ValueAct ‘Frustrated’ With MSCI Campaign Seeking Board Seats

ValueAct Capital Management, the activist investor that owns about 8.3 percent of MSCI Inc., is seeking a board seat and two additional independent directors at the securities index provider.

ValueAct Chief Executive Officer Jeffrey Ubben made the request public in a letter to lead director Rodolphe Vallee, urging the board to engage directly with shareholders. The fund, which has owned shares of MSCI since October 2012, has been quietly pursuing a board seat since August.

“We send this letter as a last resort out of great frustration at your response to our request for a board seat,” Ubben wrote. “We first asked to join the MSCI board this past August due to our significant and unanswered questions of strategy and organization.”

San Francisco-based ValueAct, which manages more than $14 billion and has served on 37 public company boards, typically seeks influence behind the scenes or with a single board seat. The firm has had a hand in changing the direction of companies including Microsoft Corp., Valeant Pharmaceuticals International Inc. and Sara Lee Corp.

“The company is on a path to deliver very mediocre returns despite incredible assets,” Ubben said today in a phone interview. “We’d prefer not to go nuclear -- instead we’ve chosen to share our conversation with the board with other shareholders via this letter. We’re really interested in what the other shareholders think -- hopefully they express themselves.”

‘Serious Concerns’

MSCI has had “extensive interactions” with ValueAct since their initial investment, said Hugh Burns, a spokesman for the company at Sard Verbinnen & Co. It has carefully considered their views, including their ideas on director representation, Burns said by e-mail.

ValueAct criticized the bundling of licenses across MSCI’s different index and analytics offerings as failing to deliver market share gains and obscuring profitability of each business. The company also underperformed its peers, ValueAct said.

MSCI rebuffed efforts for ValueAct to be seriously vetted for a directorship, Ubben wrote, leaving the activist “with serious concerns about the board’s independence from management and alignment with shareholders.”

Last month, Allison Transmission Holdings Inc. agreed to allow ValueAct partner Gregory Spivy to join its board in the future in a standstill deal with its biggest shareholder, and Armstrong World Industries Inc. added Spivy to its board in a separate deal with its second-largest shareholder.

MSCI rival London Stock Exchange Group Plc in June agreed to buy Frank Russell Co. for $2.7 billion in a deal that expanded its index business and exchange-traded funds.

Activist investors generally acquire equity stakes in publicly traded companies and agitate executives and directors to make changes they believe will boost shareholder returns.

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