Appaloosa Urges SES S.A. to Modernize Governance and Capital Structure

Appaloosa LP, a significant shareholder in both SES S.A. and Intelsat S.A., has filed proxy proposals urging SES to take immediate steps to address shortfalls in corporate governance, capital allocation, and management accountability. The proposals aim to modernize the company's share capital and board structure and address underperforming capital investment practices by returning excess capital to shareholders.

SES, a leading global content connectivity solutions provider, faces an existential threat in a rapidly changing competitive environment. Appaloosa, which manages funds holding more than 7% economic interests in both companies, supports the pending combination of SES with Intelsat SA but believes further changes are necessary for the company to confront its current challenges.

Appaloosa's proposals focus on three key areas: modernizing the share capital structure, modernizing the board structure, and returning value to shareholders.

1. Modernize the Share Capital Structure

Under SES' current share structure, the Luxembourg Government directly and indirectly holds a separate class of shares (class B) that votes on a disproportionate basis to its economic interest in the company (33.33% voting rights vs. 16.67% economic interest). Appaloosa proposes converting class B shares into class A shares at a conversion rate of 0.4/1, resulting in a single ordinary share class with the Government maintaining a 16.67% participation. This change aligns voting rights with economic interests, ensuring that shareholders' voices are proportionally represented.

The special rights attached to class B shares would also disappear in conjunction with the conversion. In their place, the Lux Government's legitimate interests in maintaining domicile, proportionate board representation, and substantive operations in Luxembourg can be narrowly addressed through specific provisions added to the Company's articles of association or by contractual agreement. Additionally, the Government's approval rights over new shareholders beyond certain thresholds should be removed from the articles of association, as they are no longer appropriate in light of the Luxembourg law dated 14 July 2023.

2. Modernize the Board Structure

Appaloosa proposes reducing the number of Board members to no more than 9, with the Government receiving no more seats than its proportionate interest merits (i.e., 16.67%) on a rounded basis. This change fosters a more agile decision-making process and better communication among directors. Annual elections for all board members ensure that directors are directly accountable to shareholders and must continually demonstrate their value to retain their seats. Eliminating the positions of Vice Chairman helps flatten the board's hierarchy, promoting more direct communication and collaboration among directors. Finally, formally adopting a policy and program of regular board refreshment ensures that the board composition remains relevant and up-to-date with the company's evolving needs and the changing competitive landscape.

3. Return Value to Shareholders

SES shares trade at a discount to their book value of more than 50% and a dividend yield well into double-digits, notwithstanding a recent speculative rebound over a potential windfall from spectrum sales. Clearly, the marketplace is reacting to the Company's woeful record of deploying capital at sub-par returns, lackluster execution, and inability to deliver on promises. Appaloosa believes that returning excess capital to shareholders is an essential step in addressing these concerns and improving the company's long-term prospects.



In conclusion, Appaloosa's proxy proposals aim to modernize SES' governance and capital structure, enhancing the company's competitiveness and long-term growth prospects. By aligning voting rights with economic interests, curtailing the government's disproportionate influence, and addressing the government's legitimate interests, the proposed changes can foster a more democratic and transparent governance structure. A more effective and accountable board, along with a balanced approach to reinvestment and capital returns, can help SES navigate the competitive environment and create value for shareholders.