Citrix Jumps After Reaching Settlement With Activist Elliott

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Citrix Systems Inc. rose the most in 2 1/2 years after the cloud-services company reached a settlement with activist investor Elliott Management Corp.

The stock gained 8.1 percent to $75.27 at the close Wednesday in New York, its highest level since September 2013 and the biggest one-day increase since January 2013.

In a flurry of statements Tuesday, Citrix said the standstill agreement includes adding Elliott executive Jesse Cohn to its board, beginning a search for a new chief executive officer, 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 7.5 percent of the company’s common stock, publicly targeted Citrix 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 settlement, Citrix 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.

Operations Review

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.”

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.

Unusual Timing

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.

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