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March 19, 2020
Christopher P. Davis
Kleinberg, Kaplan, Wolff & Cohen, P.C.
500 Fifth Avenue
New York, NY 10110
Re: HC2 Holdings, Inc.
Preliminary Consent Statement on Schedule 14A filed by Percy
Rockdale
LLC, MG Capital Management Ltd. et al.
Filed March 13, 2020
File No. 1-35210
Dear Mr. Davis:
We have reviewed the filing above and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand the
disclosure.
Please respond to this letter by amending the filing or by providing the
requested
information. If you do not believe our comments apply to the participants'
facts and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.
After reviewing any amendment to the filings and the information you
provide in
response to this comment, we may have additional comments. All defined terms
used in this
letter have the same meaning as in the preliminary consent statement unless
otherwise indicated.
Preliminary Consent Statement
1. Disclosure on page 6 indicates that "[i]f fewer than six directors are
removed pursuant to
the Removal Proposal and there are more Nominees receiving the requisite
number of
consents to fill vacancies pursuant to the Election Proposal than the
number of such
resulting vacancies, then such vacancies will be filled by plurality
vote..." Sections 3 and
4 of Article II of the Company's Fourth Amended and Restated By-Laws
provide that
vacancies caused by the removal of a director "shall be filled by the
affirmative vote of a
majority of directors then in office." In addition, it is our
understanding that pursuant to
section 228 of the Delaware General Corporation Law and Article I,
Section 9 of the By-
Laws, the Participating Stockholders' director nominees would need the
affirmative
consent of the holders of a majority of the shares entitled to vote to
be appointed to the
Company's board of directors. Please provide support for the statement
that any
vacancies on the Board resulting from the consent solicitation can be
filled by plurality
Christopher P. Davis
Kleinberg, Kaplan, Wolff & Cohen, P.C.
March 19, 2020
Page 2
vote or revise the disclosure to reflect that the Board will have the
power to fill any such
vacancies in the event that less than six directors are removed.
Reasons for the Solicitation, page 16
2. Disclosure on page 12 states that "...the Company's stockholders can no
longer afford to
trust that Mr. Falcone, or the current Board that has tacitly endorsed
his misdeeds, will
look after their best interests" (emphasis added). Disclosure on page 16
states refers to
Mr. Falcone as "run[ing] roughshod over his fellow directors by
interfering with the
Board's oversight of him." Such statements appear to impugn the
character, integrity
and personal reputation of Mr. Falcone and the Board without adequate
factual
foundation. Please do not use these or similar statements in the proxy
statement without
providing a proper factual foundation for the statements. In addition,
as to matters for
which the filing persons do have a proper factual foundation, please
avoid making
statements about those matters that go beyond the scope of what is
reasonably supported
by the factual foundation. Please note that characterizing a statement
as one's opinion or
belief does not eliminate the need to provide a proper factual
foundation for the
statement; there must be a reasonable basis for each opinion or belief
that the filing
persons express. Please refer to Note (b) to Rule 14a-9.
We Are Deeply Concerned That Mr. Falcone...Failed to Close the Significant Gap,
page 17
3. With a view towards disclosure, please indicate the valuation date used
for the B.B. Riley
FBR report, if not February 10, 2020 and the trading price for the
Company's shares on
such date.
We Are...Concerned with the Composition and Qualification of the Current Board,
page 18
4. Disclosure following this caption states that "Lead Independent
Director, Robert V.
Leffler, Jr....lacks any stated expertise in construction, insurance,
energy, marine
services, and other business segments of relevance to HC2." The
Company's lead
independent director is Wayne Barr, Jr. It is our understanding that Mr.
Barr has
extensive experience in the telecommunications and technologies
industries. Please
revise or advise.
5. The first sentence of this section criticizes the "incumbent directors"
but only discusses
two of them. Please either expand the discussion to further support the
allegations in the
first sentence or revise accordingly.
Proposal 3 The Election Proposal, page 23
6. Disclosure in this section states that "[b]ased on a review of the
agreements disclosed in
the Company's...Annual Report..., the Company's most recent quarterly
report...and the
Company's...Form 8-K filed on or after the date of the Annual Report, we
do not believe
Christopher P. Davis
Kleinberg, Kaplan, Wolff & Cohen, P.C.
March 19, 2020
Page 3
there would be any material consequences that would occur under any
agreements should
our Nominees be elected to the Board." It is our understanding that the
change of control
provisions contained in the Certificates of Designation for the
Company's Preferred
Stock, filed as Exhibits 4.4 and 4.13 to the Company's annual report on
Form 10-K filed
on March 12, 2019, would require the Company to offer to redeem the
outstanding shares
of Preferred Stock at the option of the holders if the Participating
Stockholders replace a
majority of the Company's directors, and further, that the cost to do so
would be
approximately $25 million. Please advise us of the basis for concluding
that such
expense is not a material consequence or revise the proxy statement to
disclose this
information.
7. In addition, disclosure in this section indicates that a change in
control of the Board "may
trigger change in control provisions or payments...in the Company's
employment and/or
severance agreements with its named executive officers and, potentially,
certain equity
plans," but such changes would not cause any "material consequences."
With a view
towards disclosure, please provide support for the conclusion that these
change in control
provisions or payments would not be material.
Incorporation by Reference, page 33
8. Please advise us when the Participating Stockholders anticipate
distributing the consent
statement. Given that reliance on Exchange Act Rule 14a-5(c) is
impermissible at any
time before the registrant distributes its proxy statement,
Participating Stockholders will
accept all legal risk in connection with distributing the initial
definitive consent statement
without all required disclosures and should undertake to subsequently
provide any
omitted information in a supplement in order to mitigate that risk.
* * *
We remind you that the filing persons are responsible for the accuracy
and adequacy of
their disclosures, notwithstanding any review, comments, action or absence of
action by the staff.
Please contact me at (202) 551-3444 with any questions.
Sincerely,
/s/ Perry J.
Hindin
Perry J. Hindin
Special Counsel
Office of Mergers
and Acquisitions