Activist Clinton Group Wins Imation Proxy Battle

May 21 2015 | 3:02pm ET

Activist hedge fund Clinton Group’s efforts to unseat Imation CEO Mark Lucas from his company’s board have been successful.

Preliminary results from the company’s proxy vote earlier this week indicate Lucas and and two other incumbent board members, including the chairman, were not re-elected to their positions. Instead, shareholders voted for a slate of board nominees put up by Clinton.

The outcome must still be certified, but if upheld, will end a long and at times confrontational battle between Clinton and the company. 

Clinton has argued that executives of Imation, a company that used to be famous for making floppy-disk drives, mismanaged the firm while enjoying excessive pay despite years of poor performance. As with many activists, Clinton successfully argued to Imation shareholders that fresh eyes on the board would help improve shareholder value and improve financial results. 

The company’s three new board members are Joseph De Perio, Clinton’s senior portfolio manager, data storage executive Robert Fernander, and Realization Services president Barry Kasoff. 

Although the vote removed Lucas from the board, he remains CEO. 

Clinton Group, which owns approximately 3.4% of Imation, intends to meet with the Lucas and the rest of the new board as early as next week to start the process of improving the company’s bottom line, the company noted.

Financial results have been weak. Imation lost $14 million in the first quarter of 2015 on 13% lower revenues of $155 million. 2014 revenue was $729.5 million, compared to 2008's top line of nearly $2 billion. The company's core legacy products, which include CDs, DVDs and magnetic tape storage devices, have been declining for years.

In response, Lucas has sold several unprofitable businesses, acquired data security products and introduced new products, as well as trimming costs by $100 million annually. 

Shareholders, however, were not impressed, deciding new blood was needed at the board level for the company to realize its full potential. The five largest owners of Imation stock own 59% of the company, according the poxy materials, a fact that may have made the logistics of the contest easier for Clinton.

As has become typical with public activist efforts, Clinton’s concerns sparked a rise in Imation’s share price. The stock is up more than 40% since disclosure of Clinton’s proxy battle became public in late 2014.

Founded in 1991, The Clinton Group has more than $1.5 billion in assets under management.


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