(Bloomberg) -- Thomas Barrack, a long-time ally of President Donald Trump, is facing a call to step down immediately as chief executive officer and chairman of Colony Capital Inc.
Blackwells Capital, which controls about 1.9% of Colony’s shares, plans to nominate five directors to the company’s board at an upcoming annual meeting, according to a letter to the company’s board Tuesday.
“One thing is certain: the current leadership team and business strategy are not creating value for shareholders,” Jason Aintabi, managing partner of Blackwells, said in the letter. “Colony desperately needs change or shareholders will abandon the company at an increasing pace.”
Blackwells said it had lost confidence in Barrack and that he should speed up his departure from Colony, in part because he’s “undoubtedly distracted by at least two Congressional investigations and at least one reported criminal investigation into his political and personal activities.”
The statement specifically called out Barrack’s work as chairman of Trump’s inaugural committee.
Blackwells has been pressuring Colony to make changes it argues will increase the value of the company. The parties reached a pact earlier this year that saw Colony add three board members and agree to conduct a strategic review.
That settlement came quickly despite Blackwells’s modest history of activism and relatively small stake in Colony. The firm had only agitated publicly at one other company in recent years, pushing for changes at the grocery wholesaler Supervalu Inc., which was sold to United Natural Foods Inc. in July 2018.
Colony’s shares have dropped 21% since the agreement with Blackwells was announced on Feb. 11, adding to the losses the shares have experienced since the company combined its operations with NorthStar Realty Finance Corp. and NorthStar Asset Management Group Inc. Those deals boosted assets but not profits.
“With Mr. Barrack’s track record and personal issues, no reasonable, fiduciarily aware public company board of directors would select Mr. Barrack as CEO of Colony or any other public company today,” Aintabi said. “He is Colony’s CEO only because of inertia and, seemingly, a sense of personal loyalty felt by some of the incumbent directors. Those are not reasonable business judgments.”
The Blackwells nominees for Colony Capital’s board include: Jennifer Hill, William Johnson, Jay Levine, Todd Schuster, and David Tomick. If Blackwells is successful in swapping out five more directors, Colony would have replaced 8 of its 12 directors in the past year.
Colony defended its record Tuesday, saying in a statement it has made “significant transformational progress in the last 12 months.”
“The Colony Capital board of directors and management team are committed to acting in the best interests of the company and all of its stockholders,” the firm said in a statement. “Colony Capital values constructive engagement and is committed to enhancing value for all stockholders.”
Barrack resumed his role as Colony’s CEO last year after the board ousted his deputy, Richard Saltzman.
In July, Colony agreed to acquire Digital Bridge Holdings for $325 million. The deal paved the way for Barrack to depart as CEO in 2021, with Marc Ganzi, the chief executive of Digital Bridge, taking over as his replacement.
Barrack has not said precisely when he plans to step down as CEO or if he will remain on as chairman. The company is slated to update shareholders on its strategy and succession plans in December.
Blackwells said Tuesday it believed Barrack should leave the top job immediately and resign from the board. It also said Ganzi is “not a suitable replacement as CEO.”
“Mr. Barrack has known Mr. Ganzi for decades and regularly plays polo with Mr. Ganzi at the Aspen Valley Polo Club (which itself is sponsored by Mr. Ganzi),” Blackwells said in the letter. “We do not believe business decisions and Colony’s resources should be expended on the basis of friendship and shared hobbies.”
(Updates with background on proxy fight.)
To contact the reporter on this story: Scott Deveau in New York at email@example.com
To contact the editors responsible for this story: Craig Giammona at firstname.lastname@example.org, Alan Mirabella
For more articles like this, please visit us at bloomberg.com
©2019 Bloomberg L.P.