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
OAKDALE, Minn.--(BUSINESS WIRE)--Apr. 10, 2015--
Imation (NYSE:IMN) (the “Company”), a global data storage and
information security company, today announced that it has mailed a
letter to shareholders in connection with the Company’s 2015 Annual
Meeting of Shareholders, scheduled for May 20, 2015. The Imation Board
of Directors unanimously recommends that shareholders vote the WHITE
proxy card FOR the Company’s three highly qualified and
experienced director nominees: Mark E. Lucas, L. White Matthews, III
and David B. Stevens.
The full text of the letter follows:
April 10, 2015
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
on May 20, 2015. At this meeting you will be asked to make an important
decision regarding the future of Imation. We urge you to protect the
value of your investment by voting on the enclosed WHITE
proxy card “FOR” our experienced and highly qualified Director
nominees: Mark E. Lucas, L. White Matthews, III and David B. Stevens.
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. Imation has made significant
progress towards our goal of driving revenue growth in our Tiered
Storage and Security (TSS) business and delivering continued positive
operating cash flow in our legacy optical tape and media businesses.
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, Houlihan Lokey, to explore
additional options to unlock value embedded within our TSS and Consumer
Storage and Accessories (CSA) business units. Once the process is
complete, we look forward to sharing the results and our recommendations
with you. We believe it is imperative to allow this process to continue
unimpeded to explore all the value-enhancing options available to the
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 March 2012. Maintaining the current composition of
your Board is vital to ensure the strategic actions being undertaken
continue to progress.
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 The Clinton Group (“Clinton”) and its
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 Imation as its acquisition roll up
vehicle. Clinton has provided no discussion of what this acquisition
“plan” would entail – what would be the targets, pricing, size and
financing (including potentially diluting equity issuances)? We find
it very troubling that Clinton will only do its due diligence on the
Company after it obtains control of the Board. You should know that the
Board offered Clinton the opportunity to enter into a customary
confidentiality agreement without any standstill provisions that would
allow Clinton to more fully understand the complexities of the Company
and the benefits of the Board’s strategic plan, but Clinton refused. We
are also particularly concerned that Clinton’s plans for the Company
could involve ROI Acquisition II, a blank check acquisition vehicle
affiliated with Clinton discussed below.
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
Imation is a global data storage and data security company with two
customer-centric business units: TSS and CSA. Our products and solutions
help organizations and individuals store, manage and protect their
digital content. We have well-recognized brands, a compelling product
line and innovative technology platforms that reach customers in more
than 100 countries through our powerful international distribution
network. We have a long history as an innovator, and we continue to
launch new products that allow large enterprises and individual
consumers alike to seamlessly store, secure and access their data.
Consistently providing our customers with high quality products and
solutions that provide peace of mind is at the core of what we do. To
help ensure Imation’s future success we are leveraging the strong cash
flows generated by our legacy tape and optical businesses to invest in
our higher margin data storage and retail storage business to set the
table for ongoing growth.
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 million in
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 million in 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 Drive and 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 million in 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 Europe and 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 Imation shareholders. We have taken, and will
continue to take, the necessary steps to drive high performance and
long-term profitable growth across our business segments. Despite
repeated requests, Clinton has failed to offer any compelling insights
or recommendations as to how it intends to increase shareholder value. The
“plan” presented in its preliminary proxy, which appears to involve
using Imation to launch an undefined and potentially expansive
acquisition strategy at your risk and expense, has further reinforced
our belief that Clinton is seeking to gain control of your Board to
advance its own self-serving agenda.
YOUR BOARD IS HIGHLY QUALIFIED AND INDEPENDENT, WITH SIGNIFICANT
RELEVANT EXPERIENCE TO OVERSEE THE SUCCESSFUL COMPLETION OF IMATION’S
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. Geoff Barrall and Tony Brausen
within the last eight months. Together, these highly qualified
individuals have brought an intimate understanding of the storage
landscape, deep operational experience and broad-based finance and
management experience, which will continue to prove invaluable to the
Company moving forward. It is also important to note that more than 50%
of Imation’s business is derived through the retail channel, so the
Board needs relevant representation for oversight of this business in
addition to strictly commercial data storage channels. Your Board is
committed to bringing in fresh perspectives, and its current Director
nominees fulfill the essential requirements for effective governance of
a global organization that is undergoing a highly strategic
transformation and a fulsome strategic alternatives review process.
Your Board’s nominees have the right experience to oversee the ongoing
execution of Imation’s current strategy and enhance shareholder value:
Mark E. Lucas is Imation’s President and Chief Executive Officer, and
has helped to orchestrate and oversee the Company’s strategic
transformation. He brings to Imation extensive 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 Imation in 2009, Mr. Lucas
served as Chief Executive Officer of Geneva Watch Group and Altec
Lansing Technologies and oversaw their corporate turnarounds.
L. White Matthews, III has extensive knowledge of Imation through his
tenure as Non-Executive Chairman. He brings to Imation valuable
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. Stevens brings 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 Imation and
is attempting to gain control of your Company without paying any control
premium to pursue its own, undefined, self-interested goals. Equally as
egregious, Clinton intends for its nominees to assume executive roles
with compensation they will determine.
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 Securities and
Exchange Commission. Since that time, our efforts to reach a settlement
with Clinton have only reinforced our belief that their goal is to
control the Company through its Board governance structure.
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: Mark E. Lucas, L. White Matthews, III and
David B. Stevens.
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:
Robert Fernander has NO public company experience and left his
executive post at his former company, Gnodal, under highly suspicious
circumstances. Curiously, Mr. Fernander left Gnodal in March 2013,
just six months before the company filed for bankruptcy. We find it
highly disingenuous that, in its early communication with Imation
stating its intent to nominate a slate of director candidates, Clinton
implied that Mr. Fernander had successfully positioned Gnodal to be
acquired by UK-based supercomputer company, Cray. In reality, Cray
purchased assets of Gnodal once it had already entered into
receivership. This is a blatant mischaracterization of the value, or
lack thereof, that Mr. Fernander delivered to Gnodal’s investors.
Barry Kasoff is marketed as a “restructuring specialist,” yet his
tenure on the Board of Directors of EveryWare Global (NASDAQ GM: EVRY),
alongside his fellow nominee and Clinton Senior Portfolio Manager Joseph
De Perio, would suggest otherwise. For your reference, Mr. Kasoff
and Mr. De Perio joined EveryWare’s Board after the company was
purchased in May 2013 by ROI Acquisition, a blank check company
established by Clinton. Approximately a year after Mr. Kasoff and Mr.
De Perio joined the Board, EveryWare’s stock plummeted 91% to $0.90
per share. Over the course of this remarkable destruction of value,
EveryWare shut down two factories, defaulted on a loan and furloughed
workers. Is this the type of future we want for Imation?
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 September 20, 2015. If they do not find a
company to acquire, they will have to return the money raised to
shareholders. Mr. DePerio is the President and Vice Chairman of the
Board of ROI Acquisition II, and George Hall, the Founder, Chief
Executive Officer and Chief Investment Officer of Clinton, is the Chief
Investment Officer and a Director of ROI Acquisition II. Our duties
as Imation Directors require us to question Clinton’s true intentions
and closely scrutinize their “plan” to enhance the value of our Company.
Is Clinton attempting to change control of Imation in order to allow
this blank check vehicle to acquire Imation or any of its businesses and
thereby advance its own agenda, while in the process stripping you of
the opportunity to participate in Imation’s future potential upside or
receive higher offers?
There is more to be concerned about. Mr. De Perio’s consistent track
record of shareholder value destruction does not end at EveryWare. After
Clinton assisted Overland Storage Inc. (NASDAQ: OVRL) in raising capital
through a private placement in March 2011, Mr. De Perio was granted a
seat on the company’s Board of Directors. At the time of his
appointment, Overland’s stock was trading at $11.50 per share. By
December 2, 2014, the company’s final day of trading before being
acquired by Sphere 3D, Overland’s stock price had fallen to $3.48 per
share, a decrease of almost 70% from when Mr. De Perio joined the
Board. During this downward spiral, Overland shares came close to
NASDAQ de-listing on multiple occasions, using stock splits and last
minute capital infusions to avoid delisting.
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
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 Imation and Clinton. This counterproposal was immediately
rejected by Mr. De Perio.
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 Imation, we urge them
to participate in the strategic considerations process as prospective
buyers, competing with other prospective buyers in a fair process
designed to maximize the value for all shareholders.
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
We believe Imation shareholders can protect the value of their
investment by voting “FOR” our experienced and highly qualified
Director nominees: Mark E. Lucas, L. White Matthews, III and David B.
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, Innisfree M&A Incorporated toll-free at
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.
Scott Robinson, 651-704-4311