Nautilus Inc announced that the nation's three leading independent voting advisory services, ISS Governance Services, Glass Lewis & Co, and PROXY Governance INC, have all issued recommendations to their clients, reflecting the view that Sherborne's bid for control of Nautilus' Board is not in the interest of all shareholders.
Specifically, each advisory service has rejected Sherborne's proposal to remove four directors and replace them with four Sherborne nominees. The governance firms' clients include institutional investors, mutual funds, pension funds and other fiduciaries.
"We are gratified that these independent advisors clearly understand the risk to shareholder value should Sherborne's nominees take control of the Board at the December 18th Special Meeting," CEO Bob Falcone stated. "We largely agree with the conclusions of these independent firms."
These include:
- Nautilus' strategic diversification approach offers superior opportunities for growth and profitability.
- Nautilus, unlike Sherborne, has a detailed plan.
- Sherborne's nominees lack fitness and fitness equipment industry experience.
- The Company's newly appointed CEO and managers should be given the chance to lead the strategy.
- Sherborne should not be given control of the Nautilus board.
In its December 4th analysis, PROXY Governance INC stated:
"... [We] believe that the company has implemented or is in the process of implementing a substantial part of the dissident's turnaround plan.
Further, we believe that the company's strategic diversification into other sales channels beyond its (admittedly more profitable) direct-to-consumer market will provide more opportunities for growth and profitability over the long term.
We also support the company's offer to give the dissident firm representation on the board. We therefore support the current board members."
"[W]e find it significant that the company has stated that, following this proxy contest, it intends to give each of its two largest shareholders ... representation on the board. ... [W]e consider the board's offer to be reasonable."
"[W]e believe that Falcone should be given a chance to realize his vision for the company."
Glass Lewis noted in its recommendation that:
"In our view, dissidents seeking to take over a board should pay a premium for the privilege through a buyout offer."
"[W]e are not convinced that giving the Dissident four full board seats, which would effectively give Sherborne majority control over the board, is in the best interests of shareholders."
Finally, ISS Governance Services indicated that:
"The board appointed Mr. Falcone as the interim CEO, after an extensive search process, which was based on his extensive experience as the CFO for Nike Inc and his tenure on the board of the company. In comparison, while the dissident nominees have turnaround experience, its nominees do not have experience in the fitness and fitness equipment industries."
"On the whole, we note that while the dissident has highlighted some of the issues at the company, they have not presented any specific solutions.
Comparatively, the management's plan includes detailed initiatives to address the problems at the company. As such, it is difficult to ascertain if the dissident's plan is superior to the more detailed plan presented by management."
At the special meeting on December 18th Nautilus shareholders will vote on proposals put forward by Sherborne Investors LP and its affiliates, which want to replace a majority of the Board of Directors with Sherborne's own nominees.
Nautilus Inc
