Hestia Pushes Pitney Bowes To Sell Global Ecommerce Business
UPDATE 1-23-23
Hestia has put forward seven nominations in effort to take over Pitney Bowes board. Pitney Bowes is pushing back, saying Hestia is more interested in fighting than in engaging in constructive conversations to benefit all shareholders.
Liz Morton ~ Founder
UPDATE 12-12-11
Hestia intends to take control of Pitney Bowes' Board, wants to replace CEO.
Fellow Stockholders:
Hestia, which manages a long-term capital base that is anchored by virtually my entire net worth, is a value-oriented investment firm that leverages its research team’s strategic and operational experience to invest in companies that are dramatically undervalued because they are either misunderstood or mismanaged. Hestia is not an “activist investor” and has gone to great lengths to avoid public campaigns during its nearly 15-year history. That is why we began privately engaging with Pitney Bowes this summer, providing specific suggestions to help the Company’s long-tenured leadership catalyze a sustainable turnaround. In particular, we repeatedly emphasized that the Company’s cash-generating segments – SendTech and Presort – are exceptional businesses that can underpin a lasting turnaround once they are operated more efficiently and are better aligned with strategic opportunities in their industries. Additionally, we showed that management’s seven-year-old strategy and stewardship of the Company’s highly valuable Global Ecommerce (“GEC”) segment is consistent only in management’s repeated failures, and that a fresh perspective is required to help identify how to best realize GEC’s significant value.
Given that the Company’s total stockholder returns are down over -50% during Michael Roth’s 10+ years as Chair and Marc Lautenbach’s 10+ years as Chief Executive Officer, Hestia assumed the Board and management would want to collaborate with a major stockholder on (i.) a meaningful director refresh and (ii.) forming a committee of new and legacy directors to evaluate opportunities to improve Pitney Bowes’ strategic focus and capital allocation.1 Last month, as the Company’s equity and debt hit new lows and prior to having to file a 13D, we proposed the addition of three new independent directors identified by us and the formation of a strategic planning and capital allocation committee. We conveyed that if our two sides could agree on this level of change, Hestia would not seek the immediate removal of any directors, the removal of management, an immediate sale of underperforming assets, Board fees for my service, or reimbursement for any of our costs. As a further demonstration of our desire to work collaboratively with the Company, we took the highly unusual step of making several director candidates – who were identified at our own expense and time – available for interviews, even before a high-level framework was agreed to.
It is important to note that we approached Pitney Bowes already knowing that many of you are extremely frustrated with the Company’s operational underperformance, poor capital allocation, stockholder value destruction and declining creditworthiness during Mr. Roth’s 26 years on the Board and Mr. Lautenbach’s decade as Chief Executive Officer. Despite this fact pattern and our good faith efforts, the Company did not agree to our proposal and instead opted to take the following steps:
Began working with high-priced advisors that typically charge seven-figure retainers, including a bulge bracket investment bank and global public relations agency, for so-called “activism defense” purposes. This was done while we were trying to come to a principal-to-principal agreement that would obviate any plausible reason for such a waste of stockholders’ capital.
Rejected the idea of forming a committee of independent directors to evaluate and recommend opportunities for the Company to increase stockholder value through needed strategic change and improved capital allocation.
Rejected the appointment of a Hestia principal as a director, despite the Board lacking a meaningful stockholder representative.
Rejected the appointment of the former Chief Executive Officer of Stamps.com as a director, despite his long track record of exceptional management in the space and superior value creation.
Tried to go around our back and recruit one of Mr. Lautenbach’s personal friends in Connecticut, who owns minimal shares, to join the Board as a “stockholder representative.”
Tried to go around our back and get two of our director candidates to join the Board in a manner that would mitigate Pitney Bowes’ need to continue collaborating with Hestia. This occurred after the Board’s prior bad faith efforts ultimately compelled our legal counsel to inform Pitney Bowes’ legal counsel that the Company needed to stop contacting our candidates in a seemingly harassing manner. Nonetheless, the Board’s clear entrenchment and underhanded tactics caused one our candidates – a respected former C-level executive of a Fortune 10 business – to no longer want to serve as a director of the Company.
Based on our view that Pitney Bowes’ leadership has behaved in a manner inconsistent with the levels of integrity that stockholders, employees and other stakeholders should demand, we no longer see a path to collaboration unless the Board demonstrates a willingness to come to a good faith resolution with us. Messrs. Roth and Lautenbach, who have collectively made tens of millions of dollars while stockholders have endured massive losses, seem intent on maintaining a clubby and insular boardroom that safeguards their leadership positions and the status quo at Pitney Bowes. In light of these considerations, Hestia intends to nominate a majority slate of director candidates that includes a highly-qualified proposed interim Chief Executive Officer supported by a talented group of operators and strategists. This degree of change is clearly needed to help set a new value-creation strategy after 10+ years of strategic missteps, poor execution and the significant destruction of stockholder and enterprise value under the current Board.
Please know that Hestia is squarely aligned with you. We see tremendous value in Pitney Bowes if entrenched leadership can be replaced with experienced professionals who bring fresh perspectives and track records of success. Given the incredible long-term returns we believe can be realized through needed change, we will not seek expense reimbursement for any of our costs and I will not accept Board fees for my service. The only value destruction we anticipate from a prospective election contest is continued wasteful and unjustifiable spending by the Company to defend Mr. Roth, Mr. Lautenbach and other directors who have presided over persistent value destruction. We look forward to formally introducing our proposed interim Chief Executive Officer, director candidates and their strategic operating plan in the weeks and months to come.
Hestia Capital Partners LP has a 6.9% stake in Pitney Bowes and is pushing the company to re-evaluate its capital allocation and ecommerce strategy, according to Reuters.
Svea Herbst-Bayliss
Hestia Capital Partners LP, which scored big gains on its GameStop (GME.N) bet, is pushing shipping and mailing company Pitney Bowes Inc (PBI.N) to re-evaluate its capital allocation and e-commerce strategy, sources familiar with the matter said.
The hedge fund, which owns a 6.9% stake in the company that leases postal meters and pre-sorts mail for commercial clients, has held talks with Pitney Bowes and has suggested a possible sale of an underperforming segment, two people with direct knowledge of the matter told Reuters...
...Wolf believes Pitney Bowes' stock price, which closed at $3.61 on Friday, is trading between 70% and 80% below what its divisions would be worth on a standalone basis, the sources said. In early trading on Monday, it climbed higher before wiping away gains at a time the broader market is down...
...Wolf has suggested that the board consider selling the Global Ecommerce segment if its results do not improve, the sources said. He has also proposed the company create a board committee focused on capital allocation and strategic planning, like the one he served on at GameStop with Cohen.
Wolf believes Pitney Bowes should focus on cash-generating segments like Presort Services, its mail aggregation business, and SendTech Solutions, its postage meter business. Both have market leading positions and opportunities to grow and increase profits, Wolf has told the company, according to the sources.
Selling off the ecommerce side of the business could have massive ripples across the industry, especially at eBay where Pitney Bowes just announced a renewed partnership to power cross border logistics and support the recently unveiled eBay International Shipping program that will be rolling out over the next year.
Liz Morton ~ Founder
I'll definitely be keeping an eye on this story as it develops - stay tuned!
