Under the threat of being ousted through a proxy battle started by one of largest shareholders, El Paso Corp.’s board of directors announced late Wednesday that it has appointed Ronald L. Kuehn, Jr. to serve as interim CEO and chairman of the board, replacing William A. Wise, effective immediately.
Wise had previously agreed to step down by the end of the year and assist in a CEO transition plan, but the board has decided to accelerate the transition to “provide strong leadership and stability while in search of a permanent CEO.” The board said the CEO search has been “complicated by the announced proxy contest and believes that the pursuit of the company’s business strategy will be better served without leadership uncertainty.”
Earlier this week, Selim K. Zilkha, El Paso’s largest shareholder with 8.9 million EP shares, filed preliminary proxy documents with the Securities and Exchange Commission that would to replace the current 12-member El Paso board with a nine-member board hand picked by Zilkha (see Daily GPI, March 12, March 10 and Feb. 19). The proxy materials will be presented to El Paso’s shareholders at the company’s annual meeting. The new board would consist of a number of energy industry veterans, including Stephen Chesebro’, a former executive with PennzEnergy, Pennzoil and Tenneco and Ronald Burns, a former COO with Entergy and CEO of Enron Gas Pipeline Group. Zilkha also would be on the board.
“The incumbent directors presided over a loss in shareholder value of more than 90%,” Zilkha said in a letter to be presented to shareholders. “That record speaks for itself — the incumbents must be replaced.”
However, Kuehn lauded the company’s achievements in executing its assets sales and business plan. “We have signed agreements for or closed approximately 45%, or $1.5 billion, of the $3.4 billion of asset sales the company expects in 2003,” he said. “This includes the anticipated closing this week of the agreement with Chesapeake Energy Corp. for the sale of our Midcontinent natural gas and oil reserves for $500 million. We are also continuing to work towards resolution of the company’s outstanding legal and regulatory issues.
“While our industry has recently faced unprecedented challenges, I am confident that the board and company will continue to take the necessary actions to preserve and enhance the value of El Paso.”
The company disclosed that Wise will receive severance benefits provided under his pre-existing employment agreement, principally his salary, half of his annual bonus, and pension benefits, for the remaining three-year term of the agreement. His outstanding loan obligations will remain payable to the company. However, under the agreement, Wise will no longer be eligible to receive change-in-control benefits, which Zilkha had protested in a filing with the SEC.
Additional information regarding Zilkha’s nominees, his proposals and the full text of the preliminary proxy materials is available at https://www.saveelpasonow.com.
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