Vermont Business Magazine New York hedge fund Maglan Capital LP is calling for FairPoint Communications to remove four directors and to undertake a strategic stock repurchase plan. Earlier in the month it urged a repurchase and requested FairPoint appoint a person of its choosing to the board. Maglan is one of the largest and longest-term shareholders of FairPoint Communications, Inc (Nasdaq: FRP), with beneficial ownership of approximately 7.5 percent of FairPoint's outstanding shares of common stock. Today it delivered a letter to Paul Sunu, FairPoint's Chief Executive Officer, and to the other members of FairPoint's Board of Directors, describing what it calls a complacent board that has not heeded Maglan's previous requests. It requests that four directors be removed. It also threatens to force a special shareholder meeting to discuss these matters. Maglan in this and the previously publicized letter stated that FairPoint's recent share-price slump is because "the Board has failed to act in ways that protect and enhance shareholder value."
FairPoint, based in North Carolina, is Vermont's largest telecom. Shares were at $13.49 as of today with a 52-week range of $12.69 - $18.87. Shares were $16.31 on July 18, 2016, which was the high-point for the summer.
In response, Angelynne Beaudry, Director of Corporate Communications for FairPoint, told VBM Wednesday afternoon that FairPoint had this statement: "The company's Board of Directors is carefully reviewing the letter received from Maglan Capital dated August 17, 2016. Maglan has been a long-term shareholder of the company and we are confident that our interests in enhancing shareholder value are closely aligned. Our board takes its fiduciary duties and input from shareholders very seriously. The company will continue a dialogue with Maglan as well as other investors as we are always interested in meeting with our shareholders."
The full text of Maglan Capital's letter to FairPoint:
August 17, 2016
Members of the Board of Directors
c/o Paul Sunu, CEO
FairPoint Communications, Inc.
521 E Morehead St
Charlotte, NC 28202
Gentlemen:
Investment funds affiliated with Maglan Capital LP (collectively, "Maglan") are significant, long-term shareholders of FairPoint Communications, Inc. ("FairPoint" or the "Company"), with holdings together representing beneficial ownership of approximately 7.5 % of FairPoint's outstanding common equity. Over the past few months, we have tried to engage in a constructive dialogue with the FairPoint Board of Directors (the "Board") to discuss our views and concerns regarding the direction of the Company. As we stated in our pervious letters to the Board dated June 6, 2016 and August 4, 2016, the Board has failed to act in ways that protect and enhance shareholder value and reward shareholders for the Company's successes. Unfortunately, it has become clear to us that the Board does not intend to address our serious concerns or suggestions in a timely or meaningful manner and that further change is immediately required.
As we stated previously, FairPoint's stock trades at a significant discount to its peers. In recent days, the Company's share-price has collapsed, and the Board has remained entirely complacent, despite our recommendations and demands. We find the lack of insider buying in the face of such a dramatic share-price decline extremely troubling and indicative of a complacent Board that is misaligned with the interests of shareholders.
Further to our previous demands that the Board immediately (i) establish a program to repurchase Company shares on the open market, (ii) appoint a new member to the Board to be selected by Maglan, and (iii) form a special committee to review and consider strategic alternatives, with Maglan's Board appointee as the chair, we hereby demand, that the following members of the Board immediately tender their resignation:
- Dennis J Austin
- Michael J Mahoney
- David L Treadwell
- Wayne L Wilson
Since the Company's exit from Chapter 11 bankruptcy in 2011, there has been NO turnover in the Board's membership1. In addition to long tenures, without the purchase of EVEN ONE SHARE of the Company's stock during the past three years, these directors have not been additive to the Company's strategy, are not critical to the Board in any way and have not been advocates for shareholder-rewarding activities. Furthermore, David Treadwell is the member of the Board of Directors for seven organizations, including, three public companies.
To the extent that the Board is not immediately responsive to our collective demands, we are prepared to take any and all action necessary to ensure the best interests of shareholders are represented in the boardroom, including by calling a special meeting of shareholders to remove and replace members of the Board. We do not believe that shareholders should continue to suffer under this Board's watch by waiting until the next annual meeting to hold directors accountable. As we have consistently stated, change is needed now. We believe there are other shareholders of FairPoint who would support our efforts to call a special meeting to realize value for shareholders.
The Company and the Board should turn its attention directly to shareholders and, specifically, to unlocking shareholder value. We strongly urge you to reconsider your uncooperative and non-constructive approach and instead, immediately engage with us to implement meaningful steps to enhance shareholder value. We remind you that the Board's duties are to FairPoint shareholders.
Sincerely,
|
MAGLAN CAPITAL LP |
MAGLAN CAPITAL LP |
|
By: /s/ Steven Azarbad Name: Steven Azarbad Title: Chief Investment Officer |
By: /s/ David D. Tawil Name: David D. Tawil Title: President |
cc:
Edward D. Horowitz
Michael J. Mahoney
David L. Treadwell
Wayne L. Wilson
Peter C. Gingold
Dennis J. Austin
Michael K. Robinson
Peter D. Aquino
Maglan Capital has retained Olshan Frome Wolosky LLP as its legal and strategic advisor in connection with its investment and involvement at FairPoint.
---------------------------------
About Maglan Capital
Maglan Capital is an event-driven investment fund with a core focus on all parts of the distressed cycle, investing in liquid instruments across the capital structure of companies approaching or experiencing financial distress, bankruptcy or restructuring.
Source: NEW YORK, Aug. 17, 2016 /PRNewswire/ -- Maglan Capital LP