Response Letter to the Chairman of Masmóvil Ibercom S.A.

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• España - español

LONDON, July 20, 2020 /PRNewswire/ --

Masmovil Ibercom, S.A.
Avenida de Bruselas, 38
28108, Alcobendas, Madrid

Attention: Mr Eduardo Díez-Hochleitner Rodríguez (Chairman of the Board of Directors)

In London, on 17 July 2020

Dear Mr Díez-Hochleitner,

We acknowledge receipt of your letter, dated 10 July 2020, in relation to the public takeover bid launched by Lorca Telecom Bidco, S.A.U. (the "Bidder") on all of the shares of Masmovil Ibercom, S.A. ("Masmovil"), announced on 1 June 2020 (the "Bid"), and which replied our prior communication dated 8 July 2020.

We hereby address you again, in your condition as Chairman of the Board of Directors, requesting you to make a copy of this letter available to each and all members of the Board of Directors.

We would like to thank you for your reply, trusting that, as you have expressly stated, the Board of Directors of Masmovil shall act with the aim to comply with all applicable legal provisions, including those related to loyalty duties, market abuse and public takeover bids. However, we must note that your letter does not eliminate our deep concern about the terms of the Bid that have been agreed among the Board of Directors of Masmovil, some significant shareholders, and the Bidder, and does not address all queries raised in our letter, some of them of a very specific nature.

In this sense, your letter does not clarify, as requested expressly, which members of the Board of Directors of Masmovil abstained from voting in relation to the Board resolutions required to approve the "Agreement relating to the Bid" entered into with the Bidder, and the public announcement of support issued by the Board as a whole. The existence of conflicts of interest will have to be disclosed publicly, at the latest, in the Board of Directors report required by section 24 of Royal Decree 1066/2007, so the lack of transparency cannot be supported by the reserved nature of such information. Since there are no significant reasons to delay its disclosure, we insist in the relevance of having a prompt answer to such query, given that, in our opinion, the public endorsement of the Bid by the Board of Directors as a whole, without a concurrent transparent disclosure of conflicts of interest, contradicts the spirit of Royal Decree 1066/2007 and even of the Spanish Companies Act.

It is surprising, in this sense, that your letter refers to the "swift" creation of the Steering Committee, when said corporate body was created after the binding agreements with the Bidder had been entered into, and the Board as a whole had publicly endorsed the Bid.

We must also disagree with your interpretation of applicable companies law in relation to the absence of conflict of interest affecting the CEO (understanding, on the other hand, that you are confirming your acceptance that there is effectively a conflict affecting the proprietary directors appointed at the proposal of the shareholders that have entered into irrevocable undertakings with the Bidder and who, consequently, had the duty to abstain in relation to the arrangements with the Bidder mentioned above).

In the specific case of the CEO, you point out in your letter that the absence of conflicts, and the appropriateness of his position in the Steering Committee, are based on the fact that he has not, in his individual capacity, entered into any agreement with the Bidder in relation to the Bid. You also point out that, in your view, the fact that the Bidder may support the retention of the CEO only reflects "their confidence and trust in the management and strategy followed by the Company in recent years".

However, it is essential not to forget that the company itself, whose management team is led at the highest level by the CEO, has entered into an agreement with the Bidder in relation to the Bid which, among other issues, addresses remuneration matters that affect him and his team personally and directly. His involvement, even if acting on behalf of the company, in the negotiation and execution of said arrangements, or in their subsequent follow up, implies a clear breach of the basic obligations arising from the duty of loyalty as regulated by the Spanish Companies Act, and of the most basic rules of good governance on management remuneration issues. No public shareholder is "taking comfort" from the management having been turned from stewards for all shareholders into a "Trojan horse" for the bidding group at the Board level.

Finally, we hereby also request you to provide an express opinion on the issue raised in section 4 of our letter to the CNMV dated 23 June 2020, regarding the agreement reached by Masmovil with the Bidder in order to compensate the latter for the costs of the Bid in a scenario where there are no competing bids. In our opinion, as stated in our letter to the CNMV, this contradicts an express provision of Royal Decree 1066/2007, and may generate a liability for Masmovil which will damage, if applied, all shareholders for the benefit of the Bidder and a few significant shareholders with Board representation.

We deliver a copy of this letter to the CNMV considering the need for it, as supervisory body, to have knowledge of all elements affecting the Bid in order to procure an adequate protection of the interests of Masmovil's shareholders and the Spanish market generally.

Thanking you in advance for your attention, we will expect your reply, and will be available for any additional information you may require.

Yours faithfully,

Nicolas Dautigny
Polygon Global Partners LLP

Polygon Global Partners LLP
4 Sloane Terrace
London SW1X 9 DQ
(United Kingdom)

Attention: Mr. Nicolas Dautigny

Madrid, 10 July 2020

Dear Mr. Dautigny

We acknowledge receipt of your letter dated 8 July 2020 (the "Letter"), addressed to me in my condition as Chairman of the Board of Directors of Masmovil Ibercom, S.A. ("MASMOVIL" or the "Company"), in which you raise certain questions in connection with the takeover bid for the shares of the Company launched by Lorca Telecom Bidco, S.A.U. ("Lorca") and publicly announced on 1 June 2020 (the "Bid").

We note that those questions were already raised in similar terms in your previous letter of 23 June 2020 addressed to the Comisión Nacional del Mercado de Valores ("CNMV").

With reference to the points you raise in the Letter, please note the following:

I.  In relation to the potential conflict of interest that may affect different Board members in relation to the Bid, we can assure you that the Company has always been fully conscious of and compliant with the applicable legal rules on conflicts of interest of directors as well as the most demanding corporate governance standards in this area. The Company, of course, intends to continue complying with the same rules during the course of the Bid, in particular with regards to the report on the Bid that the Board will have to issue once the Bid is duly authorised by the CNMV (the "Report").

This is one of the reasons why the Company decided to swiftly create an ad hoc steering committee within the Board of Directors to manage the Bid process and ensure its full independence and transparency. The Steering Committee is formed exclusively by directors who have not reached any type of agreement with Lorca or its shareholders and comprises a majority of independent directors. Please note that the CEO of MASMOVIL has not signed any type of agreement or commitment in connection with the Bid with Lorca or its shareholders. The mere fact that Lorca may support his retention only reflects, in our view, their confidence and trust in the management and strategy followed by the Company in recent years.

II.  In relation to the new agreements and transactions that have been publicly disclosed by the Company after the announcement of the Bid, please be assured that the Company has strictly complied at all times with the relevant takeover bid and market abuse regulations. These transactions will of course be duly considered by the Board of Directors when issuing the Report, in particular to determine whether the price per share offered by Lorca can be considered fair from a financial perspective.

Kind regards,

D. Eduardo Díez-Hochleitner
Chairman of the Board of Directors

Contact: Polygon Investor Relations ([email protected])

SOURCE Polygon Global Partners LLP