NEW YORK, Dec. 3, 2019 /PRNewswire/ -- Marathon
Partners Equity Management, LLC, a New
York-based investment firm, and its affiliated investment
funds (collectively "Marathon Partners"), which beneficially own
approximately 7.8% of the common stock of e.l.f. Beauty, Inc.
("e.l.f." or the "Company") (NYSE: ELF), announced today that it
has delivered a letter to the Company's Board of Directors (the
"Board") recommending that the Board seek a sale of the Company
through a strategic alternatives process.
In its letter to the Board, Marathon Partners outlines its
belief that there is ultimately one solution to the Company's
languishing share price - e.l.f. needs to sell itself through a
competitive auction process. Marathon Partners shared its view that
an announced strategic alternative process will inject needed
discipline into the Board's deliberations and provide benchmark
values to critically evaluate against management's current
standalone plan.
Mario Cibelli commented, "After
multiple years of share price under-performance and no operating
progress since the IPO, it is time for the Board to act in the best
interests of shareholders and initiate a strategic alternatives
process to sell the Company. e.l.f.'s CEO has been richly rewarded
over the past three years despite not delivering for shareholders,
and it is time to seek out alternative strategies for enhancing
shareholder wealth."
Mr. Cibelli continued, "We believe e.l.f. shares are currently
worth approximately $22 to
$27 per share to strategic buyers and
that it will be highly challenging for an independently run e.l.f.
to exceed the midpoint of this range over any reasonable period of
time, especially on a risk-adjusted basis. To justify continued
independence, the Board would need to support an operating plan
that could drive value well in excess of this range over a
relatively short period of time to compensate shareholders for
execution risk and the time value of money. Senior management
has shown little discipline in matching revenue and expense growth
in the past, and it is unlikely that plans to grow shareholder
value as an independent entity will suddenly start bearing fruit.
We do not believe there is a realistic plan from management that
can deliver as much value at this time as a sales process."
Mr. Cibelli added, "We believe there is only one way to
determine whether now is the right time to sell the Company, and
that is by going through a bona fide strategic alternatives process
with a properly motivated advisor. An announced strategic
alternatives process will provide directors with competing
benchmark values that can be evaluated against management's
internal plans to add shareholder value. Of course, astute
Board members need to keep in mind that senior management's
lucrative compensation will create a strong bias favoring plans of
independence so that they may continue reaping excessive
rewards."
Mr. Cibelli concluded, "There is little question in our minds
that TPG and its former employee, Bill
McGlashan, left a corporate governance mess at e.l.f. that
the Board has left unaddressed. As TPG exits its investment, it is
leaving the Company with an unsupportive shareholder base and a
Board that received the worst possible corporate governance score
by Institutional Shareholder Services Inc. We encourage Board
members to engage with public shareholders to better understand
their concerns, particularly since approximately two-thirds of
public shareholders did not support the election of Chairman and
CEO Tarang Amin and Lead Independent
Director Beth Pritchard in their
uncontested election at the Company's last annual meeting.
Kirk Perry, Sabrina Simmons
and Maureen Watson are the current
directors up for re-election in 2020, and we implore them to
critically self-reflect on their tenure and remedy the areas in
which they have fallen short as fiduciaries to win public
shareholder support."
The full text of Marathon Partners' letter to the Board
follows:
https://mma.prnewswire.com/media/1038440/elf_letter.pdf
About Marathon Partners:
Marathon Partners Equity Management, LLC is a fundamental,
research intensive investment firm that deploys capital with a
long-term investment horizon.
Investor Contact:
Mario Cibelli or Eric Hidy
(212) 490-0399
http://www.marathonpartners.com
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SOURCE Marathon Partners Equity Management, LLC