Citrix Systems Inc. said it reached a settlement with investor Elliott Management Corp., agreeing to add the activist’s chief agitator Jesse Cohn to its board and begin a search for a new chief executive officer.
In a flurry of statements Tuesday, Citrix said the standstill agreement also includes adding another mutually agreed upon independent board member, changing the chairman and conducting strategic and operational reviews. Current CEO Mark Templeton, who separately announced plans to retire, will continue to serve until a successor has been found.
Elliott, which owns about 7.5 percent of Citrix’s common stock, publicly targeted the company in June, calling for changes such as cost overhauls, evaluating selling two of its units, buying back shares and recruiting more talented managers. Under the agreement, Citrix, which sells cloud and work-from-home technology, will also review strategic options for its GoTo business unit.
Cohn, who heads Elliott’s U.S. activist efforts, has replaced director Asiff Hirji “effective immediately,” according to one of the statements. This is Cohn’s first public company board seat. The to-be-recruited board member will supplant another current director.
Citrix director Robert Calderoni will become executive chairman, while current chairman Thomas Bogan will become lead independent director.
Cohn is now part of a new four-director operations committee, “which will work closely with the company’s management team on a comprehensive operational review focusing on improving Citrix’s margins, profitability and capital structure,” the company said. He is also part of the CEO search committee, according to a regulatory filing.
“The additional actions we’re announcing today are designed to ensure we’re directing more of our energy toward our core secure app and data delivery offerings, setting the company up for even better execution, greater efficiency and profitable growth,” Templeton said Tuesday on a conference call. “I’ll be intensely focused on driving us forward until we identify the best person to take the reins however long that may take.”
Citrix shares gained as much as 4.7 percent in extended trading after the announcements. Earlier, the company rose 1.5 percent to close at $69.63 in New York.
Among conditions of the standstill accord, Elliott has agreed to limit its holdings to 9.9 percent of Citrix, abstain from seeking further board changes and not participate in an “extraordinary transaction,” according to the filing.
The timing of the settlement was unusual because often companies reach deals with activist shareholders closer to annual meetings, when proxy contests are threatened.
“We are confident that the initiatives announced today and the addition of new directors to the company’s board will allow Citrix to build upon its position as an innovative industry leader, and to drive significant shareholder value,” Cohn said in a statement. “We look forward to remaining a shareholder and working closely with the company toward our mutual goal of positioning Citrix for success and value creation.”
In his June 11 letter, Cohn criticized Citrix for failing to deliver on cost cuts and a more focused portfolio promised since 2010. He also urged the company to consider a spinoff or sale of its GoTo franchise, which includes online-meeting organizer GoToMeeting. Citrix should also explore the option of selling NetScaler, which helps speed up the delivery of Web- and mobile-based applications, Cohn said in the letter.
Making the changes could boost Citrix’s share price to more than $100 by the end of 2016, without taking into account any asset spinoffs or sales, he wrote then.
Citrix had retained advisers to review operational and strategic moves months before Elliott began pushing for changes, according to two people familiar with the discussions. The speedy settlement reflects a shared view on most of Tuesday’s announcements, said the people, who asked not to be identified because the discussions were private.
Elliott’s campaign came after earnings at Citrix fell short of expectations as the company faces higher costs and slower revenue growth than some of its peers.
Citrix also reported second-quarter sales grew 2 percent to $797 million. Net income was $103 million, or 64 cents a share, compared with $53 million, or 31 cents, a year earlier.
The company also said Tuesday it is “in active discussions” with potential buyers of its ByteMobile business.
Citrix is being advised by banks Qatalyst Partners and Goldman, Sachs & Co., and law firm Goodwin Procter LLP. Recruitment firm Heidrick & Struggles has been retained to find Templeton’s replacement, Citrix said.
Cohn has focused most of New York-based Elliott’s activist shareholder campaigns on enterprise software and hardware companies. Elliott has agitated for changes at technology providers including EMC Corp., NetApp Inc., Juniper Networks Inc., and Riverbed Technology Inc. after taking stakes in the companies.
Separately today, Elliott disclosed it had cut its stake in Juniper to 4.5 percent from 9.6 percent, citing the Cohn-targeted company’s improving business and share price gains.
Started by billionaire Paul Singer in 1977, Elliott manages about $27 billion in investment strategies including long-short hedge funds, distressed credit, arbitrage, and real estate.