Acxiom investor MMI says acquisition price too low; begins solicitation of proxies against proposed deal

By Jennifer Lanning Drey

Portland, Ore., July 16 - Acxiom Corp. investor MMI Investments, LP has begun a formal solicitation of proxies against the company's proposed acquisition by ValueAct Capital and Silver Lake Partners for $27.10 per share, Jerome Lande, assistant portfolio manager for MMI, told Prospect News on Monday.

MMI, which beneficially owns 6,455,288 shares, or 8.0%, of the company, believes Acxiom is worth upwards of $30 per share, Lande said.

"There is, I believe, little to no way to argue that this [deal] is good corporate governance," he said.

Additionally, Lande said the handling of the process surrounding the deal was "tactically a mistake and unfair to shareholders not on the board." He also said MMI believes the process was rushed, demonstrating a "short-term and unsophisticated approach."

"It's another example of private equity getting a company for cheap at the expense of public shareholders," Lande said.

Representatives from ValueAct and Silver Lake did not respond to requests for comment.

A spokesperson for Acxiom also did not respond to a request for comment on the deal, but when the company announced the proposed acquisition in May, Acxiom said in a news release that the $27.10 share price represented a 14% premium over the closing share price on May 16, the last trading day before disclosure of the agreement, and a premium of about 20% per share over Acxiom's average closing price per share during the 30 trading days ended May 16.

MMI's valuation

In a letter to Acxiom's board of directors filed Friday with the Securities and Exchange Commission, MMI said the board's negotiations with ValueAct and Silver Lake had only yielded an increase of $1.10 per share from the group's opening bid and a multiple of last-12-month EBITDA 14% below the multiple offered by ValueAct in a prior hostile offer. The prior multiple, if applied today, would yield a deal price of more than $32.50 per share, MMI said.

The shareholder also believes Acxiom's financial advisers, Merrill Lynch & Co. and Stephens Inc., made substantial adjustments to EBITDA as part of their analyses underlying their fairness opinions without corresponding adjustments to enterprise value.

MMI said based on publicly available information, it does not agree with either opinion's adjusted EBITDA and said both appear to make the mistake of reducing EBITDA for the costs of capitalized leases and software without reducing the debt for the obligations. MMI believes the error reduces discounted cash flow and enterprise value divided by adjusted EBITDA calculations by about $2 per share.

'Wholly unsatisfactory' process

MMI also believes the process surrounding the deal and the go-shop period were "wholly unsatisfactory and unfair to Acxiom shareholders," Lande said Monday.

Specifically, MMI believes the buyer had unfair advantages because ValueAct managing partner and Acxiom board member Jeff Ubben participated in board discussions regarding a sale of the company for more than a week after announcing ValueAct's interest in possibly acquiring the company.

ValueAct beneficially owns 10,329,711 shares, or a 13.2% stake, in Acxiom.

Additionally, Acxiom elected to pursue a go-shop process with a break-up fee, "having already reached a definitive agreement with a buyer with informational and cost basis advantages, rather than an auction process with an even playing field," MMI said in the letter.

"The board had previously shared confidential information with several potential strategic acquirers, but chose not to invite them to bid prior to signing the definitive agreement with ValueAct and Silver Lake," MMI said.

The investor also believes Acxiom's board was focused on signing a deal before releasing its fourth-quarter results.

Solicitation of proxies

Lande said MMI has just begun soliciting proxies, but other shareholders with whom the investor has already spoken have been in agreement with MMI's position on the deal.

The investor believes "when confronted with calculations," additional shareholders will take MMI's position.

Acxiom needs two-thirds of its shareholders to vote in favor of the deal for it to be approved.

Lande also said Monday that MMI is willing to listen to Acxiom's argument in favor of the deal but has not recently had any direct contact with the company.

"Our door is open. They haven't called, nor has ValueAct, nor has Silver Lake. We, frankly, don't know what they're thinking," he said.

Acxiom is a Little Rock, Ark., provider of customer and information management services.

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