Where: CNBC’S “Power Lunch”
When: Today, Thursday, October 5, 2017
- Q3 2017 Hedge fund letters, conferences, interviews, features etc
- Hailed by many the "Next Warren Buffett", some are calling a bluff
- Baupost Letter Points To Concern Over Risk Parity, Systematic Strategies During Crisis
- Public Pension Situation Is As Bad As You Think: Moody’s
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Marcato Capital Management Founder Mick McGuire on CNBC’s “Power Lunch” (M-F, 1-3pm) today, Thursday, October 5th, 2017. Following are link to video of the interview on CNBC.com: https://www.cnbc.com/video/2017/10/05/marcato-capitals-mick-mcguire-too-early-to-say-if-theres-a-proxy-fight-with-deckers.html.
Marcato Capital's Mick McGuire: Too early to say if there's a proxy fight with Deckers from CNBC.
MICHELLE CARUSO CABRERA: LESLIE PICKER JOINS US NOW WITH MICK MCGUIRE, A POWER LUNCH EXCLUSIVE. TAKE IT AWAY, LESLIE.
LESLIE PICKER: HEY MICHELLE, THAT’S RIGHT. MICK, THANK YOU VERY MUCH FOR JOINING US. YESTERDAY AT YOUR SOHN CONFERENCE, YOUR PRESENTATION CENTERED AROUND DECKERS. AND IT SEEMS LIKE THIS STRATEGIC REVIEW THAT THE COMPANY HAD ANNOUNCED BACK IN APRIL IS KIND OF THE END AND BE ARE, WHAT CAN YOU TELL US ABOUT THIS PROCESS SO FAR AND WHAT RESULTS WOULD YOU LIKE TO SEE THAT COULD AVOID A PROXY FIGHT?
MICK MCGUIRE: SURE. WELL, IT’S GLAD TO BE HERE LESLIE. THANK YOU FOR HAVING ME. AS FAR AS IT RELATES TO THE STRATEGIC ALTERNATIVES PROCESS, WE ARE LIKE ANY OTHER SHAREHOLDER KIND OF THE OUTSIDE LOOKING IN. SO WE KNOW WHAT THE COMPANY HAS ANNOUNCED, BUT WE ARE STILL JUST WAITING TO HEAR WHAT IF ANYTHING COMES FROM THAT REVIEW PROCESS. WHAT WE TRIED TO LAY OUT YESTERDAY IN OUR PRESENTATION, IS THAT EVEN IN THE ABSENSE OF A SALE OF THE OVERALL BUSINESS, WE SEE A LOT OF OPPORTUNITY TO CREATE A LOT OF SHAREHOLDER VALUE BY FOCUSING ON THEIR CORE UGG BUSINESS, MAXIMIZING THE PROFIT MARGINS AND THE RETURNS ON THE CAPITOL OF THAT BUSINESS AND USING THE PROCEEDS FROM EXITING SOME OF THEIR NON-CORE BUSINESSES AND IMPROVING THE PROFIBILITY OF THE CORE UGG BUSINESS TO RETURN CAPITAL SHAREHOLDERS. THE COMBINATION OF THAT WE THINK CREATES A LOT OF VALUE.
PICKER: CAUSE I KNOW THREE MONTHS AGO, YOU SENT A LETTER TO THE BOARD SAYING THAT YOU WANTED TO SEE AN OUTRIGHT SALE, AND THREATENED A PROXY CONTEST AND REMOVAL OF ALL 10 DIRECTORS IF THAT DIDN’T TAKE PLACE. YESTERDAY, IT WAS MORE ABOUT KIND OF SPINNING OFF SOME OF THOSE NON CORE ASSETS, THE NON UGG BRANDS THAT THEY HAVE. WHICH WOULD YOU PREFER. WHICH WOULD YOU LIKE TO SAY?
MCGUIRE: WELL IT VERY MUCH DEPENDS ON IF A SALE IS POSSIBLE AND AT WHAT PRICE. I THINK OUR MESSAGE TO THE COMPANY IS THAT THE STATUS QUO IS ONE NEITHER WE OR A LOT OF SHAREHOLDERS ARE SATISFIED WITH, AND IF THE COMPANY IS NOT TO BE SOLD, THE DIRECTION THAT WE TRIED TO LAY OUT IN THE PRESENTATION IS ONE THAT WE THINK IS IMPORTANT. AT THE SAME TIME, ALL BOARDS SHOULD BE, YOU KNOW, ALWAYS CONSIDERING THEIR ALTERNATIVES AVAILABLE TO THEM. AND IF THERE IS AN OPPORTUNITY TO PARTICIPATE IN CONSOLIDATION IN THE INDUSTRY AT AN ATTRACTIVE PRICE, THEN WE WOULD ENCOURAGE THEM TO PURSUE AS WELL.
PICKER: THE COMPANY SAYS YOU HAVE ENGAGED IN DISCUSSIONS WITH THEM SO FAR. I KNOW IT’S BEEN A LONG PROCESS SINCE YOU FILED YOUR 13D AND NOMINATED THE DIRECTORS A COUPLE WEEKS AGO. WHAT’S THE SENSE YOU GET FROM THEM IN TERMS OF THE POSSIBILITY OF A SETTLEMENT? DO YOU THINK THIS THING ACTUALLY GOES TO A PROXY FIGHT AT THIS STAGE?
MCGUIRE: IT’S DIFFICULT TO SAY. I WOULD SAY IT’S TOO EARLY TO SAY. WE HAVE NOMINATED A GROUP OF DIRECTORS CANDIDATES THAT WE THINK ARE EXCEPTIONAL. WE SPENT A LONG TIME OF SEARCHING FOR THOSE PEOPLE AND VETTING THEM. IF WE FIND OURSELVES ON DECEMBER 14TH IN A VOTE, WE THINK THE STRATEGY THAT WE’RE ASKING THE COMPANY TO PURSUE AND PEOPLE THAT WE NOMINATED TO DO THAT ARE PRETTY COMPELLING.
PICKER: YOU MUST HAVE A PRETTY STRONG STOMACH AS FOR THOSE PEOPLE – WE’VE SEEN A WAVE OF BANKRUPTCY AND RETAIL BASIS. AMD ONE OF THE SUGGESTIONS YOU’VE PUT FORWARD WAS TO REORIENT THE CAPITAL STRUCTURE AND ENGAGE IN SOME BUY BACKS. WHAT - HOW DO YOU KIND OF FIT IN ALL THE CHALLENGES IN THE RETAIL SPACE THAT’S GOING ON RIGHT NOW? AND DOES THAT LEAVE ENOUGH CUSHION THAT IF THEY DO WIND UP IN SOME SORT OF TROUBLE THAT THEY WOULD BE ABLE TO SUPPORT AND CONTINUE OPERATING?
MCGUIRE: YES, WE THINK SO. IT’S A GOOD QUESTION. WE DO MAKE A DISTINCTION BETWEEN, SAY A PHYSICAL RETAILER THAT SELLS OTHER PEOPLE’S BRANDS AND PRODUCTS AND AN ACTUAL MANUFACTURES AND BRAND OF PRODUCTS. AND IN THE CASE OF DECKERS, YOU KNOW, THEY ARE THE COMPANY THAT MAKES THE SHOES AND IT IS THEIR CHOICE DETERMINING HOW THEY ACTUALLY DELIVER THOSE PRODUCTS TO CONSUMERS. IT IS IN RECENT YEARS THEY CHOSEN TO DO THAT AT A TIME WHEN ALL PHYSICAL RETAILERS ARE LOOKING TO SHRINK THEIR PHYSICAL FOOTPRINT. WE THINK THAT HAS BEEN A BIG PART OF WHATS BEEN WEIGHING ON PROFIT MARGINS AND RETURNS, SO ONE OF THE PRIMARY THINGS WE WOULD LIKE TO SEE THEM DO IS BE MORE AGGRESSIVE IS REDUCING RETAIL SPACE FOR ALL THOSE REASONS. FROM A CAPITAL STRUCTURE STANDPOINT, ONE OF THE THINGS THAT WE SCRATCH OUR HEAD ABOUT - THE COMPANY IS ABOUT A $2 MILLION CAP, THE END OF THE HOLIDAY SEASON WE THINK IT COULD HAVE AS MUCH AS $500 MILLION OF NET CASH ON THE BALANCE SHEET. AND SO WHEN YOU HAVE 20% OF YOUR MARKET CAP IN CASH, IT BEGS THE QUESTION AS TO WHY THAT’S KIND OF A RESPONSIBLE WAY TO CAPITALIZE IT. WE THINK THERE’S ROOM TO IMPROVE THERE.
PICKER: THANK YOU, MICK MCGUIRE, SO MUC
