M&G Investments Issues Letter to Methanex Shareholders

LONDON, March 28, 2019 /PRNewswire/ — M&G Investments, the investment manager of approximately 16.5% of the shares of Methanex Corporation (“Methanex” or the “Company”) (TSX:MX) (Nasdaq: MEOH) today released the following open letter to its fellow shareholders.

Dear Methanex Shareholders,

In light of our nomination of four highly-qualified director nominees, Lawrence Cunningham, Paul Dobson, Patrice Merrin and Kevin Rodgers, for the Board of Methanex, we wanted to take the opportunity to share our views on long-term investing, ownership and risk.  

Our fundamental investment strategy is this: we invest for the long-term, we favor long-term value creation at the companies in which we invest, and we encourage those companies to minimize risk and to maintain an appropriate and conservative asset allocation approach.

It is precisely because of those basic principles, and because of our concerns about Methanex’s corporate governance, that we have made the decision to provide Methanex shareholders with the opportunity to elect four new, highly-qualified, independent directors.

A Long-Term Perspective
We have been significant owners of Methanex for more than 10 years. Under appropriate circumstances we would continue to own Methanex indefinitely. Notably, there are companies that we have owned for extremely long periods of time – some positions spanning several decades. This reflects our judgement that after we have identified a company that meets our investment standards, we should become a resource for that company, providing encouragement and suggestions as appropriate. Significant mismanagement of the Company is one of the very few reasons we would change this approach.  

Thus, for us, a substantial investment reflects a belief that we can work together with the management and board of the company to provide long-term value for shareholders and other stakeholders. This means that high-risk efforts must not take precedence over the patient building of value. We are disappointed and unhappy that after a 10-year relationship with us, Methanex has chosen to radically change its course.

A Focus on Long-Term Value Creation

Methanex is an excellent example of our approach to long-term value creation. As evidence of this, during the last decade, M&G has been supportive of a number of Methanex management initiatives for capital expenditures because we believed that those steps would contribute to the long-term value of the business. Those steps included disassembling and relocating two of the four plants in Chile to Geismar; increasing capacity of the New Zealand operations; re-opening the Medicine Hat facility; re-opening the two remaining plants in Chile (in progress); and potentially increasing capacity at Geismar 1 and 2. In fact, we also support the development of Geismar 3, but only if Methanex brings in a financial partner – as we have repeatedly made clear.

Our Approach to Risk

We recognize that Methanex faces one principal risk over which it has no control. That risk is the inherent volatility of prices for methanol.  For example, in May 2016 the Methanex Non-Discounted Reference Price dropped to a low of $249 /mt from $449 m/t in January 20151 (a 45% decline and down from a prior peak of $632 / mt in January 2014).

During times of sharp declines in the price of methanol it is critically important for Methanex that it has a conservative balance sheet position that enables it to weather the certainty of volatility in the price of methanol. We have continually and repeatedly encouraged Methanex to maintain such a conservative balance sheet.

Methanex has indicated that it may build the Geismar 3 plant by itself. That step, if taken without a partner, will likely result in a material increase in Methanex’s leverage. While at current methanol prices that leverage is generally sustainable, if methanol prices dropped to 2016 levels and remained there for a prolonged period Methanex would face severe financial difficulty. That scenario would simply not be in the interest of any of Methanex stakeholders, and certainly would not be not in the interest of any long-term shareholder of any company.

Clarifying our Views on Asset Allocation

There are times when the market price of Methanex stock does not reflect the intrinsic value of the Company. At those times, as long as Methanex’s balance sheet remains conservatively geared, Methanex should invest in its own stock. For the vast majority of our ownership period we supported the capital allocation policy of management, but in the latter half of 2016 the option to repurchase shares, while maintaining a robust balance sheet, represented such a compelling opportunity that we increased our engagement with the Company to pursue this policy (and M&G subsequently filed a 13D to that effect).

Should the share price in Methanex appreciate to a level approaching or above the intrinsic value of the Company, then M&G would clearly discourage repurchasing shares at that level. Our point in this regard is that shares should only be purchased at low levels with a substantial discount to the underlying asset base.

If the Geismar 3 project proceeds without a partner, in addition to creating a high degree of risk, it will make it impossible for Methanex to engage in well-timed stock repurchases. The Company therefore will have effectively handcuffed itself should methanol prices decline and such pricing opportunities occur.


Methanex has nominated 11 incumbents for re-election to its Board. Five of those incumbent directors have served on the Methanex Board for over 10 years. It stands to reason that if a director has worked closely with management for many years, at some point he or she loses a certain degree of independence.

The four candidates we have nominated will not have the long relationships with management of the longest serving Methanex directors who we ask that they replace. They will bring a fresh, but deeply experienced, perspective to corporate matters, unburdened by long-term relationships with management. Each Director is entirely independent of us.

Should Methanex pursue the Geismar 3 plant independently it will transform the Company from a stable, conservatively-financed, growing business, into a high-risk leveraged bet on the methanol price. We think this is a serious mistake that stems in part from deficiencies in corporate governance, and we encourage shareholders to support our four independent, highly-qualified nominees to the Methanex Board. If they are elected, the new Methanex Board will include a substantial minority of directors who will encourage the entire Board to take a fresh look at the future of the Company. We believe, based on our long investing history and our long-term outlook, that this would prove valuable for all shareholders over the long-term.

Please vote on the BLUE proxy card for the election of Lawrence Cunningham, Paul Dobson, Patrice Merrin and Kevin Rodgers, for the Board of Methanex.  

If you have any questions or need assistance in voting your BLUE proxy card, please call our proxy solicitor, D.F. King &Co., Inc., at (800) 864-1460 (toll-free) or (212) 269-5550 (call collect). 


Stuart Rhodes

Fund Manager

M&G Investment Management

About M&G

M&GPrudential has c. $338 billion of assets under management (as at Dec 2018) and has more than 7 million customers in the UK, Europe, Asia and the Americas including individual savers and investors, life insurance policy holders and pensions scheme members.

Investor Contact

D.F. King & Co., Inc. 
Edward McCarthy / Geoffrey Weinberg / Susy Monteiro: 1-212-269-5550

Media Contact

Sloane & Company
Dan Zacchei / Joe Germani: 1-212-486-9500

E-mail: Dzacchei@sloanepr.com 


Required Information Under Canadian Law

Information in Support of Public Broadcast Exemption

M&G Investment Management Limited (MAGIM) is relying on the exemption under section 9.2(4) of National Instrument 52-102 – Continuous Disclosure Obligations to make this public broadcast solicitation.  The following information is provided in accordance with corporate and securities laws applicable to public broadcast solicitations.  This solicitation is being made by MAGIM, and by M&G Global Dividend Fund and M&G (Lux) Investment Funds 1 (collectively, “M&G”), and not by or on behalf of the management of Methanex Corporation (“Methanex”).  The head office of Methanex is 1800 Waterfront Centre, 200 Burrard Street, Vancouver, British Columbia, V6C 3M1.

MAGIM has filed an information circular dated March 25, 2019 (the “M&G Circular”) containing the information required by Form 51-102F5 – Information Circular in respect of its proposed nominees for election at the upcoming annual meeting of Methanex shareholders on April 25, 2019 (the “Annual Meeting”).  The M&G Circular is available on Methanex’s company profile on SEDAR at http://www.sedar.com.

Proxies may be solicited by proxy circular, mail, telephone, telecopier, email or other electronic means, as well as by newspaper or other media advertising and in person by managers, directors, officers and employees of M&G who will not be specifically remunerated therefor.  In addition, M&G may solicit proxies by way of public broadcast, including press release, speech or publication and any other manner permitted under applicable Canadian laws.  M&G may engage the services of one or more agents and authorize other persons to assist it in soliciting proxies on behalf of M&G.  The costs incurred in the preparation and mailing of the M&G Circular or proxy solicitation will be borne directly and indirectly by M&G.  M&G has not yet determined whether it intends to seek reimbursement from Methanex of such solicitation expenses.

M&G has entered into an agreement with D.F. King & Co., (D.F. King) pursuant to which D.F. King has agreed that it will provide certain consulting and related services, including acting as M&G’s proxy solicitor.  Pursuant to this agreement, D.F. King will receive an initial fee of $10,000 and an additional fee of $200,000 upon the mailing of final proxy materials, plus an additional fee for telephone calls and telecommunication charges in an amount to be agreed upon by the parties.  In addition, D.F. King may be entitled to a success fee on the successful completion of a solicitation, as determined by M&G in consultation with D.F. King.

Proxies may be revoked by a registered holder of Methanex shares (i) by completing and signing a valid proxy bearing a later date and returning it in accordance with the instructions contained in the accompanying form of proxy; (ii) by depositing an instrument in writing executed by the shareholder or by their attorney authorized in writing, as the case may be: (a) at the registered office of Methanex at any time up to and including the last business day preceding the day the Annual Meeting or any adjournment or postponement of the Annual Meeting is to be held, or (b) with the Chairman of the Annual Meeting prior to its commencement on the day of the Annual Meeting or any adjournment or postponement of the Meeting; or (iii) in any other manner permitted by law. Proxies may be revoked by a non-registered holder of Methanex shares at any time by written notice to the intermediary in accordance with the instructions given to the non-registered holder by its intermediary.

None of MAGIM, M&G Global Dividend Fund or M&G (Lux) Investment Funds 1 or any of their associates or affiliates (i) has any material interest, direct or indirect, by way of beneficial ownership of securities of Methanex or otherwise, in any matter to be acted upon at the Annual Meeting, other than the election of directors, or (ii) has had any material interest, direct or indirect, in any transaction or proposed transaction since the commencement of Methanex’s last financial year that has materially affected or would or could materially affect Methanex or any of its subsidiaries.


SOURCE M&G Investments