Ally Financial says it will appoint a new independent director following a tussle with an activist hedge fund that has been frustrated with the performance of Ally’s share price.
Detroit-based Ally, which employs hundreds in Charlotte, said it will consult with the hedge fund and Ally’s other largest shareholders to identify the director. The decision comes after the hedge fund, Lion Point Capital, in January nominated two candidates to stand for election to Ally’s board at its annual shareholders meeting in May.
The move, announced Monday, appears to have defused tensions between Ally and New York-based Lion Point, which made the nominations after disagreeing with Ally over the idea of forming a strategic alternatives committee. Lion Point, which had expressed concerns about the “significant undervaluation” of Ally, sought a shareholder vote on whether the company should form such a committee. Ally, though, had said the committee would be widely viewed as a decision to pursue a sale.
Lion Point said Monday it was pleased by Ally’s decision to appoint a new independent director and that it planned to withdraw its candidate nominations and shareholder proposal.
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Ally said it expects to appoint the new director by June 30, a move that will expand its board to 12 members.
“Adding a highly qualified and independent director to our board demonstrates Ally’s continued commitment to diverse perspectives and sustainable shareholder value creation,” Ally Chairman Franklin Hobbs said in a statement.
Lion Point also said it was encouraged by Ally’s announcement Monday that its proxy filing for the May shareholders meeting will include “updates” to executive compensation policies. Ally did not give specifics but said the policies will be “directly connected to the company’s financial and operational performance, to better align management’s and shareholders’ interests.”
Ally previously went by the name General Motors Acceptance Corp., which was spun off from GM in 2006.
Some investors have been unhappy with Ally’s share price, which debuted at $25 in an initial public offering on April 10, 2014. The shares closed at $18.37 Tuesday, down about 26 percent from the IPO price. The KBW Bank Index, which tracks share performance of 24 large U.S. lenders, is down by about 4 percent over the same period.
Ally officials, including Charlotte based CEO Jeffrey Brown, have told investors and analysts they also are disappointed with the stock’s price. Hobbs reiterated those frustrations Monday and said the company expects to announce a number of new initiatives to, among other things, further position it for strong, long-term performance.
“We are all aligned in our commitment to maximize shareholder value both operationally and strategically,” Hobbs said. Ally’s current stock price, he said, “does not reflect the inherent value of this company.”
Ally also announced Monday a bylaws amendment made by its board allowing shareholders holding at least 25 percent of Ally’s common stock to call a special meeting.
The board also amended Ally’s bylaws to allow directors to be elected by a majority of shareholders in uncontested director elections.