Activist shareholder Clinton Group Inc. is targeting television and Internet home shopping company ValueVision Media Inc. (VVTV) with a campaign to replace its chief executive officer and appoint board members.
Clinton Group’s funds own more than 5 percent of ValueVision, which operates the ShopNBC network and ShopHQ, according to a letter to the company’s Chairman Randy Ronning. A copy of the letter, which was written by the New York-based investor’s President Greg Taxin and dated today, was filed with the Securities and Exchange Commission.
ValueVision CEO Keith Stewart has missed targets and the company is underperforming competitors, according to the letter. Clinton Group offered to invest at least another $25 million at “a substantial premium to the stock price” if Stewart is replaced and new board members are appointed. The fund manager isn’t seeking a board seat, though the letter refers to unnamed candidates the fund will recommend.
Taxin referred to meetings and phone calls he held with Ronning and company director Sean Orr in the letter.
ValueVision defended the turnaround under Stewart’s leadership in a statement today, and said it had been in discussions with Clinton since early September. Jefferies Group LLC is serving as financial adviser to ValueVision, while Simpson Thacher & Bartlett LLP and Barnes & Thornburg LLP are providing legal counsel.
“We will take the time necessary to thoroughly evaluate the Clinton letter while continuing to focus on the successful execution of ValueVision’s business plan to enhance our operating and financial performance,” ValueVision said in the statement.
ValueVision fell 5 percent to $5.15 in New York today, giving the company a market value of $255 million. The shares have almost tripled this year, compared with a more than 3 percent decline for larger competitor HSN Inc. (HSNI), and a nearly 38 percent gain for Liberty Interactive Corp., owner of QVC Inc.
Eden Prairie, Minnesota-based ValueVision, which sells jewelry, clothing, home appliances and other products direct to consumers via television programming, is worth about one-tenth of HSN, despite similar cable and satellite distribution, Taxin says in the letter.
“The company was in bad shape when Mr. Stewart arrived and he rightly gets credit for keeping ValueVision afloat,” Taxin wrote. “But he has not hit his own targets, optimized the operations or maximized the returns to shareholders. And now, he has no discernible strategy to lift the Company from its distant, third-place (and shrinking) market position.”
The company’s shares are up nearly 1,700 percent since Stewart was named CEO in January 2009. Still, sales of $587 million for the year ending in February, are down from a high of $782 million in 2008, the last year that the company reported an annual net profit, data compiled by Bloomberg show.
Activist funds generally acquire equity stakes in companies and try to force corporate management and directors to make changes that boost share prices and investor returns. Clinton Group has recently sought changes at weight-loss companies Nutrisystem Inc. (NTRI) and Vivus Inc. (VVUS), and XenoPort Inc. (XNPT), the maker of the drug Horizant to treat restless-legs syndrome.
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