by James Gordon
Posted 5/21/2007 12:00 am
Updated 2 years ago
Last summer, after four quarters of strong earnings, Acxiom Corp. stopped a fiery proxy fight with its largest institutional shareholder, ValueAct Capital Partners of San Francisco.
Per an August agreement, ValueAct managing partner Jeff Ubben gained a board seat and the chance to nominate another director. Acxiom remained a public company under the management of Company Leader Charles Morgan, who has been at Acxiom's helm for three decades.
Now, everything has changed.
Wednesday, while announcing tepid fourth-quarter results that included a 34 percent drop in income from operations, Acxiom said it would sell to ValueAct and California private equity firm Silver Lake Partners, for $27.10 a share plus $756 million in debt -- a deal worth about $3 billion.
Acxiom's rising stock price in the wake of the buyout news might inflate the final tally. But the deal is expected to close in about four months, after customary shareholder and regulatory approval and a 60-day waiting period in which Acxiom can entertain other offers.
Morgan said last week that it's likely other offers will surface -- Acxiom had spoken to two other private equity firms about a sale, he revealed, not naming them due to confidentiality agreements -- but that a bidding war in such a situation would not be "normal." He noted that Acxiom would have to pay a $22.25 million break fee should it choose another buyer during the 60-day period.
On Thursday, analysts with Robert W. Baird & Co. Inc. said "the emergence of another strategic buyer is a reasonable possibility, but [we] are maintaining a ?neutral' rating as we do not expect an additional upside." Baird raised its target price to $27 a share, in line with the takeover offer.
Neither Acxiom nor ValueAct-Silver Lake would comment on any possible change of company direction after the deal is complete and the company goes private. Meanwhile, there's no certainty that Morgan will continue as CEO, despite his stated desire to remain.
If Morgan decides to leave, it would be more lucrative to do so within the first year of new ownership, according to Acxiom's most recent proxy, which says Morgan would take about $4.3 million if he was terminated during the first year after a change of company control. He would receive $2.9 million if he were terminated in the second year and $1.5 million in the third year.
But on Wednesday, Morgan sounded like a man ready to go to work with the new bosses. While regulations prevented him from having discussions about his future at Acxiom while the company finalized the buyout, Morgan said he believes Acxiom's new owners want him to stay.
One future step for Acxiom emerged last week: Morgan said the company would spend much less on capital expenditures for its information technology outsourcing division than planned.
Acxiom Spokesman Kelley Bass later confirmed Acxiom would spend about half of what it spent on capital expenditures on infrastructure management -- things like hardware, software and the costs of managing and running computers for people -- in fiscal 2008 compared with fiscal 2007.
While Acxiom's core business is in managing data for its clients, for some clients it will also manage the technology infrastructure necessary for that client's database. That often involved buying more equipment and waiting to be compensated from that client.
One of the main divergences of opinion between ValueAct and Acxiom revolved around capital expenditures versus shareholder value. Echoing analysts, Ubben said Acxiom should curb expenditures on IT outsourcing and emphasize data consulting capabilities.
But that doesn't mean Acxiom will give up on IT outsourcing service. It might seek capital-light ways of providing this service. For example, the capital or the equipment itself could come through a bank or leasing agent.
The third try may be the charm for ValueAct. The private equity firm made two other offers to purchase Acxiom in 2005. The last offer of $25 for all of Acxiom's outstanding shares was rejected by Acxiom's board in December 2005. That set off ValueAct's attempts to get three of its own associates, including Ubben, elected to the board.
The total of ValueAct's last offer was $2 billion, which didn't include any of Acxiom's debt, an amount that increased $277.8 million through the share buyback program it launched in coordination with the agreement with ValueAct last August that ended the proxy fight.