicit in the adoption of a pill — that the Board is prepared to take aggressive action to resist challenges to its authority — may discourage some institutional shareholders from aligning with the dissident slate, not because of any direct economic coercion, but because of a broader concern about the Board's willingness to escalate the conflict. While this form of indirect influence may not rise to the level of coercion as that term is used in the Delaware case law, it is a relevant consideration in assessing the overall proportionality of the Board's response.
3. Range of Reasonableness. Even if a rights plan were deemed neither technically preclusive nor technically coercive, we do not believe it would fall within the "range of reasonableness" as that concept has been articulated by the Delaware courts. The range-of-reasonableness inquiry asks whether the defensive measure is proportionate to the identified threat. Here, the disproportionality is stark:
• The activist holds only 8.7% of the outstanding shares and has not signaled any intent to acquire control.
• The Company has a declassified board, meaning that the activist's path to influence is through the annual election process — the ballot box — not through the accumulation of shares to a control position.
• The activist has complied with all applicable disclosure and nomination requirements.
• The proxy contest is the quintessential mechanism of shareholder democracy; it is the means by which shareholders hold boards accountable.
• A rights plan — a tool designed to prevent hostile acquisitions — is fundamentally disproportionate to the threat posed by a shareholder exercising its franchise rights.
A reviewing court applying the Unitrin range-of-reasonableness standard would likely conclude that the adoption of a rights plan in these circumstances was not a proportionate response to the threat, such as it is, posed by Corvus Peak's proxy contest.
C. Blasius Risk
Perhaps the most significant legal risk associated with the adoption of a rights plan at this time is the prospect that a reviewing court would apply the Blasius enhanced scrutiny standard. As discussed in Section III.E above, Blasius applies when the primary purpose of a board action is to interfere with the shareholder franchise. The burden then shifts to the board to demonstrate a "compelling justification" for its action — a burden that the Delaware courts have described as "quite onerous" and one that boards rarely satisfy.
In the present circumstances, the risk that a court would apply Blasius is substantial. Corvus Peak's campaign is a proxy contest for board seats — a direct exercise of the shareholder franchise. A rights plan adopted in this context, where no hostile tender offer or creeping acquisition has been identified, would be difficult to characterize as anything other than an attempt to blunt the effectiveness of the shareholder vote. Even if the Board were to articulate a legitimate secondary purpose for the pill — such as preventing creeping accumulation — the temporal proximity of the adoption to the June 7 AGM, the absence of a hostile bid, and the clear connection between the pill and the activist campaign would create a strong inference that the primary purpose of the pill was franchise-interfering.
If the Blasius standard were applied, the Board would bear the burden of demonstrating a "compelling justification" for the adoption of the rights plan. In the absence of a hostile bid, a creeping acquisition, or some other threat that goes beyond the mere exercise of the shareholder franchise, we do not believe the Board could satisfy that burden. The failure to do so would likely result in the invalidation of the pill by the Court of Chancery, together with the attendant adverse publicity and reputational damage.
We also note that any challenge to a rights plan would be filed in the Court of Chancery of the State of Delaware, which is AGMG's exclusive forum for intra-corporate disputes pursuant to Section 11.1 of the Amended & Restated Bylaws. Corvus Peak, through its counsel at Blackthorn Howell & Crane LLP, would almost certainly bring a preliminary injunction action seeking to enjoin the pill on an expedited basis. Such an action would consume significant Board and management time and attention during the critical weeks leading up to the June 7 AGM, further diverting resources from the substantive proxy contest.
V. Proxy Advisory Firm and Institutional Shareholder Considerations
The legal analysis set forth above provides strong grounds for declining to adopt a rights plan. The practical and reputational considerations are equally compelling. The Board's ability to prevail in the June 7 AGM proxy contest depends critically on the voting recommendations of ISS and Tarrant Partners LLC and on the support of key institutional shareholders. Adoption of a rights plan would, in our judgment, severely undermine the Board's position on both fronts.
A. ISS Policy
ISS Proxy Voting Guidelines — which are followed, in whole or in part, by a substantial majority of U.S. and international institutional investors — generally recommend voting against or withholding from directors who adopt a poison pill without shareholder approval. This policy applies with particular force where the pill is adopted in the context of a proxy contest, a circumstance in which ISS presumes that the pill is motivated by entrenchment considerations.
If the Board were to adopt a rights plan at this juncture, ISS would almost certainly issue an adverse voting recommendation for the Company's incumbent director nominees at the June 7 AGM. Given that the Company's preliminary proxy statement has not yet been filed and that ISS will issue its benchmark recommendation in mid-to-late May, adoption of a pill now — approximately two months before the annual meeting — would virtually guarantee that the ISS analysis is dominated by the pill adoption rather than by the substantive merits of the Company's strategic plan and the qualifications of its nominees.
ISS would be especially likely to view the adoption as an entrenchment tactic given the timing: Corvus Peak has already nominated its director candidates, submitted timely nominations under the advance notice bylaws, and filed its preliminary proxy statement. In this context, adoption of a pill would appear reactive and defensive, precisely the characterization the Board should seek to avoid.
B. Tarrant Partners LLC Policy
Tarrant Partners LLC similarly disfavors the adoption of poison pills without shareholder ratification and applies heightened scrutiny when a pill is adopted in the context of a contested election. Tarrant Partners LLC's analytical framework considers whether the board has articulated a credible threat that justifies the pill, whether the pill is narrowly tailored to address that threat, and whether the pill is subject to a reasonable sunset provision or shareholder ratification requirement.
In the present case, Tarrant Partners LLC is likely to recommend in favor of some or all of the Corvus Peak nominees based on the governance and strategic concerns that Corvus Peak has raised in its public campaign. Adoption of a rights plan would provide additional and powerful ammunition for a Tarrant Partners LLC recommendation supporting the full dissident slate, as it would reinforce Corvus Peak's narrative that the incumbent Board is focused on self-preservation rather than shareholder value creation.
C. Impact on Key Institutional Holders
The proxy contest will ultimately be decided by the votes of AGMG's institutional shareholders. The following analysis addresses the expected reaction of the Company's three largest non-activist institutional holders:
Thorne Capital Management LP (6.3%): Thorne Capital is a passive, long-only fund managed by Portfolio Manager Oliver Thorne. Thorne Capital does not typically take public positions on proxy contests and is widely understood to follow ISS recommendations in contested elections. If ISS issues an adverse recommendation for the Company's nominees — which is virtually certain if a pill is adopted — Thorne Capital's 25,993,800 shares (6.3% of outstanding) would likely be voted for the Corvus Peak slate. This alone could be decisive in a closely contested election.
Ridgeway Asset Management Ltd. (5.1%): Ridgeway is a London-based traditional asset manager with a strong commitment to governance best practices. Head of Governance Fiona Ashcroft is well known in UK governance circles and has publicly opposed the adoption of defensive measures absent a credible and imminent takeover threat. Ridgeway's 21,042,600 shares (5.1% of outstanding) represent a significant voting block. We understand from preliminary engagement by Citrine Advisory Group that Ridgeway is currently undecided on the proxy contest and is evaluating the qualifications of both slates; adoption of a pill would almost certainly push Ridgeway toward the Corvus Peak slate.
Windermere Pension Trust (4.4%): Windermere is a U.S. public pension fund managed by Chief Investment Officer Bernard Napier. Public pension funds have historically taken a skeptical view of defensive measures and generally vote in accordance with proxy advisor recommendations. Windermere's 18,154,400 shares (4.4% of outstanding) would be expected to follow an adverse ISS or Tarrant Partners LLC recommendation resulting from pill adoption.
In the aggregate, Thorne Capital, Ridgeway, and Windermere hold approximately 15.8% of AGMG's outstanding shares. When combined with Corvus Peak's 8.7% stake, a vote by these three institutions in favor of the Corvus Peak slate would deliver approximately 24.5% of the outstanding shares to the dissident — a commanding position in a dispersed shareholder base where no other holder exceeds 4%. The Board cannot afford to alienate these critical swing voters.
D. UK/FCA Considerations
As AGMG's shares are admitted to the premium segment of the Official List of the FCA and to trading on the London Stock Exchange Main Market, the Company is subject to additional governance expectations that, while not directly prohibiting the adoption of a rights plan under Delaware law, create significant reputational and engagement risks.
UK institutional shareholders and governance bodies — including the Investment Association, the Pensions and Lifetime Savings Association, and the Financial Reporting Council (through the UK Corporate Governance Code) — generally view poison pills as inconsistent with best practice governance standards. While the UK Corporate Governance Code does not apply on a mandatory basis to AGMG (which is a Delaware-incorporated company with a premium listing, subject to the "comply or explain" regime applicable to overseas companies with premium listings), the governance expectations of UK-based holders such as Ridgeway Asset Management are informed by these norms.
Adoption of a rights plan could trigger engagement requests and public criticism from UK governance bodies, creating reputational risk that extends beyond the immediate proxy contest. Such criticism could also complicate AGMG's ongoing relationship with the FCA and the London Stock Exchange, particularly if it raises questions about the Company's compliance with the governance standards expected of premium-listed companies.
VI. Evaluation of "Shadow Pill" Alternative
A. Description. As noted in Section III.A above, a "shadow pill" is a rights plan that is fully drafted and adopted by board resolution but is not publicly announced or triggered. The plan is maintained on a confidential basis, ready for rapid deployment if a creeping accumulation or hostile bid materializes. The theoretical advantage of a shadow pill is that it provides the board with the ability to respond swiftly to an emerging threat — potentially deploying the pill within hours of learning that an acquiror has crossed a critical accumulation threshold — without incurring the immediate adverse consequences associated with a publicly announced plan.
The shadow pill approach offers certain structural advantages in the abstract: it preserves optionality, avoids the immediate negative reaction from proxy advisory firms and institutional investors, and allows the board to deploy the plan on a case-by-case basis when a genuine threat has been identified. In theory, the existence of a shadow pill should remain confidential, as it would be adopted by board resolution in executive session and would not be subject to mandatory disclosure unless and until it is triggered or its existence is otherwise required to be disclosed.
However, the shadow pill approach carries significant and potentially disqualifying risks in the present circumstances.
B. Recommendation. Calderwood & Harkness recommends against the adoption of a shadow pill at this time for the following reasons:
First, the pendency of Corvus Peak's books-and-records demand under Section 220 of the DGCL creates a material risk that the existence of a shadow pill would be discovered. Corvus Peak served a Section 220 demand on the Company on March 22, 2024, seeking access to Board minutes, committee materials, and other corporate records relating to the Board's response to the activist campaign. If the Company is required to produce Board minutes or resolutions reflecting the adoption of a shadow pill — whether in connection with the Section 220 demand or in the course of any future litigation — the existence of the plan would become known. At that point, the shadow pill would be treated identically to a publicly adopted plan by proxy advisory firms and institutional investors, negating the primary advantage of the shadow approach.
Second, the absence of a creeping control or hostile takeover threat undermines the fiduciary basis for even a shelf plan. As discussed in Section IV.A above, the Unocal threshold inquiry requires the identification of a cognizable threat. A shadow pill, no less than a publicly adopted plan, must be supportable as a reasonable response to a genuine threat. The mere possibility that a threat might materialize at some point in the future is not, in our view, sufficient to satisfy Unocal's threshold inquiry, particularly where the only identified threat is a proxy contest.
Third, the potential downside of a shadow pill — including the risk of discovery, the associated disclosure obligations under SEC rules (including Item 8.01 of Form 8-K, which requires disclosure of rights plan adoptions) and FCA Disclosure Guidance and Transparency Rules ("DTR"), and the adverse reaction if the plan's existence becomes public — outweighs the marginal benefit of maintaining a rapid-deployment capability for a threat that does not currently exist. The Board can always adopt a rights plan on an expedited basis if a genuine hostile bid or creeping accumulation materializes in the future; the incremental time required to adopt a plan de novo, as opposed to deploying a pre-drafted shelf plan, is measured in days, not weeks, and can be accomplished with the assistance of counsel on a rapid basis.
For these reasons, we recommend against the adoption of a shadow pill.
VII. Alternative Defensive Measures
This memorandum is limited to the analysis of whether the Board should adopt a shareholder rights plan. A comprehensive survey of the alternative defensive measures available to the Board — including, without limitation, enhanced shareholder engagement, strategic alternatives announcements, enforcement of the Company's advance notice bylaw provisions, corporate communications and messaging strategies, bylaw and charter review, and other proportionate responses — will be addressed in a separate memorandum dated April 12, 2024 (the "Memorandum on Defensive Measures Available to the Board").
We note here, briefly, that the Board has multiple proportionate tools available to respond to the Corvus Peak campaign without incurring the legal, reputational, and practical risks associated with a rights plan. These alternative measures are designed to address the specific nature of the threat — a proxy contest for board seats — rather than the threat of a hostile acquisition. They include, among other things, direct engagement with institutional shareholders, public articulation of the Board's strategic vision, demonstration of the qualifications and independence of the Board's nominees, and proactive communication of the Board's governance enhancements. Each of these measures is proportionate to the threat posed, consistent with governance best practices, and unlikely to trigger adverse reactions from proxy advisory firms or institutional investors.
VIII. D&O Insurance Considerations
The Board should be aware of the potential impact of a rights plan adoption on the Company's directors and officers liability insurance coverage. AGMG currently maintains a D&O insurance policy with Helmsley Indemnity Corp. (Policy No. HIC-DOL-2024-009347), providing coverage of $75 million per occurrence and $150 million in the aggregate, with an annual premium of $3.8 million. The policy period runs from January 1, 2024, through December 31, 2024.
If the Board were to adopt a rights plan and Corvus Peak were to challenge the plan in litigation — as we believe is virtually certain — the resulting defense costs and any potential adverse judgments or settlements would erode the available D&O coverage. Preliminary injunction proceedings in the Court of Chancery, which is the exclusive forum for intra-corporate disputes under Section 11.1 of the Bylaws, can involve significant legal fees, expert costs, and management time. In a contested proxy contest environment, the diversion of resources to rights plan litigation would compound the strategic disadvantage of the pill itself.
Moreover, the adoption of a rights plan that is subsequently invalidated by the Court of Chancery could create additional exposure for the individual directors who voted in favor of adoption, including the potential for breach of fiduciary duty claims. While such claims would typically be covered under the D&O policy (subject to the policy's terms, conditions, and exclusions), the erosion of coverage limits for defense costs in the rights plan litigation could leave reduced coverage available for any subsequent claims.
Avoidance of unnecessary litigation exposure is therefore an additional — though secondary — factor weighing against the adoption of a rights plan at this time.
IX. Recommendation
For the reasons set forth in this memorandum, Calderwood & Harkness LLP recommends that the Board of Directors of Aurelius Global Media Group PLC not adopt a shareholder rights plan at this time, whether as an immediately effective plan or as a shadow/shelf plan.
Our recommendation is grounded in the following considerations, each of which has been addressed in detail above:
1. No Creeping Control Threat. Corvus Peak's 8.7% stake does not constitute a creeping control threat within the meaning of the Delaware case law. Corvus Peak's amended Schedule 13D does not disclose any intent to acquire control, and its ownership position is far from a controlling stake in a company with over 412 million shares outstanding and a dispersed institutional shareholder base.
2. Proxy Contest, Not a Hostile Bid. Corvus Peak's campaign is a proxy contest for the election of three director nominees — an exercise of the shareholder franchise. A poison pill is the wrong tool for this type of activist engagement. Rights plans are designed to deter hostile acquisitions and creeping accumulations of control, not to impede shareholder voting.
3. Legal Risk Under Unocal, Unitrin, and Blasius. Adoption of a rights plan in the present circumstances would likely fail the Unocal proportionality analysis and would create a substantial risk that a reviewing court would apply the Blasius "compelling justification" standard — an extremely demanding burden that we do not believe the Board could satisfy. The resulting litigation exposure, including the prospect of a preliminary injunction action in the Court of Chancery, is significant and would divert Board and management attention during the critical pre-AGM period.
4. Adverse Proxy Advisory Firm Recommendations. Adoption of a rights plan would almost certainly trigger negative voting recommendations from both ISS and Tarrant Partners LLC for the Company's incumbent director nominees at the June 7 AGM. In the contested election environment, such recommendations could be determinative of the outcome.
5. Alienation of Key Institutional Shareholders. The Company's three largest non-activist institutional holders — Thorne Capital Management LP (6.3%), Ridgeway Asset Management Ltd. (5.1%), and Windermere Pension Trust (4.4%) — would likely view the adoption of a rights plan negatively. Together with Corvus Peak's 8.7% stake, adverse votes from these three holders would deliver approximately 24.5% of outstanding shares to the dissident slate, creating a commanding advantage in a dispersed shareholder base.
6. UK Governance and FCA Considerations. AGMG's dual listing on the premium segment of the FCA Official List / London Stock Exchange Main Market creates additional governance expectations. UK institutional shareholders and governance bodies generally view poison pills as inconsistent with best practice. Adoption would create reputational risk and potential engagement complications with UK-based holders.
7. Adequate Alternative Defensive Measures. The Board has multiple proportionate defensive tools available — addressed in our forthcoming April 12, 2024 memorandum — that do not carry the legal and reputational risks of a rights plan and that are better suited to the specific nature of the Corvus Peak proxy contest.
We recommend that the Board memorialize its decision not to adopt a rights plan in a formal resolution, documenting in detail the Board's deliberative process, its consideration of this memorandum and the advice of outside counsel, and its reasons for declining to adopt a plan. A well-documented deliberati