North & Webster Sends Letter To CSP Inc. Stockholders
Urges Stockholders to Support its Qualified Director Nominees Who Are
Committed to Conducting an Open and Transparent Sale Process for CSP
Urges Stockholders to Vote the Gold Proxy to Support a Sale of the Company
NEW YORK, Feb. 1, 2013
NEW YORK, Feb. 1, 2013 /PRNewswire/ --North & Webster, LLC ("North &
Webster") announced today that it has sent a letter to the stockholders of CSP
Inc. ("CSP" or the "Company") urging them to vote the GOLD Proxy card to
support an open and transparent sale process for the Company by electing North
& Webster's director nominees, James Bussone, J.K. Hage III, Samuel A.
Kidston, and Erik Thoresen. By voting the GOLD proxy for the North &
Webster nominees, stockholders will be able to demonstrate that they support
an immediate process be undertaken to sell the Company to the highest bidder.
North & Webster beneficially owns 133,266 shares, representing approximately
4% of the Company's outstanding common stock.
The full text of the letter follows:
January 31, 2013
Dear Fellow CSP Inc. Stockholder:
VOTE THE GOLD PROXY CARD TODAY TO SUPPORT A SALE OF THE COMPANY
North & Webster, LLC, together with its affiliates ("we" or "North &
Webster"), currently owns approximately 4% of the outstanding common stock of
CSP Inc. ("CSP" or the "Company"), making us one of the Company's largest
stockholders. On November 7, 2012, we sent a private letter to the board of
directors of CSP (the "Board") offering to acquire all of the shares of common
stock of CSP that we do not already own for $5.50 per share in cash (the
"Proposal"). At the time, our Proposal represented a 15% premium to the 60-day
moving average and was higher than CSP's 3-year high. We based this offer on
publicly available information and informed the Board that it is subject to
change based on further due diligence. Our Proposal was designed to be the
opening offer in a process that would involve (i) a reputable investment bank
hired by the Board, (ii) discussions and negotiations with multiple potential
purchasers and (iii) ultimately, a value maximizing transaction that would
benefit all stockholders.
Unfortunately, instead of engaging with us, the Board decided to completely
ignore us. The Board (1) refused to return any of our phone calls, (2)
refused to meet with us, and (3) in a proxy filing made just two days after
Christmas and with full notice of our intention to run a slate of directors at
the 2013 Annual Meeting, set a retroactive record date and an annual meeting
date window that we believe were designed to frustrate our ability to give you
a choice of an alternate slate of directors at the 2013 Annual Meeting. In
CSP's own proxy materials it has indicated the Company intends to spend
approximately $250,000 in stockholder funds in excess of what it would
typically spend on an annual meeting all to avoid conducting a sale process.
Ask yourself why, in the face of our acquisition offer and proxy contest, the
Board hasn't given stockholders any reasons why now is not the right time to
explore a sale of the Company.
CHANGE IS NEEDED NOW AT CSP
WHILE THE CSP BOARD REFUSES TO EVEN CONSIDER A SALE THAT COULD MAXIMIZE THE
VALUE OF YOUR INVESTMENT, THE COMPANY HAS ENGAGED IN A STRING OF ITS OWN
TROUBLING, VALUE-DESTROYING ACQUISITIONS
We believe CSP is desperately in need of change. Since 1994, it appears CSP
has been operating without a coherent plan. During such time, CSP has
conducted a string of value-destroying acquisitions that have left
stockholders with a company consisting of two disparate businesses that lack
synergies, all the while enriching management and the Board with over $24.5
million in compensation.
Below is a sample of CSP's troubling acquisition strategy:
oIn March, 2000, the Company invested $2 million in stockholder capital in
Vertical Buyer, Inc. Just over a year later, the Company recorded an
impairment charge of $1.2 million on this transaction, writing off 60% of
the cost of the investment as worthless.
oOn May 30, 2003, CSP acquired Technisource Hardware, Inc. (CSP director
and current Chairman Shelton James was CEO of a subsidiary of Technisource
Hardware at the time of the transaction), for $2.68 million in cash. $2.8
million in goodwill was created in the transaction.
oOn Sept. 25, 2008, the Company acquired R2 for $2.4 million and recorded
approximately $1.1 million in goodwill for the transaction.
oAs of the 10K dated 12/29/2008 the Company had goodwill "of approximately
$2.8 million" in connection with the acquisition of certain assets of
Technisource Hardware on May 30, 2003, and "approximately $1.1 million" in
connection with the acquisition of the assets of R2, for total goodwill of
oOne year later in the 10K filed on 12/22/2009, the Company took a full
impairment of all of its goodwill as of September 30, 2009, where the
Company wrote down the full cost of the Technisource Hardware acquisition,
and all goodwill related to R2 (which was acquired one year earlier).
These three acquisitions cost stockholders approximately $7 million, yet the
Company wrote off over $5 million in these costs, in one case writing off the
full cost of an acquisition only one year after the purchase!
The Company has underperformed for 20 years. $10,000 invested in the Company
twenty years ago would be worth $11,083 while that same $10,000 invested five
years ago would be worth $7,348. Likewise, $10,000 invested in the NASDAQ
Composite Index over the same time period would be worth $49,175 and $11,054
over those same time periods.
We believe CSP is a company that operates two disparate businesses with no
apparent synergies and where the future prospects of value creation at CSP in
the hands of the current Board is a serious question and concern.
We are not alone in having serious concerns about the Company's prospects.
Consider these examples that come from the Company itself:
o"While we anticipate continued growth from our Service and Systems
Integration segment, the timing of programs will most likely result in a
loss at our Systems segment." Press Release dated Dec. 13, 2012. "The year
(FY 2013) will create a difficult year over year comparison." Gary Levine,
CFO, on 4th Quarter earnings conference call.
o"One of the problems we have - these two businesses have different
profiles and don't make sense together." Statement from telephone call on
October 29, 2012 between Sam Kidston, Gary Levine and Shelton James.
oThe Company stated the VAR business needs to grow at least 100% or it
cannot support the costs of being a public company. Statement from
telephone call on October 29, 2012 between Sam Kidston, Gary Levine and
oThe Company also stated in the Q&A section of the December 13, 2012
conference call, that as a result of conversations with Lockheed, they do
not believe there will be other orders for planes placed.
We believe that the Company has underperformed historically and that these
examples demonstrate that there are considerable risks to the Company as a
stand-alone business. The fact is that in the last 20 years stockholders have
received a total return of 10.83%, and since 1994 the Company has earned
cumulative net income of $5.65 million while management and the Board of this
Company has pocketed over $24.5 million in that same period. It is time for
CSP to finally return value to investors rather than merely serving as a
personal cookie jar and pension fund for the management and Board. CSP needs
to be sold in an open and transparent process now!
Unfortunately, since the Board has chosen to allow very little time between
now and the 2013 Annual Meeting and has refused to engage in discussions
regarding our offer or a sale process for the Company, we have been left with
little choice but to nominate a slate of four qualified director candidates to
run for the Board with the express mandate to SELL THE COMPANY TO THE HIGHEST
BIDDER! We feel that if nothing is done to challenge this Board the history
of poor stockholder returns over the past 20 years will simply continue. If
you prefer the Company to immediately commence a strategic process designed to
maximize the value of your investment rather than the status quo, VOTE THE
GOLD PROXY CARD!
WE ARE NOT ASKING YOU TO VOTE ON OR APPROVE ANY OFFER TO ACQUIRE CSP AT THIS
TIME. HOWEVER, BY VOTING FOR OUR SLATE OF NOMINEES, YOU WILL BE VOTING FOR
DIRECTORS THAT ARE COMMITTED TO DOING WHATEVER NECESSARY TO COMMENCE AN
IMMEDIATE SALE PROCESS DESIGNED TO MAXIMIZE STOCKHOLDER VALUE.
Please note, any shares voted on the Company's proxy card, even if you vote
against every item, will count as a vote against our slate. If you have
already voted on the Company's proxy card please see the instructions in the
proxy statement or call our proxy solicitor, whose information is listed
If you have any questions or require any assistance with your vote, please
contact SCB Advising, Inc., who is assisting us, at 1-877-786-3323 or
Thank you for your support.
Samuel A. Kidston
North & Webster, LLC
North & Webster
Sam Kidston, 617-395-8121
SOURCE North & Webster
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