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GAMCO Files 14N – Proxy Access Nomination

On November 10, 2016 GAMCO filed the required 14N with the SEC to make proxy access nominations. National Fuel Gas Company (NFG) received notification from GAMCO that it intends to nominate one director pursuant to the company’s proxy access bylaws.

GAMCO, owning 7.81% of outstanding shares of NFG, has nominated Lance A. Bakrow to the Board of Directors. GAMCO stated that it believes its nominee’s skill sets and relevant experience “will be extremely valuable to the issuer and GAMCO is confident its nominee will have an immediate impact on the board.”

NFG adopted its proxy access bylaw in March of 2016, without previously having a shareholder proposal on the ballot. The bylaw has typical 3-3-20 provisions: the ability for one or more shareholders owning 3% or more of the company’s shares for at least three years to nominate up to 20% of the board. However, one somewhat unusual aspect is that the deadline for making proxy access nominations aligns with the deadline to make nominations under the advance notice provisions in the bylaws; for most companies the proxy access nominations deadline is earlier.

GAMCO has a history of attempting to push NFG to make strategic changes, having filed nine 13D’s since 2010. In 2015, it submitted a shareholder proposal requesting the company hire an investment bank to explore a spin-off of its utility business. NFG’s opposition statement to the proposal stated that “while we believe the GAMCO proposal was made with the sincere belief that it would benefit stockholders, after careful consideration, we firmly believe that our current strategy best positions us to deliver long-term value to investors.” The proposal received only 18% support, with GAMCO owning 9% of outstanding shares at that time. Prior to this in 2007, NFG was the subject of a proxy contest with New Mountain Ventures. The company settled the contest by giving them a board seat and splitting the CEO and chairman positions.

GAMCO has a fairly active history with 42 campaigns for board representation in the past six years. Although many felt proxy access would not be used by an activist hedge fund, due to the three-year holding requirement and limitations of solicitation in the bylaws, it appears this was appealing to GAMCO as an inexpensive way to engage for a board seat, given the history of this specific situation.

We will continue to monitor the situation and provide further updates as the matter develops.