MDC Partners shareholder FrontFour Capital has turned up the heat in its attempt to shake up the beleaguered holding company's board as it continues to search for a new CEO and explores a possible sale.
FrontFour — which says it owns more than 5 percent of voting securities of MDC, making it one of the largest shareholders of the holding company, it claims — sent a letter to MDC on Dec. 31 announcing its intention to call a special meeting of shareholders to replace three current board directors with new ones, according to an SEC filing Wednesday.
"Despite our efforts to work with the current board over the past several months, it is clear that we have reached an impasse," the letter says. "The board has rejected our requests and does not appear to support shareholder representation on the board." The letter is signed by FrontFour portfolio managers Zachary George, David Lorber and Stephen Loukas.
MDC Partners' board currently includes its former CEO Scott Kauffman; 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; Telesat Canada President and CEO Daniel Goldberg; former Johnson Publishing Co. 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 letter says the FrontFour leaders have been "left with no choice but to requisition a special meeting of shareholders" to be held no later than March 29 to remove Kauffman, Copeland and Simon and replace them with three "highly qualified directors."
Those new directors proposed by FrontFour include Kristen O'Hara, former Warner Media chief marketing officer, who was named Snapchat's head of advertising in the role of VP of global business solutions before CEO Evan Spiegel hired another executive to the role instead; David Moran, founding partner of consumer brand strategy firm Deep Relevance Partners; and FrontFour's Loukas.
FrontFour's letter says the collective backgrounds of the proposed directors "are well suited to help MDC tackle the challenges and secure the opportunities ahead."
The letter concludes with a description of FrontFour's key concerns with MDC Partners, which include the performance of MDC's shares trailing the broader market and other publicly traded ad holding companies; a failure to address a "bloated holding company cost structure" and the potential for material conflicts of interest "given the role of a preferred shareholder on the board." (The letter did not identify that shareholder by name.) FrontFour also says MDC's stock price has traded down more than 40 percent since the announcement of the strategic review process, "which is concrete evidence that shareholders do not believe that the current board can surface value."
The letter comes a month after FrontFour filed documents expressing its desire for a board shakeup, claiming that MDC had rejected the company's requests for a board that was better aligned with that of MDC's shareholders.
Reached for comment, MDC said in an emailed statement that it is evaluating the communication received Wednesday from FrontFour and "will respond in due course."
"Our focus remains on conducting our previously announced strategic review and CEO search process, and we remain committed to delivering value for all our stakeholders," the statement said.
Kauffman's employment as CEO of MDC partners ended on Monday, but according to an SEC filing last week he was expected to serve as a board member through June 2019. In the interim period while MDC continues its strategic review process — including exploring a possible sale — and weighs CEO candidates, the board of directors has assembled an executive committee including exec VP and chief financial officer David Doft; Exec VP and general counsel Mitchell Gendel; Exec VP of Partner Development and Talent Stephanie Nerlich; and Exec VP of Strategy and Corporate Development David Ross.
The executive committee is expected to assume the responsibilities of the CEO until a successor is appointed, the filing said.