Ryanair irks shareholders with Brexit threat

UK investors set to lose voting rights under hard Brexit

Ryanair

Royal London Asset Management has spoken against Ryanair’s plans to remove their voting rights under a hard Brexit.

Airlines must be at least 50% owned by European Union shareholders under the Open Skies agreement in order to retain access to flight routes in the bloc.

But Royal London Asset Management’s (RLAM) head of responsible investment, Ashley Hamilton Claxton, said they are vehemently against the proposal that would see the fund house lose its voting rights.

“One share, one vote is a fundamental pillar of good governance that companies should uphold,” Hamilton Claxton said.

Easyjet has been shoring up its shareholder base in the EU ahead of the UK’s exit from the bloc, while British Airways could face problems over its shareholder base too.

Portfolio Adviser contacted fund managers with some of the biggest bet in Ryanair. Baillie Gifford, GAM and St James’ Place all said they would not comment on their holdings in the airline.

Tough decision for airline’s shareholders

Non-EU shareholders will be forced to decide whether they retain their shares without any voice in the company or whether they “simply wash their hands” of the affair and walk away, said AJ Bell investment director Russ Mould.

He said: “Some may be tempted to simply sell the shares and have done with it, especially as Ryanair’s record on corporate governance is not entirely unblemished in the eyes of some.

“Others may take the view that the risks are worth the potential rewards, given Ryanair’s disruptive model and its long-term growth prospects.”

Ryanair told Portfolio Adviser it may be forced to make the changes.

“While there is a view that a 21-month transition agreement from March 2019 to December 2020 will be implemented (and extended), recent events in the UK political sphere have added to this uncertainty, and we believe that the risk of a hard Brexit is being underestimated.  It is likely that in the event of a hard Brexit our UK shareholders will be treated as non-EU.”

Further governance concerns at Ryanair

RLAM voted against the re-election of chairman David Bonderman at today’s annual shareholder meeting.

Several investors, including RLAM and Britain’s Local Authority Pension Fund Forum (LAPFF), had publicly announced their plans to vote against the re-election of Bonderman.

Hamilton Claxton said: “We have had long-standing issues with the independence of Ryanair’s board and with the extent to which the board can provide effective challenge to management decisions. The recent labour unrest, operational issues, and the decision to take away our voting rights under a hard Brexit scenario has crystallised our concerns.”

Bonderman was re-elected with 70.5% of votes, although this was a fall from 89% last year.

Investment Association funds with largest allocation to Ryanair

FundHolding (%)
F&C – European Growth & Income – Jan 954.80%
Carmignac – Portfolio Grande Europe – Nov 154.01%
GAM – Multistock – Europe Focus Equity – Jul 903.88%
Baillie Gifford – European – Jan 003.40%
SJP – UK Income – Nov 143.11%
Source: FE Analytics

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