Rovi Activist Engaged Wins Two Board Seats, Ousts Chairman

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Activist investor Glenn Welling’s Engaged Capital LLC won two of three board seats it sought at Rovi Corp., ousting Chairman Andrew Ludwick in a proxy fight at the company, which licenses data for television guides.

Shareholders backed Engaged Capital’s candidates, Welling and Raghavendra Rau, who will join the seven-member board, Rovi said Wednesday in a statement, citing preliminary voting results from the annual meeting in Santa Clara, California. Chief Executive Officer Thomas Carson will be interim chairman.

The vote adds new oversight at Rovi, which Engaged has targeted publicly since March, after privately nominating candidates in December. The investor, with about 0.6 percent of the stock, criticized Rovi’s performance, strategy, costs, capital allocation, compensation, and governance. Shareholder advisory firms Institutional Shareholder Services Inc. and Glass Lewis & Co. sided with Engaged.

Rovi rose 0.2 percent to $17 at the close in New York. The stock traded close to $70 in 2011, declining after acquisitions and efforts to develop new products absorbed lucrative licensing cash flows and failed to deliver growth.

Rovi had said it sought to settle its differences with Engaged as recently as May 3. The company, based in Santa Clara, offered to add Rau as a director and find another director jointly, while saying Ludwick wouldn’t stand for re-election next year. The company offered to pay the costs of Engaged Capital’s proxy fight, and form a finance and strategy committee.

Battle Lines

Engaged, a Rovi investor since April 2013, rejected the proposal in part because no incumbent directors were being ousted. A third Engaged nominee, David Lockwood, failed to win a board seat

Rovi, formed through the 2008 merger of Macrovision and Gemstar, holds the patents for TV programming guides and products that are licensed to cable companies and others such as Sony Corp. and Google Inc. It has fought companies including Amazon.com Inc. and Netflix Inc. over patent-infringement claims.

Welling, a former partner at activist firm Relational Investors LLC, formed Engaged Capital with other Relational managers in 2012, backed by Grosvenor Capital Management LP.

Engaged, which describes its investing style as “constructive activism,” recently settled for board changes at juice chain Jamba Inc., manufacturer TriMas Corp., weight-loss group Medifast Inc., and saw two other targeted companies sold - - HDMI video transmission technology creator Silicon Image Inc. and fiber-optic supplier Oplink Communications Inc.

Activist funds acquire equity stakes in companies and seek to force changes that boost share values and investor returns.

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