Friday, February 11, 2011

Icahn and Drapkin Both Threaten Proxy Fight Against Mentor Graphics (MENT)

Mentor Graphics (MENT)
Market cap: $1.565B
Shares: 110 million
Board: 8 members, annually elected
Institutional Ownership: 94.2%
Poison Pill: In place with 15% trigger

Icahn: 14.7% beneficial ownership (13D filing, DFAN14A)
Drapkin: 5.48% beneficial ownership (13D filing, DFAN14A)

The Oregonian

Activist Concerns: Company is undervalued; management hasn't contained costs; poor corporate governance decisions, specifically regarding decision to move the 2011 annual shareholders' meeting; operational improvements can be made to increase share value.

Activist Seeking: Both seek board representation; Icahn has stated that he is pushing for MENT's sale.

Icahn 13D Item 4: "Mentor Graphics Corporation... announced that it will hold its 2011 annual meeting of shareholders six weeks earlier than last year, and left shareholders with only 10 days to nominate a dissident slate. We, at that time, called the Company and stated that, in light of our prior friendly discussions, we viewed the announcement as a hostile and unprovoked defensive tactic intended to impede shareholder rights. We asked the Company to rescind the announcement, which it refused to do. We therefore currently intend to nominate three individuals for election..., but reserve the right to nominate a different number of individuals, up to a full slate" (emphasis added).

Icahn DFAN14A statement: "[A] strategic acquirer should find extremely attractive the fact that the Company spent $407 million on SG&A ($313 million on marketing and selling expenses and $94 million on G&A) over the last twelve months"

Drapkin 13D Item 4: "[Casablanca] believe[s] that the Issuer's operations may be improved, and hope[s] to engage in an open and constructive dialogue with the board of directors and management of the Issuer regarding its assets, business, strategy, financial conditions and operations... Casablanca expresses its concerns and disappointment about the curtailment of shareholder rights resulting from their actions with respect to the meeting date... [Casablanca] intend[s] to nominate an alternative slate of directors" (emphasis added).

Mentor Graphics' Response: "Mentor Graphics' Board and management team are focused on delivering shareholder value and we have a proven track record of growing our earnings and share price. Our share price has grown over 70% in the last year, and it grew about 50% in the previous year, for a two year growth of over 150%, significantly outperforming our peer group and the market... With regard to nominees, our nominating and corporate governance committee, comprised of independent directors, will evaluate and consider qualified nominees".

Casablanca Capital's Letter to Mentor Graphics' Board

Posted by David Schatz