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As a shareholder for over 10 years, M&G worked closely with Methanex to improve clarity around their capital allocation strategy.
Headquarters: Vancouver, Canada
Methanex Corporation is the world’s largest producer and supplier of methanol, a light, flammable liquid used as an ingredient in many industrial and consumer items.
M&G has been a shareholder in Methanex for over 10 years and is a company we know extremely well. We have visited their production sites, regularly meet their management team and have on occasion interacted with the Methanex Board of Directors.
M&G pays close attention to all aspects of the company’s Environmental, Social and Governance factors but one of our most effective engagements has centred around governance and the allocation of capital. Capital is a limited resource and allocating it appropriately, whether investing in the underlying business (either organically or via acquisition) or returning it to shareholders, is one of the most important responsibilities of management and the board. As a result, it is something we monitor very closely in all companies.
In Methanex’s case, we felt that the management team was not sufficiently clear in communicating its strategy on the use of capital. We have a strong preference to keep our discussions with companies private. However, given the strength of our view and the size of our holding (M&G is the largest shareholder), we took the unusual step of publicising our view.
Our public statement outlined our belief that all surplus capital generated by Methanex should be used to buy shares back (except for investing in its Chilean assets) whilst the shares trade below the replacement cost of the company’s assets. Methanex’s public response to our statement and subsequent actions have been reassuring and we believe that the company have provided important clarity on their capital allocation strategy for the benefit all their shareholders.
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