PITTSBURGH, Dec. 20, 2011 (GLOBE NEWSWIRE) -- LCV Capital Management, LLC ("LCV Capital") issued today an open letter to the shareholders and the independent directors of ModusLink Global Solutions, Inc. (Nasdaq:MLNK) ("ModusLink" or the "Company") affirming its support for Peerless Systems Corporation's (Nasdaq:PRLS) two nominees to the ModusLink Board of Directors at the Company's upcoming annual meeting of stockholders.
LCV Capital Management also calls on the ModusLink Board of Directors to reach a settlement with Peerless, which would enhance investor confidence in the Company.
The full text of the letter follows:
December 20, 2011
LCV Capital Management, LLC
Centre City Tower, Suite 705
650 Smithfield Street
Pittsburgh, PA 15222
Dear Shareholders and Independent Directors of ModusLink:
LCV Capital Management, LLC is one of the largest shareholders of ModusLink Global Solutions, Inc. (Nasdaq: MLNK). We are well-informed, long-term investors in ModusLink, who have met with senior management and several Board members on several occasions since we began investing in the Company in 2010. However, please do not interpret our longstanding ownership of ModusLink common stock as an indication of confidence in, or support for, Mr. Lawler and his management team.
We support Peerless' commitment to positive change in ModusLink; we believe that the time has come for a change on the Board.
We wish to reiterate our support for Peerless Systems Corporation's (Nasdaq: PRLS) nominees for election to the Board at the Company's 2011 annual meeting. We further call on the Board to take internal control of this costly proxy battle and settle with Peerless as soon as possible, which would be in the best interest of all shareholders.
It would be our preference that such settlement includes the appointment of Peerless' nominees to the Board alongside Mr. Jeffrey J. Fenton. We vehemently oppose Mr. Thomas H. Johnson's reappointment to the Board. We believe he has been a key player in the value destruction process at ModusLink since his appointment in April of 2006, through his support of Mr. Lawler's failed growth initiatives and disastrous acquisitions. Responsible corporate governance dictates that Mr. Johnson be held responsible for his actions and be removed from the Board. We further believe that the appointment of Peerless' nominees on the Board of the Company and the removal of Mr. Johnson would send a positive message to Wall Street and would enhance investor confidence in the Company.
Absent a settlement with Peerless, we intend to vote on Peerless' Gold Card and encourage all fellow shareholders of ModusLink to express their disappointment with the lack of leadership by Mr. Lawler and Mr. Johnson by supporting Peerless' nominees and by demanding immediate corrective action by the Board.
We believe that Peerless Systems Corporation has articulated a clear strategy for creating long-term shareholder value.
We are amused by the Company's suggestion that Peerless has not articulated a clear strategy for creating long-term shareholder value at ModusLink. We believe that Peerless' call for cost reductions, evaluation of strategic alternatives and return of capital to shareholders is a very clear strategy for value creation that closely parallels our own views. We feel that the Company assertions to the contrary are false and misleading.
The facts are that the financial performance of ModusLink under the stewardship of Mr. Lawler has been abysmal, that Mr. Lawler has executed disastrous and dilutive acquisitions with the support of Board members like Mr. Johnson, and that the Company lags behind its peers in nearly every financial metric, resulting in ModusLink's stock price maintaining its status as a chronic underperformer in the marketplace. The facts, therefore, indicate that Mr. Lawler and his management team have repeatedly demonstrated that they do not have a viable strategy for creating long-term shareholder value.
We believe that the Company's investment and cost reduction plan, as well as its evaluation of strategic alternatives, are the direct result of our nomination of Mr. Jeffrey J. Fenton to the Board of ModusLink during last year's proxy season, as well as Peerless' public proxy campaign this year.
Management's repeated failures to seize on opportunities to increase share value, as well as the Board's failures to prevent Mr. Lawler from destroying even more shareholder value suggest that only new Board members with fresh perspectives and a thorough understanding of economic realities can restore investor confidence in the Company.
We believe there is significant unrealized value in ModusLink and that is why we felt compelled to run a campaign with Raging Capital during last year's proxy season, which resulted in our nomination of Mr. Fenton to the ModusLink Board. Since then we have observed improvements in performance and corporate governance, but unfortunately, these processes have been painfully slow. We believe that this slow pace is largely due to the lethargic and inflexible management style of Mr. Lawler and his allies on the Board. It was not until Peerless announced its proxy campaign and other active shareholders began to express their frustrations that Mr. Lawler and his allies on the Board felt sufficiently threatened and compelled to announce long overdue changes in corporate governance, cost reduction initiatives and review of strategic alternatives.
We are also amused by the Company's suggestion that the aforementioned initiatives are the result of management's own ingenuity and design, including the $40 million capital distribution announced on March 7, 2011 and executed on March 31, 2011. Specifically, the $40 million capital distribution was one of our conditions for settling with the Company. However, while we advocated for an aggressive share repurchase and cautioned against one-time dividend payment on the back of lackluster financial performance, the Company ignored our recommendations. Mr. Lawler and his management team further chose to ignore our recommendations for improving corporate governance, implementing targeted cost reductions and review of strategic alternatives for all or parts of the Company.
Therefore, we object to the Company's suggestion of having engaged in constructive and sincere dialogue with us and such a suggestion is misleading. In fact, evidence suggests that while Mr. Lawler and his management team were attempting to placate us, they were determined to carry on with business as usual.
The Board has power to unlock and deliver shareholder value immediately.
It is our sincere hope that the independent directors of ModusLink will seize this critical opportunity to do what is best for all shareholders. Coming to an affirmative resolution, as outlined above, should be the top priority of each independent director, consistent with his and her fiduciary duties.
The shareholders of ModusLink can no longer afford the status quo.
While we agree that a proxy campaign is both costly and disruptive, we also suggest that continuing to maintain Mr. Lawler's status quo would prove even more costly and disruptive to all shareholders. An appalling example of this status quo is that management and the Board expect to spend a minimum of $2.6 million of our shareholder cash during this proxy campaign in order to attempt to isolate and protect Mr. Lawler and other irresponsible directors from having to account for their value-destroying actions. Therefore, Mr. Lawler's status quo is clearly unacceptable and the Board must take immediate action to protect shareholder interests.
As significant shareholders of ModusLink, our objective is to see the full value of our shares recognized in the marketplace. Therefore, we are committed to work on behalf of all shareholders to ensure that shareholder interests remain the top priority inside the ModusLink Board room.
Please address any correspondence or questions to: LCV Capital Management, LLC, Centre City Tower, Suite 705, 650 Smithfield Street, Pittsburgh, PA 15222, Attn: Lodovico de Visconti, Managing Member, telephone (412) 281-7000.
Sincerely,
/Lodovico de Visconti/
Lodovico de Visconti
Managing Member
LCV Capital Management, LLC
About LCV Capital Management, LLC
LCV Capital Management, LLC manages a group of shareholder activist hedge funds, which invest in small- and mid-cap public companies in the United States and seek to assist those companies in realizing their full potential for the benefit of all shareholders and stakeholders. We engage in extensive due diligence prior to making an investment and typically invest in under-performing businesses that have strong growth prospects. We are committed to work hard on behalf of our portfolio companies by providing insight and advice to management and boards over a long-term time horizon. Through our active and constructive ownership approach, we aim to help our portfolio companies out-perform their peers and the market.