MDC 'disappointed' activist investor 'elected to go public' with concerns

FrontFour Capital agitates for board changes at holding company

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An MDC Partners shareholder pushing for a board shakeup has gone public with its dissatisfaction with the holding company, which is currently searching for a new CEO and exploring a possible sale.

In an SEC filing Wednesday afternoon, FrontFour Capital — which says it owns 5.1 percent of the holding company — revealed that it had initiated private conversations with MDC's board in August to replace CEO Scott Kauffman "with a candidate better suited to leverage the strength" of its agencies and to grow its market share in certain industries. According to the filing, "shortly thereafter, the board hastily announced Mr. Kauffman's intention to resign as CEO by December 31, 2018 without having commenced a search for his replacement, and then announced the launch of a strategic review process a week later."

The filing says that FrontFour has "stressed the importance of shareholder representation" on the board to better align its perspectives with that of MDC's shareholders "particularly at this critical juncture." FrontFour claims MDC's board has rejected its requests.

"FrontFour continues to believe that significant changes to the composition of the board are required in order to ensure that the best interests of shareholders are represented in the boardroom and therefore is evaluating all available options, including seeking changes to the composition of the board at a special meeting of shareholders requisitioned for such purpose," the filing says. "FrontFour may continue to enter into discussions with management and the board and reserves all rights to take any and all action with respect to its investment in the issuer."

MDC Partners' board currently includes Kauffman and commercial development and casino operator Vice Chairman Clare Copeland; Goldman Sachs Merchant Banking Division Managing Director Bradley Gross; MarketWatch founder and former USA Today president and publisher Larry Kramer; global financial services executive Anne Marie O'Donovan; and Telesat Canada President and CEO Daniel Goldberg.

The board also includes former Johnson Publishing Company CEO and White House social secretary Desirée Rogers and Irwin Simon, the charmain, president and CEO of The Hain Celestial Group, a natural and organic food company.

The holding company issued a statement in response to FrontFour's filing, saying that it "welcomes open and constructive conversations with our shareholders and seriously considers all ideas and suggestions that may enhance long-term shareholder value."

"We have had an ongoing dialogue with FrontFour, and are disappointed that they elected to go public with their concerns at this time," the statement said. "While we expect communication with FrontFour to continue, our focus remains on conducting our previously announced strategic review and CEO search process, and we remain committed to delivering value for all our shareholders."

MDC has had a difficult 2018. Kauffman called the advertising holding company's first-quarter results "unacceptable" in May, citing client cutbacks and slower conversion in its new-business pipeline. In its second-quarter earnings last month, the holding company said it was looking into possible dispositions of non-core assets or those that "might be more valuable in someone else's hands."

In July, MDC said it had laid off a "small handful" of its corporate team. MDC's global chief marketing officer Bob Kantor was among the cuts.

MDC's stock has been under pressure. MDC traded around $10 a share at the start of the year but closed Wednesday at $2.38 after earlier in the day slumping to $2.20, its lowest price in years.

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