The tone is remarkably polite. Plaudits are offered to company management. And there’s something else that differentiates Citadel Investment Group’s message to Gemstar-TV Guide International from other activist hedge fund missives: a reticence to sell.
Of course, the circumstances are somewhat different. Los Angeles-based Gemstar put itself up for sale two weeks ago, and Rupert Murdoch, who controls the entertainment company, is somewhat preoccupied with another sale at the moment, that of Dow Jones and The Wall Street Journal to his News Corp. And so Chicago-based Citadel, which has boosted its stake in Gemstar to 8.4%, wrote the board of directors to calmly urge caution and discretion in picking a buyer.
After offering “our public support for both management and the board of directors,” noting, “we have been particularly impressed with the management team CEO Rich Battista has assembled and the strategic direction this leadership has brought the company”—Citadel even goes so far to forswear seeking board representation—the letter gets down to brass tacks: If you must sell, sell to another media company.
“While we welcome the board of directors’ decision to pursue strategic alternatives for Gemstar-TV Guide, we do so with some reservation because we firmly believe that Gemstar-TV Guide has the potential to realize several billion dollars of incremental [emphasis in original] equity value creation over the next several years based solely on the company’s strategic positioning and management’s ability to execute its strategy,” Citadel wrote. “While we are not averse to the sale of the company, we believe any sale must adequately compensate all shareholders for the immense opportunity that lies before Gemstar-TV Guide. In this regard, we do not believe that an investment or takeover by a financial investor is likely to be in the best interest of shareholders.”
Gemstar shares have soared more than 30% since it put itself up for sale.