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Section 1: SC 13D/A (ARGO GROUP INTERNATIONAL HOLDINGS, LTD.)

SECURITIES AND EXCHANGE COMMISSION  
Washington, D.C. 20549  
   
SCHEDULE 13D/A
 
Under the Securities Exchange Act of 1934
(Amendment No. 4)*
 

Argo Group International Holdings, Ltd.

(Name of Issuer)
 

Common Shares, par value $1.00 per share

(Title of Class of Securities)
 

G0464B107

(CUSIP Number)
 

 

J. Daniel Plants
Voce Capital Management LLC
600 Montgomery Street, Suite 4400
San Francisco, California 94111
(415) 489-2600

 

with a copy to:
Aneliya Crawford, Esq.
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022

(212) 756-2000

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
 

November 6, 2019

(Date of Event Which Requires Filing of This Statement)
 

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the following box. [ ]

(Page 1 of 7 Pages)

______________________________

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

 
 

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

 

 CUSIP No. G0464B107 SCHEDULE 13D/APage 2 of 7 Pages

 

1

NAME OF REPORTING PERSON

VOCE CAPITAL MANAGEMENT LLC

2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) ¨

(b) ¨

3 SEC USE ONLY
4

SOURCE OF FUNDS

OO

5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ¨
6

CITIZENSHIP OR PLACE OF ORGANIZATION

California, United States

NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH:
7

SOLE VOTING POWER

0

8

SHARED VOTING POWER

1,974,447

9

SOLE DISPOSITIVE POWER

0

10

SHARED DISPOSITIVE POWER

1,974,447

11

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON

1,974,447

12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
13

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

5.8%

14

TYPE OF REPORTING PERSON

OO

         

 

 

 

 CUSIP No. G0464B107 SCHEDULE 13D/APage 3 of 7 Pages

 

1

NAME OF REPORTING PERSON

VOCE CAPITAL LLC

2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) ¨

(b) ¨

3 SEC USE ONLY
4

SOURCE OF FUNDS

OO

5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ¨
6

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware, United States

NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH:
7

SOLE VOTING POWER

0

8

SHARED VOTING POWER

1,974,447

9

SOLE DISPOSITIVE POWER

0

10

SHARED DISPOSITIVE POWER

1,974,447

11

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON

1,974,447

12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
13

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

5.8%

14

TYPE OF REPORTING PERSON

OO

         

 

 

 

 CUSIP No. G0464B107 SCHEDULE 13D/APage 4 of 7 Pages

 

1

NAME OF REPORTING PERSON

J. DANIEL PLANTS

2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a)¨

(b)¨

3 SEC USE ONLY
4

SOURCE OF FUNDS

OO

5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ¨
6

CITIZENSHIP OR PLACE OF ORGANIZATION

United States

NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH:
7

SOLE VOTING POWER

0

8

SHARED VOTING POWER

1,974,447

9

SOLE DISPOSITIVE POWER

0

10

SHARED DISPOSITIVE POWER

1,974,447

11

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON

1,974,447

12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
13

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

5.8%

14

TYPE OF REPORTING PERSON

IN

         

 

 

 CUSIP No. G0464B107 SCHEDULE 13D/APage 5 of 7 Pages

 

This Amendment No. 4 (“Amendment No. 4”) amends and supplements the statement on Schedule 13D filed with the Securities and Exchange Commission (the “SEC”) on February 4, 2019 (the “Original Schedule 13D”), Amendment No. 1 filed with the SEC on February 25, 2019 (“Amendment No. 1”), Amendment No. 2 filed with the SEC on March 8, 2019 (“Amendment No. 2”) and Amendment No. 3 filled with the SEC on October 15, 2019 (“Amendment No. 3,” and together with the Original Schedule 13D, Amendment No. 1, Amendment No. 2 and this Amendment No. 4, the “Schedule 13D”) with respect to the common shares, $1.00 par value (the “Common Shares”) of Argo Group International Holdings, Ltd., a Bermuda exempted company limited by shares (the “Issuer”). Capitalized terms used herein and not otherwise defined in this Amendment No. 4 have the meanings set forth in the Schedule 13D. This Amendment No. 4 amends Items 3, 4, 5 and 7 as set forth below.

 

Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
   
  Item 3 of the Schedule 13D is hereby amended and restated as follows:
   
  The Common Shares beneficially owned by Voce Capital Management were purchased with the working capital of the Voce Funds (which may, at any given time, include margin loans made by brokerage firms in the ordinary course of business) in open market purchases.  The aggregate purchase price of the Common Shares beneficially owned by Voce Capital Management is approximately $130,523,748, including brokerage commissions.

 

Item 4. PURPOSE OF TRANSACTION
   
  Item 4 of the Schedule 13D is hereby amended and supplemented by the addition of the following:
   
  On November 6, 2019, Voce Capital Management distributed a press release (the “Press Release”) commenting on the recent retirement of Mark E. Watson III from his position as CEO and President of the Issuer.  In the Press Release, Voce Capital Management also called for a full evaluation of the Issuer’s strategic alternatives and reiterated the need for Board reform, now, in order to carry out a faithful evaluation of the Issuer’s strategic alternatives.  A copy of such press release is attached hereto as Exhibit 7, and is incorporated herein by reference in its entirety.

 

Item 5. INTEREST IN SECURITIES OF THE ISSUER
   
  (a) The aggregate percentage of Common Shares reported as beneficially owned by each person named herein is based upon 34,288,704 Common Shares outstanding as of August 1, 2019, which is the total number of Common Shares outstanding as reported in the Issuer’s Quarterly Report on Form 10-Q for the period ended June 30, 2019, filed with the Securities and Exchange Commission on August 6, 2019.

 

  As of the close of business on November 6, 2019, Voce Capital Management beneficially owned 1,974,447 Common Shares, constituting approximately 5.8% of the Common Shares outstanding.  Voce Capital, as the sole managing member of Voce Capital Management, may be deemed to beneficially own the 1,974,447 Common Shares beneficially owned by Voce Capital Management, constituting approximately 5.8% of the Common Shares outstanding.  Mr. Plants, as the sole managing member of Voce Capital, may be deemed to beneficially own the 1,974,447 Common Shares beneficially owned by Voce Capital Management, constituting approximately 5.8% of the Common Shares outstanding.

 

 CUSIP No. G0464B107 SCHEDULE 13D/APage 6 of 7 Pages
   
  As of the close of business on November 6, 2019, the Reporting Persons collectively beneficially owned an aggregate of 1,974,447 Common Shares, constituting approximately 5.8% of the Common Shares outstanding.
   
  Each Reporting Person disclaims beneficial ownership with respect to any Common Shares other than the shares owned directly and of record by such Reporting Person.
   
  (b) By virtue of their respective positions with Voce Capital Management, each of Voce Capital and Mr. Plants may be deemed to have shared power to vote and dispose of the Shares reported beneficially owned by Voce Capital Management.
   
  (c) Schedule A attached hereto lists all transactions in Common Shares of the Issuer by the Reporting Persons since the filing of Amendment No. 3.

 

Item 7. MATERIAL TO BE FILED AS EXHIBITS
   
  Item 7 of the Schedule 13D is hereby amended and supplemented by the addition of the following:
   
Exhibit Description
7 Press Release, dated November 6, 2019
   

 

 

 CUSIP No. G0464B107 SCHEDULE 13D/APage 7 of 7 Pages

 

SIGNATURES

After reasonable inquiry and to the best of his or its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

Date: November 7, 2019

 

  VOCE CAPITAL MANAGEMENT LLC
     
  By: Voce Capital LLC, its Managing Member
     
  By: /s/ J. Daniel Plants
    Name: J. Daniel Plants
    Title: Managing Member
     
     
  VOCE CAPITAL LLC
     
  By: /s/ J. Daniel Plants
    Name: J. Daniel Plants
    Title: Managing Member
   
   
  /s/ J. Daniel Plants
  J. Daniel Plants
   

 

 

   

SCHEDULE A

TRANSACTIONS IN COMMON SHARES BY THE REPORTING PERSONS

The following table set forth all transactions in the Common Shares effected by each of the Reporting Persons since the filing of Amendment No. 3 to the Schedule 13D. All such transactions were effected in the open market through a broker and all prices per share exclude commissions.

Voce Capital Management

 

Trade Date Shares Purchased (Sold) Price Per Share ($)
10/30/2019 17,066 62.22
10/30/2019 16,000 62.11
10/31/2019 15,055 61.22
10/31/2019 4,183 61.38
10/31/2019 9,026 61.16
11/1/2019 300 61.96
11/4/2019 25,961 61.55
11/5/2019 17,959 61.23
11/5/2019 5,340 60.94

 

 

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Section 2: EX-99 (EXHIBIT-7)

EXHIBIT 7

Voce Comments on CEO Change at Argo

 

Abrupt CEO Transition Does Not Allay Concerns about Broader Governance and Oversight Issues at Argo – Including Ongoing Investigation

 

Existing Board Cannot be Trusted to Choose Argo’s Leadership or its Strategic Direction

 

A Reconstituted Board, Including Shareholder Representation, is Urgently Needed at Argo to Ensure Shareholder Interests Are Finally Being Put First

 

SAN FRANCISCO--(BUSINESS WIRE)-- Voce Capital Management LLC (“Voce”), the beneficial owner of approximately 5.8% of the shares of Argo Group International Holdings, Ltd. (NYSE: ARGO) (“Argo” or the “Company”), today issued the following statement commenting on Argo’s recent CEO transition announcement:

 

“The abrupt ‘retirement’ of Argo’s CEO yesterday does not resolve our concerns about the Company’s operations, strategy and corporate governance; in fact, it raises more questions than it answers. As we stated in our October 14 press release following the initial news of the SEC probe, ‘[t]he disclosure that the Company is now under federal investigation vividly illustrates the need for immediate and sweeping changes at Argo. . . . [We] do not believe that a Board that allowed myriad corporate governance transgressions at Argo can be trusted to deliver the Company from the resulting crisis which now engulfs it. Needless to say, many crucial decisions lie ahead. It’s imperative that shareholders have full faith and confidence in the group of individuals making those determinations and that simply will not happen with the Board as currently constituted.’ (emphasis added)

 

This is even more true now than it was then, as these ‘crucial decisions’ are being made in real time and the stakes are higher given yesterday’s announcement. While the details are unclear (according to the 8-K Argo filed last night there is only a ‘term sheet’ but no actual separation agreement), Mr. Watson will be required to ‘reimburse the Company for certain of his personal expenses that were paid for by the Company,’ presumably the ones that were highlighted in our prior letters and targeted by the SEC subpoena.[1] In light of what appears to be this admission of misconduct, why did the Board choose to allow Mr. Watson to ‘retire,’ rather than terminate him outright? And why did the Board allow Mr. Watson to remain a ‘full-time, non-executive employee of the Company’ until the end of 2019, rather than just show him the door immediately? According to the 8-K, Mr. Watson will ‘fully vest in his unvested restricted stock’ – to the tune of $4.9 million – and receive cash severance of $2.5 million while continuing to collect base salary of nearly $200,000 over the next few weeks. Had he been terminated for cause, all of these amounts would have been forfeited. Was the Board trying to secure his willingness to fall on his sword in the investigations, given that the Board is also implicated in the inappropriate expenses and misuse of corporate assets that have been uncovered on its watch? The gratuitous $7.6 million windfall for ‘retiring’ under these clouded circumstances is unconscionable and appears designed to serve the interests of the Board rather than those of shareholders.

 
 

 

Second, we understand that the Board did not and will not consider external CEO candidates, and that Mr. Rehnberg’s designation as ‘interim’ CEO is only temporary. With no disrespect to Mr. Rehnberg, who appears to have run the US business successfully, why would the Board refuse to even consider external candidates, especially given the large number of highly-qualified property and casualty CEOs who are currently available as a result of all of the M&A activity in the industry? Why is the Board so afraid of outside perspective? Recall that the Board has also steadfastly refused to accept even a single independent Director nominated by shareholders rather than those hand-selected by the Board. This type of insularity at Argo is exactly what led the Company to the place it finds itself today.

 

Finally, given the CEO turnover and the recent reserve charge announcements, a full evaluation of all of Argo’s strategic alternatives is in order. While we do not prejudge the outcome of such a review, it is essential that it be conducted by a Board that shareholders can trust to act in their best interests rather than its own. There should be no ‘sacred cows’ in such a review and, again, we see no reason to believe that can occur without meaningful Board reform, including the departures of legacy Directors and the appointment of replacements identified by shareholders.

 

Even when forced to acknowledge that it has been asleep at the switch for decades – clearly, the SEC investigation finally appears to have forced its hand – the subsequent choices the Board made reveal that it once again placed its own interests ahead of those of shareholders. Until this Board is reconstituted, there will be no fundamental change at Argo.”

 

 

About Voce Capital Management LLC

 

Voce Capital Management LLC is a fundamental value-oriented, research-driven investment adviser founded in 2011 by J. Daniel Plants. The San Francisco-based firm is 100% employee-owned.

 

Media Contact:
Sloane & Company
Dan Zacchei / Joe Germani
(212) 486-9500
[email protected] / [email protected]

 


[1] https://www.sec.gov/ix?doc=/Archives/edgar/data/1091748/000119312519284845/d831135d8k.htm

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