News

Activist Investors Increase Pressure on Imation

Clinton Group nominates three for board in SEC filing.

Activist Investors Increase Pressure on Imation
Activist investors are turning up the heat on Oakdale-based Imation Corp., a data storage and data security company. On Thursday morning, the New York-based Clinton Group filed documents with the U.S. Securities and Exchange Commission and issued a statement formally nominating three candidates to the Imation board.
 
The Clinton Group hedge fund fired the first shot across Imation’s bow in late 2014, when it signaled its intent to nominate directors to the Imation board.
 
In a December 15, 2014, letter to the company’s board of directors, Clinton Group senior portfolio manager Joseph De Perio wrote: “We own common shares of the company because we believe there is significant untapped value at the company. …In sum, we have spoken to a number of large shareholders of the Company today and believe that there is support for significant change at the Company’s corporate leadership.”
 
For 2014, Imation reported revenue of $729.5 million and a net loss of $114.7 million. When the company announced its results on Feb. 10, CEO Mark Lucas also indicated that it had retained a financial adviser to “explore options to unlock embedded value” in the company.
 
But the Clinton Group believes Imation needs new people to drive change.
 
“We have a simple goal – to strengthen Imation and reverse the years of decline under the company’s existing leadership.  We believe our director nominees can help optimize the company’s legacy businesses for cash flow generation and long-term solvency and can reposition the disk based businesses to create an attractive enterprise without taxing shareholder returns,” wrote De Perio in an email to Twin Cities Business.
 
The Clinton Group’s three nominees are De Perio, technology executive veteran Robert Fernander and management consultant Barry Kasoff.
 
De Perio added: “During the current CEO’s tenure, shareholders have lost $300 million in market value. Meanwhile, total compensation to the Board and CEO was over $25 million. This is not equitable. As we recently read in Imation’s annual report, we are not alone.  The board of directors is facing a derivative action lawsuit in Delaware Court regarding their egregious compensation practices.” 
 
A March 16 SEC filing from Imation outlines discussions in January between the company and the Clinton Group:
 
  • “On January 14, 2015, Imation management met with representatives of the Clinton Group at Imation’s headquarters in Oakdale, Minnesota. Management provided an update on Imation’s business and strategic transformation. The Clinton Group declined to execute a confidentiality agreement which would have permitted a more in-depth conversation. They were asked, but could not offer, any suggestions to create improved shareholder value.”
  • “On January 16, 2015, L. White Matthews, III, the Non-Executive Chairman of the Board of Imation, and Mr. De Perio spoke by telephone to discuss the background and agenda for a meeting to be held on January 20, 2015 to discuss the Clinton Group’s concerns.”
  • “On January 20, 2015, Mr. Matthews and William LaPerch, a Director of Imation, met with Mr. De Perio, in New York to discuss the Clinton Group’s concerns. The discussion was again limited by the lack of a confidentiality agreement. Mr. De Perio offered no plans for creating value for Imation.”
 
The company’s revenue has been in decline for years and Imation has a long history of losses. The company had approximately $2 billion in sales in 2008, nearly three times as much as the company today.
 
Imation has not posted a profit since 2006. Imation was spun off from Maplewood-based Fortune 500 3M Company in the mid-1990s. Twin Cities Business looked at the challenges facing Imation in 2012.
 
Imation’s annual meeting is slated for May 20 in Lake Elmo.
 
Imation is the second Minnesota company where the hedge fund has pursued changes.
 
Last year, the Clinton Group led a proxy fight with Eden Prairie-based ValueVision Media Inc., owner of the nation’s third-place home shopping network, ShopHQ, that has long struggled for profitability. The Clinton Group prevailed with getting its slate elected to the board, which then appointed Mark Bozek as the CEO after the previous CEO resigned. The company was renamed EVINE Live Inc. in November 2014.
 
EVINE Live Inc. recently reported a gain in revenue and a narrowing of its losses for its fiscal year 2014.
 
“In the case of EVINE Live, we prevailed in replacing a majority of the board members and upgrading the executive team,” added De Perio. “We couldn’t be happier with the progress made by Mark Bozek, CEO, in less than a year, and I think this is an example of how quickly things can be turned around when the shareholders speak loudly that there needs to be a change.” 
Newsletter Sign Up