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Outerwall Inc. agreed to add three directors to its board as part of a settlement with Glenn Welling’s Engaged Capital, averting a potential proxy fight.
The agreement puts Engaged nominee Jeffrey Brown on the board immediately, according to a Tuesday statement from the company, which owns Redbox DVD rentals and Coinstar cash-exchange kiosks. Two other directors will be added to the board later, and its size will increase to nine directors.
Engaged has a 14.6 percent stake in Bellevue, Washington-based Outerwall, according to a regulatory filing Tuesday.
Outerwall also agreed to hire a separate law firm to advise the board by May 1. Last month, the company retained Morgan Stanley and Perkins Coie LLP to review strategic alternatives.
Engaged’s nominee Brown will be given notice of meetings between the board and its advisers, as well as the opportunity to participate in discussions related to Outerwall’s review of strategic alternatives, according to the filing.
The investors asked for a separate law firm to advise the board as a result of its failure to engage with interested suitors in the past, according to a person familiar with the matter, who asked not to be identified discussing private information.
Outerwall’s former Chief Executive Officer J. Scott Di Valerio, who left in January 2015, clashed with Chairman Nelson Chan about a potential sale, people familiar with the matter said in February. The board didn’t engage with incoming offers as high as $90 a share, they said.
A representative for Outerwall declined to comment beyond the statement.
Outerwall’s shares have fallen 39 percent in the last 12 months, valuing the company at about $674 million.
Engaged typically seeks private talks before beginning a public campaign. The firm has successfully helped agitate for the sale of targeted companies, including Boulder Brands Inc., the maker of gluten-free baked goods and dairy-free spreads, which was sold to Pinnacle Foods Inc. for $710 million, and Silicon Image Inc., the creator of HDMI transmission technology, which was bought by Lattice Semiconductor Corp. in a $600 million deal.