VIEX Capital Issues Letter to Stockholders of KVH Industries, Inc.
14 June 2021 - 10:00PM
Business Wire
Announces Glass Lewis Endorses VIEX’s Case
for Change and Recommends Stockholders Vote on the WHITE Proxy Card to Elect Nominee John
Mutch
Highlights that Glass Lewis and ISS have
Chided KVH’s Attack-Filled Campaign, Which is Costing an Astounding
5% of the Company’s Total Cash
Notes Glass Lewis Specifically Spotlighted
Eric Singer’s Record Helping Turn Around Founder-Dominated and
Underperforming Technology Companies
Reiterates Stockholders Should Question the
Integrity of KVH’s Defensive Board Refresh Efforts Given its
Nominees’ Links to the Company’s Defense Advisors
Urges Stockholders to Vote on the
WHITE Proxy Card to Elect Messrs.
Mutch and Singer, who Possess Superior Governance Acumen, Ownership
Perspectives and Turnaround Experience
VIEX Capital Advisors, LLC and the other
participants in its solicitation (collectively, the “VIEX-led
investor group” or “we”) today issued the below open letter to
stockholders of KVH Industries, Inc. (NASDAQ: KVHI) (“KVH” or the
“Company”) regarding the Company’s Annual Meeting of Stockholders
(the “Annual Meeting”). The VIEX-led investor group is seeking to
elect two highly-qualified individuals – John Mutch and Eric Singer
– to KVH’s Board of Directors (the “Board”) at the Annual Meeting
on June 17, 2021.
***
Fellow Stockholders,
The VIEX-led investor group holds nearly 10% of KVH’s
outstanding common stock, making us the Company’s largest
stockholder. We believe the case for change atop KVH is crystal
clear after 20 years of abysmal financial performance and insular
corporate governance under founder, chairman and chief executive
officer Martin Kits van Heyningen. We contend the case for change
has grown even stronger in recent months as Mr. Kits van Heyningen
and his long-standing boardroom allies threatened to invalidate our
nomination, rebuffed our proposal to settle for one designee and
subsequently initiated a multi-million-dollar smear campaign that
has been chided by leading independent proxy advisory firms.
We find the Board’s wasteful campaign all the more alarming when
taking into account that KVH appears to have not repaid its nearly
$7 million loan under the Paycheck Protection Program. We are truly
confounded by the Company’s decision to spend 5% of its capital on
a proxy fight, especially when we were willing to settle for one
designee. Given this seemingly irresponsible level of spending, we
want stockholders to receive a detailed breakdown of the millions
of dollars in professional fees and incentive payments associated
with this contest.
In our view, stockholders have two distinct choices at this
week’s Annual Meeting:
- Vote on the WHITE proxy
card to elect our two highly-qualified nominees, who possess
strong corporate governance acumen, ownership perspectives and
turnaround experience in the technology sector. We feel this is the
most direct path to disrupting the money-losing status quo and
igniting a sustainable turnaround that benefits all of KVH’s
stockholders and stakeholders.
- Vote on the Company’s card to elect two individuals with
insufficient boardroom experience and no ownership perspectives. We
suspect this would enable Mr. Kits van Heyningen and his allies to
continue operating with minimal accountability and oversight.
Without our nominees serving as a check on Mr. Kits van Heyningen,
we fear the Company will continue to burn through capital and
remain his unprofitable fiefdom.
Prior to voting, we encourage all stockholders to review our two
public presentations and also consider the findings in the report
issued by Glass, Lewis & Co. LLC (“Glass Lewis”) late last
week. In addition to recommending that stockholders vote on VIEX’s
WHITE proxy card to elect Mr.
Mutch, Glass Lewis notes:1
- “Despite the Company’s claims to be committed to good corporate
governance, we agree with VIEX that KVH
has a generally poor governance structure which results
in a lack of accountability and has enabled a lack of needed
oversight, excessive board tenures and, until the Dissident’s
campaign, insufficient board refreshment.”
- “The Company maintains several
out-of-favor corporate governance policies, including a
founder CEO who also serves as chairman, a staggered board
structure and no right for shareholders to act by written consent,
among others, as noted by the Dissident.”
- “[…] Company’s trailing one- and
three-year returns have significantly underperformed industry
peers, contrary to the board’s assertions.”
- “[…] we would agree with the Dissident that the Company has for
the most part touted revenue growth
opportunities without providing much in the way of near-term
guidance on achieving profitability. Nor has the Company
provided any substantive detail regarding the long-term economics
of the Company’s business model and platform.”
- “Beyond the foregoing considerations, we note the Company has
taken a particularly defensive posture in
response to VIEX’s campaign. KVH threatened to
invalidate VIEX’s director nominations and, in our view, it has
been overly critical of the track records and experience of VIEX’s
nominees […] we generally find these
attempts to denigrate board nominees to be superficial, context
lacking and irrelevant to the primary concerns at issue in a proxy
contest.”
- “[…] we believe VIEX has made a
sufficient case for incremental board change at KVH,
based on the Company’s relatively stagnant stock price and
operating performance, the lack of a fully developed financial plan
to go along with the Company’s strategy, and various corporate
governance concerns and considerations. While VIEX has not
presented a detailed operating plan for KVH, the Dissident has offered several constructive ideas that
we believe are aligned with shareholders’ interests and the
Company’s stated objectives, such as implementing
enhanced governance practices, focusing on cost containment,
establishing a disciplined capital allocation policy, integrating
new executives into management and helping KVH develop a realistic
path to profitability.”
- “Given the significant technology sector and public company
board experience of the Dissident's nominees, particularly at
smaller, often founder-led companies striving to achieve
sustainable profitability, we find each of
VIEX's nominees to be qualified and capable of advancing and
overseeing these priorities as an independent member of the KVH
board.”
Although we believe stockholders seeking to facilitate truly
meaningful change should vote to elect both of our nominees, we
largely agree with the Glass Lewis conclusions. We were especially
pleased that Glass Lewis joined Institutional Shareholder Services,
Inc. (“ISS”) in rebuking KVH’s unseemly campaign. ISS noted in its
own report that the Company was “launching questionable attacks on
the dissident's character.”2 We hope all of our fellow stockholders
can agree that money-losing companies such as KVH should not be
spending millions of dollars in this manner.
It is equally notable that both Glass Lewis and ISS consider
KVH’s attempted board refresh to be defensive in nature. We could
not agree more. While KVH claims its two new nominees were
identified by an independent search firm, both candidates appear to
have recent overlap with the Company’s advisors. KVH’s proxy
solicitor was also the proxy solicitor for South Jersey Industries,
Inc. (NYSE: SJI) when nominee Cielo Hernandez served as Chief
Financial Officer. KVH’s activism defense advisor was also the
activism defense advisor to TESSCO Technologies, Inc. (NASDAQ:
TESS) during the period when nominee Cathy-Ann Martine-Dolecki was
placed on the Board for one month. This apparent overlap gives us
significant concern about the integrity of KVH’s refreshment
efforts in recent months.
In light of the facts pertaining to KVH’s long-term
underperformance and recent entrenchment maneuvers, we believe it
is absolutely essential for the Company’s stockholders to send a
loud and clear message at the Annual Meeting. Mr. Kits van
Heyningen and his allies have not earned the right to unilaterally
refresh the Board. We feel their apparent willingness to peddle
mischaracterizations and waste stockholder capital on an
unnecessary contest validates our conclusion. The Company’s
leadership should instead be focusing on improving its operating
model to return capital to investors.
Stockholders can rest assured that our two nominees will work to
fix KVH’s broken corporate culture and hold management accountable
if they are elected to the Board. Our slate has the sector
expertise, turnaround experience and passion that KVH’s Board needs
at this pivotal point in its lifecycle. John Mutch and I have
collectively served on nearly 20 public boards, including many
founder-dominated tech companies similar to KVH. Both of us have
also repeatedly received recommendations from leading independent
proxy advisory firms over the years.
In closing, we want to emphasize that the VIEX-led investor
group has committed a significant amount of its own capital and
resources to this campaign – unlike Mr. Kits van Heyningen and the
Board. We have done so because we fear the value of our investment
will greatly depreciate if Mr. Kits van Heyningen and his
hand-picked Board members continue to preside over KVH without the
addition of truly independent directors. We urge all stockholders,
including the many fund managers who owe fiduciary obligations to
their own investors, to realize the risk associated with allowing
the status quo to persist. A credible refresh of the Board can help
finally put the Company on a path to long-term growth and
profitability after two decades of stagnation.
Sincerely,
Eric Singer VIEX Capital Advisors, LLC
***
1 Approval to quote Glass Lewis neither sought nor received.
Emphasis added by VIEX. 2 Approval to quote ISS neither sought nor
received. Emphasis added by VIEX.
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212-257-1311 jferguson@saratogaproxy.com /
jmills@saratogaproxy.com
For media:
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gmarose@profileadvisors.com
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