Benchmark Electronics’ Activist Engaged Wins Two Board Seats

  • Activist wins two of three dissident director seats sought
  • Welling's Engaged critical of Benchmark's use of capital

Benchmark Electronics Inc.’s activist investor Engaged Capital won two board seats as part of a proxy fight pushing for changes at the contract electronics manufacturer and designer.

Engaged, the activist fund founded by Glenn Welling, had sought up to three directors at Benchmark, after going public with its change campaign in February. Shareholders voted in favor of Robert K. Gifford and Jeffrey S. McCreary in a vote Wednesday, according to a statement from Engaged. Nominee Brendan B. Springstubb, a senior analyst at Engaged, wasn’t elected.

Proxy advisory services Institutional Shareholder Services Inc. and Glass Lewis & Co. had recommended investors back Gifford and McCreary on the dissident slate put to a vote by Engaged.

“Jeff and Robert will bring a culture of accountability, an ownership mindset, and a much needed fresh perspective to the boardroom,” said Welling.

In its campaign, Engaged criticized what it called Benchmark’s inefficient use of working capital and unsophisticated approach to capital allocation. The activist described Benchmark as the only electronic manufacturing-services provider “that pays its suppliers faster than it is paid by its customers.” The firm also criticized Benchmark’s recent $230 million cash acquisition of Secure Technology, saying it was a misallocation of capital that would have been better spent repurchasing its own undervalued shares.

‘Extensive Dialogue’

The activist, which owns about 4.9 percent of Benchmark, made public Feb. 24 a Jan. 29 nomination letter to the company’s board after “extensive dialogue” seeking changes privately failed.

The company’s shares rose about 1.1 percent to $20.18 at 11:36 a.m. in New York, giving the Angleton, Texas-based company a market value of about $996 million. The stock had fallen about 17 percent in the 12 months before Wednesday’s vote.

Winning nominee Gifford is the former president of supply chain at Ingram Micro Inc. and was previously at Ecolab Inc. McCreary is an independent management consultant and former senior vice president overseeing sales and marketing at Texas Instruments Inc.

Second Win

This is the second board proxy fight win for Engaged, which last year won two of three board seats it sought at television guide data licensor Rovi Corp. Rovi in April agreed to buy digital-video recording pioneer TiVo Inc. in a deal worth about $1.1 billion.

In October, Benchmark said it was buying Secure Technology from private equity firm Vance Street Capital. The company said at the time that buying the maker of customized electronics, sub-systems and components for industrial, aerospace and defense markets would deepen its engineering capabilities in those often highly regulated markets. The deal was completed in November.

On Dec. 7, Benchmark’s board added $100 million to its existing $100 million buyback authorization, and Chief Executive Officer Gayla Delly said the company had spent more than $250 million on repurchases in the past five years. That failed to appease the activist.

The activist has waged 15 campaigns since Welling founded Engaged in 2012, settling most without a proxy fight. Last month, Outerwall Inc. agreed to put three directors on its board as part of a settlement with Engaged.

Welling, a former partner at Relational Investors, formed Newport Beach, California-based Engaged Capital with other Relational managers in 2012, backed by Grosvenor Capital Management. The firm typically wages activist campaigns at small- and mid-sized companies, which have included juice chain Jamba Inc., and clothing retailer Abercrombie & Fitch Co.