Says Major Shareholder's 'Disparaging' Comments Hurt Company's Worth

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CINCINNATI ( -- While Information Resources Inc. may have announced its intention to "explore strategic options" two weeks after a major shareholder demanded sale of the company, that wasn't what prompted the move, Chairman-CEO Joseph Durrett said.

In an interview with, Mr. Durrett said the company retained Chicago investment banking firm William Blair & Co. "several months ago," though he wouldn't provide precise timing. IRI announced last week that it had hired the firm to seek buyers, venture partners or "capital infusions." But Mr. Durrett said IRI has been in discussions with other companies about various arrangements since last year.

Trouble with a shareholder
The process began well before the involvement of Chap-Cap partners, a hedge fund led by Chapman Capital, which owns more than 5% of IRI, Mr. Durrett said. The fund's managing partner, Robert L. Chapman, demanded in a Feb. 14 filing with the U.S. Securities and Exchange Commission that IRI's board either sells the company or fires Mr. Durrett.

"His criticisms of the company,

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to the standpoint that our earnings and our stock market performance have not been good, are very valid criticisms, and we accept them without question," Mr. Durrett said. But he added: "We want to improve the value of the company. We think the smart way to do that is to focus on what needs to be improved. ... Attacking the board and the management team can run the risk of disparaging the company. So we don't think it's the smartest way to go. But he's entitled to do what we wants to do. We don't take it personally. This is business."

IRI lost its biggest account in December, when Procter & Gamble Co. announced it will move its retail measurement business to rival VNU's ACNielsen Corp., effective July 1.

'Cash positive'
Mr. Durrett believes IRI will retain sizeable panel and analytics business from P&G. While he won't project IRI's earnings for 2003 because of uncertainty about how much P&G business will remain, he did say IRI will be "cash positive" for the year. For 2002, IRI's net loss before an accounting change increased 53% from a year ago to $6 million on sales of $555 million, down less than 1%.

Despite doubts raised by Mr. Chapman, Mr. Durrett still believes IRI can continue to go it alone, too. "But we started getting approached in recent months by other companies who said, 'Hey, you've got some skills and strengths that we don't have. Let's talk and see if we can do things if not better together then faster together.' ... We decided we needed to turn that into an examination process."

Mr. Durrett said IRI hasn't set a deadline for the process, which he expects to take "several more months." He wouldn't comment on whether he'll consider bids from private equity groups.

In the meantime, he said IRI should announce within 90 days the first of what he intends to be several proprietary data sources and research services.

Pressure for better data
He acknowledged client pressure is growing for better data than the consumer-panel solutions currently available to replace scanner data that Wal-Mart Stores stopped supplying to IRI and ACNielsen in 2001. He wouldn't comment on whether P&G had sought a doubling in household panel sizes to accomplish that and said views vary in the market research industry on whether that's the solution.

"It's an undecided issue at the moment in the industry," Mr. Durrett said. "There is nothing in the financial position of IRI that would prevent us from doing that if that's what our clients want."

Client reaction to word that IRI is exploring its "strategic options" has been mostly positive, Mr. Durrett said. "The client reactions are: 'We're glad you did it. It's about time. We think this will make a stronger IRI.' ... I think the [package goods] industry wants a strong IRI."

Employees have been naturally concerned, he said. "We're not in a position where you can ever guarantee anything to anyone, but we try to be as reassuring as we can."

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