Engaged Capital Sends Letter to Outerwall Board Outlining Immediate Strategy for Sustainable Value Creation
February 18 2016 - 9:00AM
Business Wire
- Believe OUTR’s underperformance and
current depressed valuation is a direct result of the Board’s
failed strategies, flawed capital allocation policies, and
misaligned governance.
- Encourages shareholders to voice their
concern directly to the Board.
Engaged Capital, LLC (together with its affiliates, “Engaged
Capital”), an investment firm specializing in enhancing the value
of small and mid-cap North American equities, and a 14.6%
shareholder of Outerwall Inc. (“OUTR” or the “Company”)
(NASDAQ:OUTR), announced today that it has delivered a letter and
presentation to the Board of Directors (the “Board”) of OUTR. The
letter and presentation outline Engaged Capital’s concerns
regarding the governance and management of the Company’s assets and
recommends a series of actions aimed at creating significant, and
lasting, shareholder value.
In the letter, Engaged Capital asserts its belief that OUTR’s
underperformance and current depressed valuation is a direct result
of the Board’s failed strategies, flawed capital allocation
policies, and misaligned governance. Over the last four years,
OUTR’s Board has squandered approximately $1.2 billion of
shareholder capital, a staggering sum representing approximately
2.5x the Company’s current market value.
In addition, Engaged Capital believes that on at least three
occasions in the last year the Board refused to engage with
potential acquirers by either insisting the Company was not for
sale or simply failing to respond at all to the interested party.
If true, these actions represent a dereliction of the Board’s
fiduciary duty to shareholders as the pecuniary interests of
individual directors and management appear to have been placed
above that of the Company’s shareholders. The Board’s interests are
clearly misaligned with shareholders as evidenced by the miniscule
collective ownership position of OUTR’s independent directors (less
than 0.3% of shares outstanding).
Engaged Capital believes there is a path to create immediate and
sustainable value for all OUTR shareholders, and that the fix is
largely under the Board and management’s control. Due to Chairman
Nelson Chan’s refusal to meet with Engaged Capital in a timely
fashion, Engaged Capital felt it was necessary to share its views
more broadly to encourage swift action by the Board. Specifically,
Engaged Capital recommends the Company:
- Cease all growth investments;
- Aggressively manage both Redbox and
Coinstar for cash;
- Sell or shut down the ecoATM
business;
- Halt the Company’s share repurchase
program;
- Use the majority of free cash flow to
pay a large annual dividend (ie. a
$125 million annual dividend which equates to a 25% yield at
current prices) and reduce debt; and
- Immediately retain financial advisors
and begin a sales process with the goal of taking OUTR
private.
Engaged Capital strongly encourages OUTR’s shareholders to
directly contact Mr. Chan, as well as the other directors, and
insist the Board of OUTR immediately take the steps outlined in the
letter and presentation available at the link below. Engaged
Capital will remain vigilant in ensuring the Company enacts these
recommendations and will not hesitate to use every method available
to shareholders to hold the Board accountable, including nominating
new directors at the 2016 annual meeting in June.
The full text of the letter and presentation can be found
here:Letter:
http://engagedcapital.com/press/OUTR-BOD-letter.pdfPresentation:
http://engagedcapital.com/press/OUTR-presentation.pdf
About Engaged Capital:
Engaged Capital, LLC (“Engaged Capital”) was established in 2012
by a group of professionals with significant experience in activist
investing in North America and was seeded by Grosvenor Capital
Management, L.P., one of the oldest and largest global alternative
investment managers. Engaged Capital is a limited liability company
owned by its principals and formed to create long-term shareholder
value by bringing an owner’s perspective to the managements and
boards of undervalued public companies. Engaged Capital manages
both a long-only and long/short North American equity fund. Engaged
Capital’s efforts and resources are dedicated to a single
investment style, “Constructive Activism” with a focus on
delivering superior, long-term, risk-adjusted returns for
investors. Engaged Capital is based in Newport Beach,
California.
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version on businesswire.com: http://www.businesswire.com/news/home/20160218005517/en/
Investors:Morrow & Co., LLCTom Ball,
203-658-9400tomball@morrowco.comorJohn Ferguson,
203-658-9400jferguson@morrowco.comorMedia:Bayfield Strategy,
Inc.Riyaz Lalani, 416-907-9365rlalani@bayfieldstrategy.com
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