CEO Watch List - S. Sundaresh, Adaptec Update #1

Sundi Sundaresh’s reign as Adaptec CEO is looking more and more precarious. Steel Partners, an activist investor/shareholder, is claiming to have the votes to get him dismissed. Steel Partners has been working for more than a year to make management changes at the firm. According to a story by Chris Mellor in the UK’s Register,

AP is now reporting that Steel Partners claims it has amassed enough proxy votes from shareholders to boot Sundaresh off Adaptec’s board. The board says it’s waiting for certification of the votes cast before ceding or claiming anything.

If Steel Partners is certified as having sufficient written consents from shareholders then Sundaresh better pack his CEO bags, as can the anti-Steel Partners board members. Adaptec faces having a new CEO, probably an interim one, and a new board that will quite rapidly announce a new strategy aiming at getting Steel Partners a return on its Adaptec investment.

Stay tuned as the answers start rolling in on Sundaresh’s fate as well as that of the firm.

For more:

Steel Partners Press Release

CEO Watch List - S. Sundaresh, Adaptec

Adaptec’s ADPT (NASDAQ) CEO, S. Sundaresh, has come under increasing pressure. Adaptec creates hardware and software to manage, protect and store digital data. Last week on October 22, RiskMetrics Group and Proxy Governance Inc. pressed for the removal of Sundaresh as Adaptec’s CEO. The pressure ratcheded up today when Steel Partners, the activist hedge fund and large shareholder in the company, continued its push to get Adaptec shareholders to follow suit by signing what is known as the White consent card. Steel Partners put out a press release today over Business Wire that was included in a Reuters link. Adaptec continues to fight back to try and stop the Steel Partners push. Back on October 6, Adaptec put out its own release to counter the arguments being made by Steel Partners.

Keep a close eye on how this all plays out. Activist investors are beginning to raise their heads again.

Recommended Reading - Funds take greater role as activists, Globe and Mail

Steve Ladurantaye wrote a piece for Canada’s Globe and Mail about the increasing activism associated with Mutual Funds with respect to corporate management. According to Ladurantaye’s piece,

Mutual funds are becoming increasingly aggressive in voting against company management and using annual general meetings to push socially responsible agendas.

“You are seeing a less friendly attitude toward director nominees, for one thing,” said Laura O’Neill, director of law and policy for the Shareholder Association for Research and Education. “It’s a relatively positive sign that shows some movement toward a more critical approach to management.”

Don’t expect mutual funds to pressure management across the board but we can expect to see increased pressures on management by mutual funds when they determine specific corporate policies are not in their interest.

Recommended Reading - Top investor wants annual board re-elections, Reuters

Raji Menon wrote a story for Reuters today that examined a call by the UK’s institutional investment firm, Legal and General Investment Management (LGIM), for the annual election of corporate board members. LGIM’s call is intended to help push for greater board accountability. Hopefully the same calls will be raise here in the United States and Canada by institutional and activist investors.

Anyone interested in greater corporate accountability should read Menon’s story.

Recommended reading - Optimistic activists, The Deal.com

Ron Orol of the Deal.com wrote a clever piece today entitled Optimistic activists.  The article focuses on how certain activist investors have been approaching today’s difficult market.  In the story, Orol focused on the importance of management and how they plan to deal with it.  Below is a brief snippet of the story,

Companies with weak management are attracting activists seeking to change boards and executives, focusing on profit and loss statements rather than cash on the balance sheets that can be handed to investors. Bulldog Investors’ Phillip Goldstein expects that trend to continue in the coming months, as CEOs are no longer able to hide behind improving share prices. “One group has so far escaped unscathed — boards of directors, the very people responsible for these financial problems,” says Goldstein. “There is too much collegiality on boards, not enough skepticism.”

 Anyone interested in management and how it might be impacted by activist investors should check the piece out.

Recommended Reading - Activist investors' retail campaigns

Activist investors (e.g., Carl Icahn, Wattles Capital Management, Pershing Square's Ackman, Crescendo Partners, Sun Capital), who remain a potent force as it relates to executive turnover for companies they pressure, may find themselves with a higher profile in relation to the struggling retail industry.  According to a blog in the Deal.com's Dealwatch a number of high profile retailers can expect increasing pressure from activist investors.  According to the piece,

Times are tough for retailers, and activist investors are at the ready lobbying for moves to boost shareholder value including: sale-leaseback deals to raise cash to return to shareholders; shuttering underperforming stores; board shakeups; selling a company entirely; or thwarting sale plans that undervalue assets. 

The Deal's Matt Miller wrote recently:

Real estate values are down, and energy costs are up. With the belief that a recession is upon us and that the near-term economic future is bleak, consumer confidence has been in free fall. That gloom has put a screeching halt to spending on much more than essentials.

For some time now, we have been following many of the specific companies referred to in the Dealwatch piece.  Keep a close eye on related executive turnover for possible additional clues.

CEO Watch - Philip Schoonover, Circuit City, Update 3

As Circuit City CC (NYSE) continues to resist Blockbuster's BBI (NYSE) efforts to merge, the electronics retailer also continues to resist attempts by Wattles Capital Management to change a portion of the board.  To complicate the already difficult situation, a new fly has appeared in the ointment.  While Wattles Capital Management owns just over 6% of Circuit City stock and has continued to put increasing pressure on the firm's management, HPK Investments, who owns just over 9% of the stock has turned activist as well.  When HPK first invested in Circuit City the firm considered their investment as passive.  Just yesterday, the passive nature of HPK's investment changed.  The investment firm filed a new 13D.  In the filing HPK stated,

... On April 28, 2008, HBK Capital Management sent a letter to the Issuer encouraging the Issuer to allow Blockbuster to perform due diligence in connection with Blockbuster's proposal to acquire all of the outstanding shares of Common Stock of the Issuer and to commence good faith negotiations with Blockbuster regarding its proposal. In addition, HBK Capital Management urged the board of directors of the Issuer to create a competitive bidding process in

order to maximize shareholder value...

Circuit city's CEO, Philip Schoonover, now finds himself in an even more precarious position. Pressure is growing from all sides.  It is hard to imagine he can survive with the situation continuing as it is right now. 

Stay tuned.

For more:

The Deal.com

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Activist Shareholders Push out Another CEO

Duckwall-Alco Stores DUCK (NASDAQ), a struggling rural retailer, announced the immediate resignation of president and CEO Bruce Dale, who had joined the company in 2oo5. SVP and CFO Donny Johnson was appointed interim CEO until a permanent replacement is found. Dale's resignation comes three days after Raymond French and Strongbow Capital who together hold over 14% of Duckwall-Alco voting stock in an SEC filing said,

... they intended to put up nominees at the upcoming annual meeting “to replace certain members of the board” – including chairman, Warren Gfeller – and wanted director Royce Winsten named chairman.

They also said the board has not taken satisfactory steps to improve shareholder value and that the makeup of the board should change in order for shareholders to receive a "reasonable return on their investment."

As the retail related market continues to reel under the pressures of a weakening economy, more and more pressure is being placed on top executives to perform. The increased pressure is often particularly forceful from large shareholders who find their investment values shrinking. Expect more changes at the firm.

For more:

Witchita Eagle 3/6
Press Release
MSN Money
CNBC
Houston Chronicle

Activists Finally Prevail at PDL BioPharma

PDL BioPharma PDLI (NASDAQ) finally gave in to the pressures of activist investors, Third Point LLC, and Highland Capital Management. Mark McDade the CEO has stepped down as CEO and director effective immediately and the company has agreed to seek offers for the sale of the company in whole or in key parts. We already discussed the capitulation of the PDL's CEO back on August 20th. Now comes agreement to seek a sale whether full or partial.

For more see:

Mercury News
Blogging Buyouts
CNN Money