ValueVision Proxy Batt le May Drag On

CONTROVERSY, CONFUSION OVER MOST RECENT DIRECTOR ELECTION
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The months of name-calling and mud-slinging in ShopHQ parent ValueVision Media’s proxy battle with activist shareholder Clinton Group may continue as doubts surface over how many of the home-shopping channel’s board seats actually changed hands at its recent annual shareholders’ meeting.

Clinton Group has been battling Value- Vision since November, when it proposed replacing six of the Eden Prairie, Minn., company’s eight-member board of directors, ousting its management team, revamping its product mix and opening a merchandising office in New York.

Key to that strategy was pushing through its slate of directors — a Who’s Who of reality TV and retail executives including Fremantle Media North America CEO Thom Beers and former Sony Music Entertainment chairman Tommy Mottola — at ValueVision’s June 18 annual meeting of shareholders.

But despite Clinton Group’s claims to the contrary, it appears that the activist shareholder may have fallen short of its goal, gaining approval of just four members of its slate to the ValueVision board, almost certainly assuring a tie vote in any major future decisions.

TWO DIRECTORS SHY

A few hours after the meeting adjourned on June 18, Clinton Group said in a statement “once the election results are certified, six of the eight directors of ValueVision will have joined the Board in 2014.” That would presumably mean that Clinton Group’s full slate of six directors made the cut. But one person familiar with the vote said that two of ValueVision’s current directors — Lowell Robinson, former chief operating officer of online advertising company MIVA, and Landel Hobbs, former COO of Time Warner Cable, were appointed by the shopping channel in this year.

Later in its statement, Clinton Group added that “four of our nominees received support from more than 70% of the shares voted by public shareholders and were elected to the board.”

The person familiar with the companies said that statement is only partially true — large blocks of shares owned by private institutions aren’t counted in the 70% of shares voted by public shareholders.

“It sounds like Clinton’s six nominees were elected, but that is not the case,” said one member of the investment community familiar with both companies who asked not to be named. The final results will not be certified until sometime later this week [June 23], the person said.

Clinton Group president Gregory Taxin said in a statement the election results “are a clear message from shareholders that ValueVision needs to chart a different course, under new leadership. We are confident that there will be a solid, cohesive majority on the board to implement the changes to strategy and management shareholders have demanded.”

In an interview, Taxin appeared secure in the belief Clinton Group’s agenda would prevail.

CLINTON CONFIDENT

“I am highly confident that there will be significant changes in the board and the management team at ValueVision,” Taxin said. “There will be more on that over the next week.”

But with just four board seats, just how much change the activist investor can muster is still up in the air. In a statement, Value Vision said it expects to announce the election results in “the next few business days.”

For its part, ValueVision was sticking to its guns.

“ValueVision has a proven track record of returning the company to growth and success, the right strategy to continue driving shareholder value, and a team of over 1,000 employees and hosts who are passionate about the company and the 1.4 million customers they serve,” ValueVision said in the statement.

ValueVision shares were up 7% (33 cents) to $5.01 each on June 18.

“Shareholders reacted like some change is happening,” said Feltl & Co. senior research analyst Mark Smith, who follows ValueVision. He added that it is still difficult to call the outcome of the vote before certification, but added that with only four board seats, Clinton Group would have a “tough” time implementing meaningful changes.

“If they did have an evenly split board, you would perhaps see more stalemates,” Smith said.

Just how the vote turned out is still open to speculation — neither side would reveal who they think ultimately won the seats. But according to one person in the financial community who asked not to be named, preliminary results show that Clinton Group nominees Beers, former HSN CEO Mark Bozek, former Tommy Hilfiger Corp. chief operating officer Robert Rosenblatt and former QVC senior vice president and marketing head Fred Siegel won seats.

The remaining directors are Robinson, Hobbs and two current board members, ValueVision CEO Keith Stewart and the non-executive chairman of Minnesota health insurer Medica, John Buck. According to one source in the financial community that asked not to be named, Buck, Robinson and Hobbs are likely to be sympathetic to at least some of Clinton Group’s proposals — the source added that Buck even voted his shares in favor of the Clinton Group slate.

Bozek or Rosenblatt are expected to be the top candidates for interim CEO if Clinton Group’s slate is approved, the source continued.

The shareholders meeting took place at ValueVision’s headquarters and lasted about 10 or 15 minutes, Smith, who attended the meeting, added. He said after a brief presentation from ValueVision, Clinton Group was given about three minutes to state its case before the vote was started.

Smith said Taxin kept his comments mostly in line with what he has said in the past, criticizing Value- Vision’s performance compared to its peers.

“It’s hard to guess exactly what’s going on,” Smith said. “It certainly appears from Clinton’s statements they had the votes to put their people on the board, but it is purely speculation until we get full official results.”

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