Hestia Capital Announces Intent to Overhaul Pitney Bowes’ Board of Directors Following 10+ Years of Significant Value Destruction Under Chair Michael Roth and CEO Marc Lautenbach
December 12 2022 - 8:00AM
Business Wire
Confounded by the Board’s Rejection of a
Private Proposal to Add Three Stockholder-Designated Directors and
Establish a Strategic Planning & Capital Allocation
Committee
Disappointed by the Board’s Seemingly Bad
Faith and Unethical Tactics in Response to Private Attempts to
Collaborate
States Intent to
Nominate a Majority Slate of Director Candidates that Includes a
Proposed Interim CEO with a Record of Superior Value Creation in
Pitney Bowes’ Industry
Hestia Capital Management, LLC (collectively with its
affiliates, “Hestia” or “we”), which is the third largest
stockholder of Pitney Bowes, Inc. (NYSE: PBI) (“Pitney Bowes” or
the “Company”) with a beneficial ownership position of
approximately 7.1% of the Company's outstanding shares, today
issued the below letter to fellow stockholders regarding its
attempts to engage in a productive, private manner with the
Company’s Board of Directors (the “Board”). In the letter, Hestia
explains why it is now compelled to state its intent to nominate a
majority slate of director candidates, including a proposed interim
Chief Executive Officer, at the Company’s 2023 Annual Meeting of
Stockholders.
***
Fellow Stockholders:
Hestia, which manages a long-term capital base that is anchored
by virtually my entire net worth, is a value-oriented investment
firm that leverages its research team’s strategic and operational
experience to invest in companies that are dramatically undervalued
because they are either misunderstood or mismanaged. Hestia is not
an “activist investor” and has gone to great lengths to avoid
public campaigns during its nearly 15-year history. That is why we
began privately engaging with Pitney Bowes this summer, providing
specific suggestions to help the Company’s long-tenured leadership
catalyze a sustainable turnaround. In particular, we repeatedly
emphasized that the Company’s cash-generating segments – SendTech
and Presort – are exceptional businesses that can underpin a
lasting turnaround once they are operated more efficiently and are
better aligned with strategic opportunities in their industries.
Additionally, we showed that management’s seven-year-old strategy
and stewardship of the Company’s highly valuable Global Ecommerce
(“GEC”) segment is consistent only in management’s repeated
failures, and that a fresh perspective is required to help identify
how to best realize GEC’s significant value.
Given that the Company’s total
stockholder returns are down over -50% during Michael Roth’s 10+
years as Chair and Marc Lautenbach’s 10+ years as Chief Executive
Officer, Hestia assumed the Board and management would want to
collaborate with a major stockholder on (i.) a meaningful director
refresh and (ii.) forming a committee of new and legacy directors
to evaluate opportunities to improve Pitney Bowes’ strategic focus
and capital allocation.1 Last month, as the Company’s
equity and debt hit new lows and prior to having to file a 13D, we
proposed the addition of three new independent directors identified
by us and the formation of a strategic planning and capital
allocation committee. We conveyed that if our two sides could agree
on this level of change, Hestia would not seek the immediate
removal of any directors, the removal of management, an immediate
sale of underperforming assets, Board fees for my service, or
reimbursement for any of our costs. As a further demonstration of
our desire to work collaboratively with the Company, we took the
highly unusual step of making several director candidates – who
were identified at our own expense and time – available for
interviews, even before a high-level framework was agreed to.
It is important to note that we approached Pitney Bowes already
knowing that many of you are extremely frustrated with the
Company’s operational underperformance, poor capital allocation,
stockholder value destruction and declining creditworthiness during
Mr. Roth’s 26 years on the Board and Mr. Lautenbach’s decade as
Chief Executive Officer. Despite this fact pattern and our good
faith efforts, the Company did not agree to our proposal and
instead opted to take the following steps:
- Began working with high-priced advisors that typically charge
seven-figure retainers, including a bulge bracket investment bank
and global public relations agency, for so-called “activism
defense” purposes. This was done while we were trying to come to a
principal-to-principal agreement that would obviate any plausible
reason for such a waste of stockholders’ capital.
- Rejected the idea of forming a committee of independent
directors to evaluate and recommend opportunities for the Company
to increase stockholder value through needed strategic change and
improved capital allocation.
- Rejected the appointment of a Hestia principal as a director,
despite the Board lacking a meaningful stockholder
representative.
- Rejected the appointment of the former Chief Executive Officer
of Stamps.com as a director, despite his long track record of
exceptional management in the space and superior value
creation.
- Tried to go around our back and recruit one of Mr. Lautenbach’s
personal friends in Connecticut, who owns minimal shares, to join
the Board as a “stockholder representative.”
- Tried to go around our back and get two of our director
candidates to join the Board in a manner that would mitigate Pitney
Bowes’ need to continue collaborating with Hestia. This occurred
after the Board’s prior bad faith efforts ultimately compelled our
legal counsel to inform Pitney Bowes’ legal counsel that the
Company needed to stop contacting our candidates in a seemingly
harassing manner. Nonetheless, the Board’s clear entrenchment and
underhanded tactics caused one our candidates – a respected former
C-level executive of a Fortune 10 business – to no longer want to
serve as a director of the Company.
Based on our view that Pitney Bowes’ leadership has behaved in a
manner inconsistent with the levels of integrity that stockholders,
employees and other stakeholders should demand, we no longer see a
path to collaboration unless the Board demonstrates a willingness
to come to a good faith resolution with us. Messrs. Roth and
Lautenbach, who have collectively made tens of millions of dollars
while stockholders have endured massive losses, seem intent on
maintaining a clubby and insular boardroom that safeguards their
leadership positions and the status quo at Pitney Bowes.
In light of these considerations, Hestia
intends to nominate a majority slate of director candidates that
includes a highly-qualified proposed interim Chief Executive
Officer supported by a talented group of operators and
strategists. This degree of change is clearly needed to
help set a new value-creation strategy after 10+ years of strategic
missteps, poor execution and the significant destruction of
stockholder and enterprise value under the current Board.
Please know that Hestia is squarely aligned with you. We see
tremendous value in Pitney Bowes if entrenched leadership can be
replaced with experienced professionals who bring fresh
perspectives and track records of success. Given the incredible
long-term returns we believe can be realized through needed change,
we will not seek expense reimbursement for any of our costs and I
will not accept Board fees for my service. The only value
destruction we anticipate from a prospective election contest is
continued wasteful and unjustifiable spending by the Company to
defend Mr. Roth, Mr. Lautenbach and other directors who have
presided over persistent value destruction. We look forward to
formally introducing our proposed interim Chief Executive Officer,
director candidates and their strategic operating plan in the weeks
and months to come.
Sincerely,
Kurt Wolf Founder and Chief Investment Officer Hestia Capital
Management, LLC
***
About Hestia Capital
Hestia Capital is a long-term focused, deep value investment
firm that typically makes long-term investments in a narrow
selection of companies facing company-specific, and/or industry,
disruptions. Hestia seeks to leverage its General Partner's
expertise in competitive strategy, operations and capital markets
to identify attractive situations within this universe of disrupted
companies. These companies are often misunderstood by the general
investing community or suffer from mismanagement, which we
reasonably expect to be corrected, and provide the 'price
dislocations' which allows Hestia to identify, and invest in,
highly attractive risk/reward investment opportunities.
1 Total stockholder return calculation included dividends
reinvested and runs through the close of trading on November 18,
2022, which is the last day of trading prior to Hestia having to
file a 13D with the U.S. Securities and Exchange Commission.
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Kurt Wolf info@hestiacapital.com (878) 217-4800
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