TMCnet News
Lakeview Issues Open Letter to Pitney Bowes' Board of Directors Calling for Expeditious Sale of GECLakeview Investment Group & Trading Company, LLC, which beneficially owns approximately 2.55% of the outstanding common shares of Pitney Bowes, Inc. (NYSE: PBI) ("Pitney Bowes" or the "Company"), today issued the below open letter to the Company's Board of Directors. *** April 30, 2024
Pitney Bowes, Inc.
Members of the Board of Directors, Lakeview Investment Group & Trading Company, LLC (collectively with its affiliates, "Lakeview," "we" or "us") beneficially owns approximately 2.55% of the outstanding common shares of Pitney Bowes, Inc. (NYSE: PBI) ("Pitney Bowes" or the "Company"). Lakeview has a record of engaging with boards of directors and management teams to help them improve governance and initiate value-enhancing actions. We want to maintain a similarly productive relationship with Pitney Bowes. We recognize the Board's efforts to help reduce the Company's cost structure and streamline the organization since last year's Annual Meeting. We simply believe there is more work to be done to unlock value for shareholders, which leads us to why we are writing to you today:
How a Sale of the GEC Unit Could Generate Significant Shareholder Value By continuing its pursuit of unprofitable volume and nonexistent scale within GEC, Pitney Bowes continues to burn cash. No matter how you slice it, the best scenario for shareholders is for the GEC segment to be sold. We believe this view is shared across the investor base, as evidenced by the fact that we are not the first shareholder to publicly call for a divestiture of GEC. According to our analysis, a sale would significantly increase net income, deleverage the balance sheet and unlock shareholder value. The GEC segment continues to earn a small fraction of its competitors' margins, meaning a buyer that can apply its superior cost structure to the business will eventually be able to extract value from a segment that has so far delivered nothing but losses. We believe there are strategic buyers that would be interested in acquiring all or part of the GEC business, given its volume and package characteristics. The disposition of GEC should also allow for right-sizing the corporate balance sheet over time. Notably, although the Company's total debt appears to be ~$2 billion, this includes ~$1 billion of implied financing related debt that should be excluded from the net debt calculation.2 The business will be less indebted overall (<1.5x Net Debt / EBITDA) once the negative GEC EBITDA is removed, so any future financing should be from a position of improved creditworthiness, which should result in more favorable interest rates and covenants, such as the removal of the current restriction on share repurchases. Additionally, the increased cash flow can be used for some combination of debt paydown, and - to the extent the share price remains depressed - share repurchases. Longer term, we believe the Board should evaluate all strategic alternatives to maximize shareholder value, including a sale of the entire Company. Stripping out GEC with the assumption that costs and proceeds from selling the unit could potentially deliver zero, we still expect the resulting corporate entity to trade at 3x EV / EBITDA:
Even absent significant reductions in corporate overhead, we are hopeful that the shares could re-rate materially. If, for example, post-GEC disposition, the shares trade at an undemanding 5x EV / EBITDA (assuming no overhead reductions), this would result in a share price north of $8 - almost double current levels. Shareholders would clearly benefit from a timely divestiture of GEC, rather than wasting additional resources pursuing elusive growth within the segment. Our singular goal is to help Pitney Bowes realize the full potential of its underlying value. We urge you to consider the immense value creation opportunity at hand and would welcome the opportunity to share additional details regarding our recommendations at your convenience. Sincerely,
*** About Lakeview Investment Group Lakeview Investment Group & Trading Company, LLC is a Chicago-based investment manager founded in 2004 with a focus on small- and mid-cap companies. Lakeview's strategy focuses primarily on long-term investments in companies trading at significant discounts to intrinsic value. On select occasions, Lakeview engages directly with company leadership to help drive shareholder value.
1 The latest update regarding the GEC segment was during the Company's Q4 2023 earnings call (February 1, 2024).
View source version on businesswire.com: https://www.businesswire.com/news/home/20240430575135/en/ |