Crown Castle CEO out following letter from activist investor

Jay Brown is out as CEO of Crown Castle (CCI) after 7½ years in the role and 24 years at the company.  His departure will be effective January 16, 2024. Anthony Melone, a member of the Board of Directors has been appointed interim CEO, while the company conducts a search.

CCI owns and operates 40,000 large cell towers, 120,000 small cells and 85,000 miles of fiber. The company has revenues of around $7 billion, 90% of which comes from the rental of its infrastructure.



Mr. Brown’s ouster comes 10 days after activist investor, Elliott Management called for changes at the company. Following feedback from investors, analysts and current and former employees, Elliott sent another letter to the Board just this morning. In it, they said;

‘Jay Brown’s severe underperformance as a CEO has made the prospect of his departure his greatest moment of outperformance.’

The main criticism from Elliott concerns the lack of return on the amount of money Crown Castle has spent on its fiber business. Elliott are right on this. If you look at the last annual report, the Towers segment had an operating profit of $3.5 billion on assets of $22.2 billion. The Fiber division had an operating profit of $1.1 billion on assets of $16 billion. Now that Mr. Brown is out, expect the company to perform a strategic review of the Fiber business.

Today’s letter also noted that one day after the initial letter sent to the Board, the company announced that the COO of the underperforming Fiber business would be made COO of the Tower business as well.

Long-time CFO, Dan Schlanger, announced in October that he will leave the company in March 2024. [Update 01-24-24 Mr. Schlanger is staying with the company].

Severance Package

Mr. Brown will receive a severance of 1x base salary ($1.06 million), plus target bonus (175% of base), plus actual bonus for 2023 (which won’t have been paid by the time he leaves in  January), plus prorated target bonus for 2024 (approx $80k). Restricted stock will also vest. According to the latest proxy statement, the total severance would have been valued at $10.2 million at December 31, 2022.

 

NRG Energy

This is the second recent success that Elliott has in ousting a Houston-area CEO.  On November, 20, Mauricio Gutierrez, CEO of NRG Energy, announced his departure from the company. Elliott first took a stake in NRG in 2017 and forced the company to refocus with some success. It exited the investment in late 2017 with a return of over 100%. Mr. Gutierrez incurred the wrath of Elliott when it bought Vivint, a home security business in March 2023 for $2.6 billion. Elliott disclosed a 13% stake in NRG in May.

Phillips 66

Elliott has also recently taken aim at a third Houston company, Phillips 66. It argues that the refinery margins are considerably lower than those of its peers.

SEC filing – Crown Castle CEO departure

 

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