The stage is set for a showdown between U.S. publisher MediaNews, job-hunting website Monster Worldwide and staffing agency Randstad.
MediaNews has filed this week a definitive consent statement in its attempt to completely overhaul Monster Worldwide’s board – and stop a proposed $3.40 per share merger between the company and Randstad.
You can follow the dispute on Activist Insight Online, but what I want to discuss here is the communication strategy used by Monster Worldwide in its statements, letters and presentations against the dissident.
There is almost no document in which Monster Worldwide forgets to mention that MediaNews is “controlled” by its activist fund affiliate Alden Global Capital. It also took the opportunity to level at MediaNews one of the classic accusations made by issuers against activists: “This is yet another attempt by [MediaNews]… to take control of the company without paying a control premium to all Monster stockholders.”
MediaNews – which operates under the name DigitalFirst Media – is a private company, and it does not publish details of its ownership. However, despite having more than one shareholder, it has admitted that Alden “may be deemed to be in control of or ultimately controlling” the company.
In July, when a representative of the publisher first met with Monster, he was accompanied by a representative of Alden. Subsequent communications were carried out by a person that Monster has described as a representative of both the publisher and Alden.
Given that Randstad’s bid is more than 50% lower than Monster Worldwide’s stock price a year ago, it may be fair to say that the accusation of being backed by a hedge fund is “beside the point,” as a MediaNews spokesperson told me.
Two months before acquiring a stake in the job-hunting website, MediaNews sold Utah’s daily newspaper Salt Lake Tribune, one of its largest publications. However, the company is not an empty shell with no other business than investing in the interest of Alden; it runs around 240 U.S. local newspapers and websites, and it is a member of a local newspaper consortium that operates as a re-seller of Monster Worldwide’s products.
In a recent statement, MediaNews said that it had revenues of over $1 billion – against $1.3 billion reported in 2007, the last year in which it filed an annual report.
That said, Monster Worldwide’s decision to continuously mention Alden is something to which activists and consultants working with activists must pay great attention – no matter how rhetorical the move can be.
This year, we saw two proxy contests waged by issuers backed by activist investment firms resulting in significant failure.
In June, Rubicon Technology, a U.S. firm producing sapphire products for electronic components, defeated a slate advanced by Paragon Technologies, which is the owner of a material handling systems company.
The principal of investment firm GAD Partners Funds has served as CEO of Paragon since 2012, and Rubicon accused him of using the company as “his personal vehicle to pursue proxy fights,” while it had “reported net losses in four of the last six years.”
Also in June, Arlington Asset Investment, a company specializing in the acquisition of mortgage-related assets, won a proxy contest against Imation and Clinton Group.
Once a data storage and data security company, Imation lost a proxy contest with Clinton in 2015. Since then, it has sold most of its businesses, invested large sums in the activist hedge fund, and started to team up with the investment firm in its activist campaigns.
Imation’s stock price has declined more than 70% over the last 12 months, and Clinton’s use of the company was at the center of Arlington’s communication strategy against the dissidents.
These two examples – which are in many aspects significantly different from MediaNews’ case – are not enough to draw any statistically meaningful conclusion. However, activists planning proxy contests should better start to form their own opinion on whether shareholders like to see a hedge fund using an issuer to conduct a campaign, and whether doing so may distract attention from the merit of their proposals.
After all; rhetoric plays a role in a proxy contest.
Article by Activist Insight