It appears that the practice of a major shareholder — dissatisfied with the financial performance and share price of its investment — issuing a public letter directed at the publicly-held company’s board of directors, seeking change, has become commonplace. Such is the case with New York-based Sententia Capital Management Group, which with its affiliates owns 869,687 shares (2.6%) of LSC Communications outstanding common stock.
Sententia had already issued a letter on Feb. 21, 2020, serving notice that it had nominated a slate of six directors to replace existing board of directors members at Chicago-based LSC Communications (stock symbol: LKSD), to be voted on at the LSC 2020 Annual Shareholder Meeting.
According to Sententia, the LSC board of directors has responded to their action by adopting a Shareholder Rights Plan (aka Poison Pill) to thwart any hostile takeovers, postponed its 2020 shareholder meeting, and is heading LSC toward a bankruptcy filing (presumably a Chapter 11 reorganization plan) to preserve the positions of existing management (click here to view LSC’s Q4 2019 financial results and the waiver and forbearance agreements with its lenders).
So, in turn, Sententia issued a public followup letter on March 9, 2020, threatening to file a preliminary proxy card with the SEC, calling for a special meeting of LSC stockholders to remove and replace members of LSC’s board — including LSC Chairman Thomas “Tom” Quinlan — with its own slate of board candidates.
“The LSC board lacks relevant turnaround, restructuring, and mergers and acquisitions experience that is required to best serve shareholders rights,” the value-based investing capital management firm, which is led by Founder Michael R. Zapata, noted in a press release that accompanied its letter to LSC’s board of directors.
“Sententia believes LSC’s board is responsible for the current state of LSC Communications and the board may seek to expedite bankruptcy filings to preserve management’s positions. Sententia is calling on the board to engage with Sententia immediately for the benefit of all shareholders.”
The full letter said:
LSC Communications, Inc.
Thomas “Tom” Quinlan
M. Shân Atkins
To the Board of Directors of LSC Communications, Inc.:
I am writing to you on behalf of Sententia Capital Management, which together with its affiliates beneficially owns 869,687 shares of common stock of LSC Communications, Inc representing approximately 2.6% of the shares outstanding.
As you are aware, on February 21, 2020, we delivered to the company a letter serving as notice of our nomination of six candidates (the “nominees”) for election to LKSD’s Board of Directors at its 2020 Annual Meeting of Stockholders. Although we submitted the nomination letter privately in an attempt to work constructively with the board, the company unilaterally decided to publicly announce our nomination in a press release issued on February 23, 2020.
Since the company’s public announcement of our nomination, other LKSD stockholders have contacted us to express their concerns with LKSD’s leadership and to indicate their support for change to the composition of the board. Yet, based on the company’s recent actions, including its adoption of a stockholder rights plan (aka “poison pill”) and its announcement that the company would postpone the 2020 Annual Meeting, the board appears intent on frustrating the will of stockholders by entrenching the existing board and management rather than genuinely engaging with stockholders on the actions needed to cease the destruction of stockholder value at LKSD.
We are further concerned that the board and management’s next step at the expense of stockholders will be to accelerate a bankruptcy filing.
We Call on the Board to Cease its Destruction of Stockholder Value
Mark Michelson is the Editor-in-Chief of Printing Impressions. Serving in this role since 1985, Michelson is an award-winning journalist and member of several industry honor societies. Reader feedback is always encouraged. Email firstname.lastname@example.org