No surprise here. Now that it is public knowledge that Fisher Communications turned down a buyout proposal in April, one of its hedge fund investors is pressing the board of directors to put the company up for sale.
FrontFour Capital Group wants Fisher’s board to engage an investment advisor to find a buyer for the company and maximize shareholder value. The hedge fund, which has previously clashed with Fisher’s board and management, also wants a halt to any and all acquisitions. If the board doesn’t agree to those demands, FrontFour is threatening to call a special shareholders meeting or stage a proxy battle next year for control of the board.
Here is the letter to the board from David A. Lorber, Portfolio Manager, FrontFour Capital Group LLC:
“We are extremely disappointed by the Board of Directors’ apparent unwillingness to engage in discussions with a potential buyer. Given the Board and management’s failure to create shareholder value over the past two and a half years, the Board’s rejection of an unsolicited indication of interest at a 35% to 40% premium, announced June 23, 2008, has left us no choice but to publicly express our discontent.
This letter should come as no surprise to the Board and management of Fisher. We have privately expressed our concern about Fisher’s operating performance, dilutive acquisitions, discounted public market valuation, and archaic corporate governance policies, which promote entrenchment.
New management was brought in over two and a half years ago to pursue a turnaround that has not materialized. As a result, shareholders have suffered a 30% loss while approximately $100 million was spent on acquisitions that have added limited to no value. Management has stated that the television broadcast assets should be operating at a 40% broadcast cash flow margin, yet in 2007, there was no meaningful improvement versus 2006, and margins remain below 30%. As depicted in management’s own presentation to shareholders at the 2008 annual meeting, broadcast margins continue to be meaningfully below peer levels.
It appears that management has been given more than sufficient time to improve shareholder value, but has been unsuccessful in its efforts. Accordingly, we believe that this Board should immediately announce the retention of an investment advisor with a clear mandate to engage all strategic and financial buyers in a transaction that would maximize shareholder value. Additionally, this Board should affirmatively announce a permanent moratorium on all acquisitions. Given the current trading level of Fisher’s stock, we believe that any further acquisitions would be highly dilutive and inconsistent with the Board’s fiduciary duty to shareholders. Should discussions with potential buyers not result in a transaction, the Board should focus on amending or removing provisions in the capital structure to allow for a significant return of cash to shareholders.
We welcome further discussions with the Board or its representatives. In the meantime, we will work with our advisors to determine potential courses of action, which may include calling a special meeting of stockholders or running a proxy contest at the 2009 annual meeting.”
