Imation Issues Letter to Shareholders Regarding Upcoming Annual Meeting
Shareholders Have A Clear Choice: Imation’s Board’s Full Commitment to the Fulsome Strategic Alternatives Process Underway to Maximize Value for ALL Shareholders Versus The Clinton Group’s Undefined and Potentially Self-Serving Scheme
Urges Shareholders to Vote FOR the Company’s Director Nominees on the WHITE Proxy Card
The full text of the letter follows:
Dear Fellow Shareholder:
We are writing to you today regarding Imation Corp.’s (“Imation” or the
“Company”) upcoming Annual Meeting of Shareholders, which will be held
The Imation Board of Directors (the “Board”) and management team are
firmly committed to further improving the Company’s operating and
financial results and delivering short and long-term shareholder value
by making us a stronger, leaner and more focused organization. To
achieve this, our primary focus is completing Imation’s strategic
evolution to become a pure-play, global leader in data-storage and
security solutions. Since 2012, this transformation has involved a major
restructuring to create two distinct business units, critical
acquisitions to strengthen our storage and security platforms,
aggressive downsizing to divest non-core businesses and significant cost
reductions through streamlined operations.
As part of the Board and management team’s efforts to deliver value to
our shareholders, we are also evaluating a full range of potential
scenarios to maximize the value of your investment. In particular, we
are working with our financial adviser,
Your Board is, and has been, committed to change – from leading a
fundamental transformation of Imation’s business model, to fully
exploring all of the Company’s strategic alternatives, to significantly
refreshing the Board, with one-third of the Directors having been
appointed in the last eight months and 80% of the independent directors
being added since
Importantly, your Board is aligned with the interests of ALL
shareholders. Therefore, it is critical not to allow the considerable
progress your Company has achieved over the past three years to be
destroyed by nearsighted individuals with self-serving interests who
offer NO SPECIFIC PLAN for Imation’s future or any way to create
value for shareholders other than
Your Board has, and shareholders should have, serious concerns regarding
Clinton’s intentions. Clinton’s preliminary proxy statement offers no
specific plan for enhancing shareholder value and suggests that it may
take steps in the future that your current Board and management have
already taken or are in the process of implementing. It appears that
Clinton may be seeking to use
We believe the experience and expertise of your current Directors will be drivers of Imation’s future success. As such, the Board unanimously recommends that shareholders vote the WHITE proxy card to elect ALL THREE of our Director nominees. We strongly urge you not to sign or return any gold proxy card sent to you by Clinton.
YOUR BOARD AND MANAGEMENT TEAM HAVE POSITIONED IMATION
TO BECOME A PURE-PLAY, GLOBAL LEADER IN DATA-STORAGE AND
SECURITY SOLUTIONS THAT IS POSITIONED TO DELIVER SUBSTANTIAL
GROWTH AND SHAREHOLDER VALUE
YOUR BOARD IS LEADING A FUNDAMENTAL TRANSFORMATION OF IMATION’S BUSINESS MODEL – AND THE RESULTS HAVE SHOWN REAL PROGRESS
We have made significant strides towards achieving our goal and look forward to continuing this positive momentum under our existing Board. Among our recent achievements to support future profitable growth, we:
Managed Cash Flow: Having taken out more than
$100 millionin legacy costs since the beginning of our multi-year evolution, we worked to further solidify our balance sheet in 2014. In addition to improving gross margins companywide, we closed the year with almost $115 millionin cash and generated positive cash flow for the third and fourth quarters.
- Stimulated Growth: We have established Storage and Security Solutions as a significant growth business through a series of strategic acquisitions and the introduction of new products; after posting sequential gains in the second and third quarters of 2014, this unit then reported year-over-year (as well as sequential) revenue increases in the fourth quarter.
- Drove Efficiencies Across the Organization: A top priority was to carefully manage our legacy media businesses to maximize cash generation to invest in our growth agenda.
Invested in Innovation: Our teams launched new, higher margin
data storage and retail storage products to set the table for ongoing
growth. These products include the IronKey™ Enterprise H300 USB 3.
0 Hard Driveand the NST™2000 and NST4000 storage solutions as part of the Nexsan™ family, and different combinations of our products can be offered as part of our Secure Data Movement Architecture (SDMA). We are also highly encouraged by the additional Fortune 500 customers certifying our PC-On-A-Stick™ devices using Microsoft Windows to Go. We believe Microsoft’s expected release of Windows 10 later this year will be a catalyst for driving our PC-On-A-Stick revenues. Our Storage and Security Solutions revenue in the fourth quarter of 2014 was $36.9 million, up from $33.5 millionin the fourth quarter of 2013, and we expect it to continue to grow in 2015.
Strengthened our Nexsan Sales and Engineering Teams: To develop
incremental business in
Europeand Asia, as well as engineering resources to expand our product portfolio, we added data storage talent to Nexsan, one of our priority growth businesses. These efforts showed positive results, as we posted both sequential and year-over-year revenue growth in the brand.
Your Board and management team are laser focused on creating superior
value for ALL
YOUR BOARD IS HIGHLY QUALIFIED AND INDEPENDENT, WITH SIGNIFICANT RELEVANT EXPERIENCE TO OVERSEE THE SUCCESSFUL COMPLETION OF IMATION’S STRATEGIC TRANSFORMATION
The composition of your Board is something we take very seriously, and
we believe the experience, expertise and lack of self-interest of your
current Directors is essential to completing Imation’s strategic
transformation. We have taken careful measures to add individuals to our
Board who have direct relevant experience and stature, which is
reflected in the appointments of Dr.
Your Board’s nominees have the right experience to oversee the ongoing execution of Imation’s current strategy and enhance shareholder value:
Mark E. Lucasis Imation’s President and Chief Executive Officer, and has helped to orchestrate and oversee the Company’s strategic transformation. He brings to Imationextensive commercial and consumer trade channel experience and a strong international business background. These are important attributes as the majority of Imation’s revenue is derived from these channels and more than 50% of its business is done outside the U.S. Mr. Lucas’ in-depth knowledge of Imation’s operations provides the Board with detailed and specific insight that is essential for effective operation and governance of the Company. Prior to joining Imationin 2009, Mr. Lucas served as Chief Executive Officer of Geneva Watch Groupand AltecLansing Technologies and oversaw their corporate turnarounds.
L. White Matthews, IIIhas extensive knowledge of Imationthrough his tenure as Non-Executive Chairman. He brings to Imationvaluable corporate governance experience having served on the Board of several public and privately-held companies. Mr. Matthews has played a key role in refreshing Imation’s Board with new, proven talent to further advance the Company’s strategic transformation. As an established financial leader who has held a variety of executive positions, Mr. Matthews has led several divestitures, acquisitions and restructuring activities across multiple industries.
David B. Stevensbrings over 20 years of experience in the enterprise networking, security and data storage industries to Imation’s Board. He was specifically recruited to join the Board for his broad knowledge and expertise in the data storage industry and his intimate understanding of its competitive landscape. He most recently served as Chief Technology Officer and Vice President of Corporate Development at Brocade Communications Systems, Inc.Prior to his tenure at Brocade, Mr. Stevens held leadership positions and was highly involved in the successful growth of Nortel, Bay Networks and SynOptics Communications. Mr. Stevens’ knowledge of the competitive framework in the data storage and security markets has been, and will continue to be, highly valuable to Imation.
Your Board believes that its range of skills and track record demonstrate its proficiency in all key aspects of the business. Clinton’s slate of director nominees has no significant experience leading the operations or strategic direction of a public company and lacks deep institutional knowledge of your Company. Your Board urges you to protect the value of your investment – DO NOT let Clinton supplant your highly qualified Directors with inexperienced individuals who prioritize their interests over those of all shareholders.
WE BELIEVE CLINTON IS SEEKING TO TAKE CONTROL OF YOUR COMPANY
FOR THEIR OWN BENEFIT
Clinton has submitted a slate of nominees that do not know
You should be aware that Clinton owns just over 3% of your Company,
and has only owned the stock for approximately 6 months. Clinton is
seeking more than disproportionate influence over Imation’s direction
without offering a legitimate plan for our future or any way to create
value for you. Clinton initially approached the Company demanding three
Board seats without ever discussing its plans and proposal with the
Company – Clinton expected the Company to simply hand over half of the
Board seats to its nominees without providing the Company any
opportunity to discuss Clinton’s plans and proposal in a reasonable and
appropriate manner. In fact, the first time the Company was provided an
opportunity to review the broad outlines of Clinton’s so-called “plan”
was when all shareholders were provided the opportunity – the filing by
Clinton of its preliminary proxy statement with the
The unnecessary proxy contest Clinton has launched severely risks
disrupting our progress towards maximizing shareholder value if they
change control of your Board. You can prevent this from happening by
voting the WHITE proxy card “FOR” our experienced and highly
qualified Director nominees:
Clinton seeks to replace your highly qualified Directors with three individuals with highly questionable backgrounds that should raise serious concerns. Based on our extensive due diligence, we do not believe these individuals possess the necessary credentials or track records to serve on your Board:
As mentioned earlier in this letter, Clinton and Mr. DePerio formed
another blank check company, ROI Acquisition II, which needs to identify
an acquisition target by
There is more to be concerned about. Mr. De Perio’s consistent track
record of shareholder value destruction does not end at EveryWare. After
IMATION HAS ATTEMPTED TO AVOID A DISRUPTIVE PROXY CONTEST;
CLINTON IS INTENT ON A FIGHT AT ALL COSTS
Consistent with our culture of open shareholder engagement and good corporate governance, your Board has attempted to engage Clinton in discussions to solicit its input. After turning down Imation’s original settlement proposal, Clinton initially indicated that they would enter into a confidentiality agreement with the Company before ultimately refusing to do so. We thought that such an agreement could have furthered our efforts to resolve Clinton’s concerns without the need for a costly, disruptive proxy contest and did not include standstill provisions.
Unfortunately, Clinton countered with an unrealistic offer that was nothing more than a thinly veiled attempt for them to gain control of the Company. They demanded, among other things, that two of the current Directors be replaced with two Clinton Directors, Mr. De Perio and Mr. Fernander, and that Mr. De Perio be named Non-Executive Chairman of the Board. In addition, Mr. De Perio demanded that he and Mr. Fernander be named to chair and to constitute a majority of four Board committees: the Compensation Committee, the Nominating and Governance Committee, a new Alternatives and Capital Allocation Committee that would oversee Imation’s current review of strategic alternatives and the execution of any restructuring alternatives, and a new Disk Storage Committee to oversee the strategy and management of the Company’s Nexsan, Ironkey and mobile security businesses.
Given the fact that Clinton has an ownership interest in the Company of
just over 3% and that they lack a demonstrable plan to increase
shareholder value, the Board reviewed Clinton’s proposal and determined
it would be unwise to allow them such control over the Board’s
governance structure and processes, including critical processes
involving Imation’s review of strategic alternatives and future
direction. The Board offered a counterproposal giving Clinton the
opportunity to name one director to replace one of the existing
Directors on the Imation Board and to add a new independent director
agreed upon by both
Showing an unwillingness to enter into any form constructive dialogue
with the Company, Clinton has instead elected to pursue a costly and
distracting proxy contest. We fear this will prove to be highly
disruptive, both to our normal business operations and current
comprehensive and independent review of strategic alternatives. If
Clinton’s objective is to acquire a part or all of
Again, it is our firm belief that Clinton has NO real strategy other than to change control of your Board to pursue its own interests. Rather than improving the fundamental foundation on which the long-term value for all shareholders rests, they are focused on their own personal agenda. Conversely, your existing Board is actively engaged in the oversight of the Company’s strategy and is committed to delivering results while serving the best interests of all Imation’s shareholders. The recent announcement that the Board is exploring ALL strategic alternatives is a critical example of that oversight and commitment. Your Board and management have the commitment and strategy to enhance value for ALL shareholders, and not a select few.
PROTECT THE FUTURE OF IMATION:
PLEASE VOTE THE WHITE PROXY CARD TODAY
Your vote is extremely important, no matter how many or how few shares
you own. We urge you to vote today by telephone, online, or by signing
and dating the enclosed WHITE proxy
card and returning it in the postage-paid envelope provided. Please do NOT
return or otherwise vote any gold proxy card sent to you by Clinton. If
you have previously submitted a gold proxy card sent to you by Clinton,
you can automatically revoke it by signing, dating and returning the
enclosed WHITE proxy card in the
accompanying envelope. We appreciate your continued loyalty and support.
If you have any questions or need assistance voting your shares, please
contact our proxy solicitor,
We are extremely honored to serve on behalf of you, our shareholders. Your Board and management team are committed to acting responsibly and to maximizing the value of your investment.
On behalf of the Board, thank you for your continued support.
|L. White Matthews, III|
|Non-Executive Chairman of the Board|
|Mark E. Lucas|
|President and Chief Executive Officer|
You can vote your shares by telephone or via the Internet.
Please follow the easy instructions on the enclosed proxy card.
If you have any questions or need assistance in voting
your shares, please call our proxy solicitor,
INNISFREE M&A INCORPORATED
TOLL-FREE, at 1-877-717-3898.