- Activist Hestia Capital Management, LLC names Lance Rosenzweig as interim CEO candidate at Pitney Bowes, Inc. (NYSE: PBI)
- CorpGov reviewed letter from Mr. Rosenzweig to Pitney Bowes shareholders ahead of May 9 annual meeting
- Hestia seeks five seats total which would give it control of the board of directors
- Letter includes turnaround strategy designed to lift share price above $15 in coming years
- Each of Hestia’s director nominees in charge of one or more parts of six-pillar strategy
- Hestia’s Kurt Wolf (8.4% shareholder) to focus on improved corporate governance
- Pitney Bowes has seen sharply negative total shareholder returns over all relevant time periods before Hestia arrived
Activist Hestia Capital Management, LLC has named its pick for interim CEO at struggling shipping and mailing company Pitney Bowes, Inc. (NYSE: PBI), also laying out a price target of at least $15 a share with details of a turnaround strategy, according to a letter to shareholders reviewed by CorpGov.
Pitney Bowes is a storied company whose roots go back over 100 years a collaboration between an inventor, Arthur Pitney, and a promoter, Walter Bowes, who launched the metered mail industry. The company now offers a variety of technology, logistics, and financial services to some of the world’s largest corporations.
But in recent years, the stock has not been kind to shareholders, with steep declines in total shareholder return (TSR). In the 10 years until the day before Hestia appeared in November, the TSR was -47%, over five years -52%, over three years -13% and over one year -49%, according to Bloomberg.
The company, which has thousands of employees but a market capitalization of just $670 million, has also racked up a heavy debt load – with plenty maturing in the next few years. It now has a junk debt rating following multiple downgrades.
Now, Hestia seeks sweeping change with Mr. Rosenzweig at the helm as interim CEO, as described in more detail on its website: https://www.transformpitneybowes.com/. Mr. Rosenzweig’s track record as a CEO shows he’s been a performer for shareholders. In his most recent role as chief of Support.com, Inc. (formerly NASDAQ: SPRT), shareholders saw a TSR of over 620%. He also executed turnarounds as CEO of at two private-equity owned businesses.
Pitney Bowes didn’t immediately respond to a request for comment from CorpGov.
Mr. Rosenzweig will be responsible for two of the six pillars of the turnaround strategy. The first is to optimize the corporate cost structure – with a plan to reduce at least $50 million in annualized expenses in the first 100 days of his tenure. “Based on our slate’s analysis, there is a significant opportunity to consolidate, re-engineer and/or streamline non-essential functions. There is also runway to reduce marketing and other unnecessary spending once the Company is no longer chasing unprofitable growth,” the letter says.
He’s also in charge of reviving the Presort business, which is a leader in the mail sortation category but has seen its operating margin shrink over time. “[O]ur slate believes it can significantly improve EBIT margins and return on investment through several initiatives. Alternative pricing models can likely drive several hundred basis points of margin expansion. In addition, tuck-in acquisitions and selective efficiency-enhancing investments can augment the segment’s economies of scale and drive higher earnings,” the letter says.
Kurt Wolf, Founder and Chief Investment Officer of Hestia and an 8.4% shareholder, will focus on improving corporate governance. “We will take proactive steps to instill a stockholder-first, rather than management-first, philosophy in the boardroom. Our slate plans to significantly improve corporate governance by taking steps that include empowering stockholders to call special meetings and act by written consent, reducing director interlocks and requiring transparent disclosure of any potential conflicts of interest. Additionally, our slate is committed to maintaining a value-additive corporate social responsibility program that keeps Pitney Bowes strong in areas like human capital management and sustainability, the letter states.
Hestia also has its sights on the company’s global ecommerce (GEC) division, which had an operating loss of $100 million last year. Todd Everett, who was CEO of Newgistics, Inc. when it was acquired by Pitney Bowes, is in charge of a intiative to restore profitability at GEC and also run a strategic process to explore strategic alternatives that deliver value to the company.
The penultimate pillar of the strategy relates to SendTech, which has a legacy postage-meter business, a label software division and the Pitney Bowes Bank. The initiative will be led by Katie May, who was CEO of ShippingEasy.com and a director at Stamps.com
Finally, Hestia aims to address capital structure problems that have festered in recent years as credit downgrades continued. “Fortunately, our slate’s focus on halting GEC’s losses and prioritizing Pitney Bowes’ cash-generating segments can lift the Company out of distress. We will quickly chart a path back toward “investment” grade credit status through thoughtful debt reduction, which can, and should, be done in partnership with our creditors,” the letter states. Milena Alberti-Perex, who has experience in multiple CFO roles, will lead the initiative.
As the annual meeting approaches on May 9, there are signs of other shareholders siding with Hestia. Reuters recently reported that Park Circle Investors, Anqua Management, DOMO Capital Management and the family office of former Third Point executive Bradley Radoff said they will back Hestia’s nominees.
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