[June 13, 2018] |
|
Both Leading Proxy Advisory Firms Support Voce Capital's Case for Change at Natus Medical and Recommend Stockholders Vote on the BLUE Proxy Card
Voce Capital Management LLC ("Voce"), a long-term owner of Natus Medical
Incorporated (Nasdaq: BABY) ("Natus" or the "Company") and the owner of
approximately 2.2% of its shares outstanding, today announced that
leading proxy advisory firm Glass, Lewis & Co. ("Glass Lewis") has
recommended that Natus stockholders vote FOR the election of both Voce
nominees, Lisa Wipperman Heine and Joshua H. Levine, to Natus' Board of
Directors (the "Board") on the BLUE
proxy card at the upcoming Annual Meeting of Stockholders on June 22,
2018. Previously, fellow leading proxy advisory firm Institutional
Shareholder Services ("ISS") also recommended that Natus stockholders
vote on the BLUE card FOR the
election of Ms. Wipperman Heine and Mr. Levine.
Voce also urges Natus stockholders to vote on the BLUE
proxy card FOR the removal of Chairman Robert Gunst and FOR the election
of Mark Gilreath to replace Gunst as a Director.
In its detailed report and findings, Glass Lewis affirmed Voce's
criticisms of the performance, strategy and corporate governance of
Natus - as well as the qualifications of Voce's nominees. Glass Lewis
concluded that stockholders should therefore vote on the BLUE
proxy card:1
-
"[W]e believe Voce has made a compelling argument that change to the
composition of the Natus board is warranted at this time. We find that
the Company significantly underperformed on a TSR (News - Alert) basis relative to
peers and market benchmarks in recent years and that the Company's
operating performance has been largely unfavorable. While the
incumbent board touts the Company's revenue growth and acquisitions,
this strategy has not led to shareholder value creation in recent
years and management has consistently failed to meet the financial
targets it has communicated to shareholders."
-
"We find that the Company suffers from numerous corporate governance
shortcomings, including an entrenched board with a lack of fresh
perspective, ineffective board oversight of management and poor
executive compensation practices. We believe shareholders would
benefit from fresh perspective and additional independent oversight
and find that the Dissident Nominees are well qualified to serve on
the board, with significant and highly relevant experience in the
medical device industry as well as prior public company board
experience."
With regard to Natus' corporate governance issues and Board composition,
Glass Lewis stated:
-
"[T]he Dissident has expressed valid concern with several aspects of
the Company's governance structure and practices. The
Company maintains a classified board, which limits the ability of
shareholders to hold directors accountable, in our view. We
agree that the incumbent board is stale and in
need of refreshment."
-
"Following the Dissident's involvement, the Company announced that the
longest-serving director, William Moore, would not stand for
reelection at the 2018 annual meeting and that the board had nominated
a new director, Robert Weiss, for election at the 2018 annual meeting
to fill the seat vacated by Mr. Weiss….[W]e are
concerned that the incumbent board determined to act only after the
Dissident's involvement and that it appears to be a reactionary
measure to the Dissident's campaign."
-
"Moreover, in the context of this proxy contest, we
find it concerning that Mr. Weiss was recommended to the board by CEO
Hawkins and that CEO Hawkins and Mr. Weiss reside in the same gated
community in Pleasanton, CA (News - Alert). Given these connections, we question
whether Mr. Weiss would provide a sufficient level of independent
oversight."
Glass Lewis was also emphatic - as Voce has been throughout this
campaign - that the allegations pending against CEO Hawkins in a federal
securities fraud lawsuit for misleading Natus investors are serious and
require much more oversight by the Board than appears to have occurred:
-
"We are particularly troubled that the incumbent
board does not appear to have taken any steps to investigate or address
business in Venezuela. These allegations are the
subject of ongoing shareholder litigation against the Company…CEO
Hawkins is alleged to have misled shareholders by promoting the
benefits of a $232.5 million supply contract with the Venezuelan
Ministry of Health while failing to disclose that the counterparty had
defaulted on the agreement by failing to make multiple required
prepayments totaling $69 million by the end of 2015."
-
"[W]e believe the details of Mr. Hawkins'
conduct contained in a Federal District Court opinion filed February
26, 2018 are highly concerning and warrant scrutiny from the board.
Given the board's apparent failure to pursue this matter, we believe
additional independent oversight on the board is warranted."
Glass Lewis also criticized Natus' compensation practices, and stated:
-
"[W]e believe the Dissident has raised valid
concerns with the structure of the Company's compensation plans.
We are particularly concerned that the Company relies on time-based
vesting of equity awards for executive officers. We view
performance-based vesting as more appropriate for linking executive
compensation with performance…[W]e find that the Company has been
deficient in linking executive pay to corporate performance, as
indicated by the "F" grade received by the Company in Glass Lewis'
pay-for-performance model."
With regard to Natus' performance, Glass Lewis stated:
-
"Having considered the arguments presented by both sides as well as
our assessment discussed above, we believe there is reasonable basis
to conclude Natus has materially underperformed on a TSR basis,
particularly in recent periods."
-
"We find that…Natus has suffered from poor financial performance in
recent years and that the Company has failed to achieve numerous
financial targets set by management. The Company has struggled to
deliver meaningful organic growth and recent acquisitions do not
appear to have generated anticipated scale benefits."
Finally, Glass Lewis noted the qualifications of Voce's nominees,
writing:
-
"Turning to the nominees, we find that the Dissident has put forward
well-qualified nominees with relevant industry experience and
appropriate credentials. Notably, Dissident Nominees Gilreath, Heine
and Levine all have executive management experience in the medical
device industry and public company board experience."
J. Daniel Plants, Founder and Chief Investment Officer of Voce Capital,
said, "We are gratified that both leading proxy advisory firms - ISS and
Glass Lewis - have, at the conclusion of their respective thorough
inquiries, supported our call for change at Natus by recommending that
stockholders vote for our nominees on the BLUE
proxy card. In its report, Glass Lewis articulates the depth of the
issues at Natus, including chronic underperformance, strategic missteps,
misaligned executive compensation and wholly inadequate Board oversight.
"Most notably, in our view the findings of ISS and Glass Lewis in
aggregate point to a holistic failure of corporate governance at Natus.
It is apparent to us that the issues here cannot be addressed with quick
fixes or cosmetic modification - but instead require real, meaningful
changes to the composition and structure of the Board especially its
chairmanship.
"This is why we also strongly urge stockholders to support our Removal
Proposal to recall Chairman Gunst as a Director. Chairman Gunst lacks
any healthcare experience, has been retired from active employment for
almost two decades and hasn't sat on another public company board in
more than ten years. In his 14 years as Chairman, a culture of
entrenchment, insularity and misalignment with stockholders has taken
root at Natus. It is high time that Chairman Gunst is held accountable
for this."
Mr. Plants concluded: "We ask our fellow stockholders to join us in
seeking to restore credibility to Natus' Board by voting on the BLUE
proxy card today FOR Voce's highly-qualified and independent Nominees,
and FOR Voce's Removal Proposal to replace Chairman Gunst. We look
forward to seeing our fellow stockholders at the upcoming
Annual Meeting on June 22, 2018."
FOLLOW ISS' AND GLASS LEWIS' RECOMMENDATIONS AND VOTE FOR CHANGE AT
NATUS ON (News - Alert) THE BLUE PROXY CARD TODAY.
About Voce Capital Management LLC
Voce Capital Management LLC is a fundamental value-oriented,
research-driven investment adviser founded in 2011 by J. Daniel Plants.
The San Francisco-based firm is 100% employee-owned.
_______________________________ 1 Permission to quote
Glass Lewis and ISS was neither sought nor obtained. Emphases added.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180613005735/en/
[ Back To TMCnet.com's Homepage ]
|