The Works secures heavyweight backing in activist investor row

The Works, a stationary and crafts retailer, has secured backing from two major shareholder advisory firms in its ongoing battle with Kelso, an influential London-listed investment firm. The Works has been at odds with Kelso since the latter sought to impose a director onto the retailer's board. Two prominent shareholder advisors, Institutional Shareholder Services (ISS) and Glass Lewis, have urged investors to reject Kelso's proposal, boosting the retailer's position.

Kelso has recommended that Graeme Coulthard, a former Card Factor director and significant shareholder, join the board, but The Works has refused, claiming Coulthard's presence would "risk derailing" its growth strategy. Both ISS and Glass Lewis have criticized Kelso, stating that the investment firm has not provided a compelling case for a board change and that Coulthard's appointment lacks sufficient support, particularly given The Works' improving performance and recent shareholder returns.

The dispute escalated when Kelso criticized The Works' chairman for joining board meetings remotely from New Zealand. However, Glass Lewis pointed out that chairman Stephen Bellamy attended all of the company's board meetings last year. The Works has urged shareholders to vote against Kelso's proposal, arguing that it would create a governance imbalance and potentially prioritize specific shareholder interests over the broader shareholder base.

Kelso, The Works's third-largest shareholder with a 10% stake, expressed disappointment over the board's decision to advise shareholders to reject Coulthard's appointment. The company's recent pivot towards screen-free entertainment for children has resulted in 3.3% sales growth and £260m in revenue in the first half of 2021, with adjusted profit increasing by 44% to £7.2m.