ValueAct Sweetens Bid for Acxiom Corp.

ValueAct Capital Partners has sweetened its offer to acquire Little Rock's Acxiom Corp.

In an document filed with the Securities & Exchange Commission on Friday, the San Francisco investment fund increased its offer to buy all shares of Acxiom it does not already own to $25 a share, a 25 percent premium on the stock's latest closing price.

ValueAct also said it was prepared to go even higher than its current $2 billion offer in its hostile takeover attempt.

Shares of Acxiom stock (Nasdaq: ACXM) spiked more than 5 percent to $21.12 per share Monday morning following the announcement. Shares closed at $20.04 on Friday.

In a statement Monday afternoon, Acxiom Company Leader Charles D. Morgan said his company "is encouraged by what we have achieved, we are making demonstrable progress, and we are convinced we are making the right long-term decisions for our business. Acxiom senior management strongly disagrees with ValueAct's analysis of our business, and we believe the results of this last quarter and the continuing progress we are making are evidence that we are moving in the right long-term direction."

ValueAct, which owns nearly 12 percent of Acxiom's stock and is the company's largest shareholder, previously offered $23 per share for the remaining shares of Acxiom it did not own.

In July, Acxiom's board of directors voted not to accept ValueAct's offer, Morgan has said his company is not for sale.

In ValueAct's most recent letter to Acxiom's board of directors, dated Friday, ValueAct managing partner Jeffrey Ubben said, "The second-quarter results reported on October 19th further confirm our belief that assets are being poorly deployed, opportunities missed, and that shareholder value is being eroded by current management."

Last Wednesday Acxiom reported second-quarter pretax profits of $12.4 million, a 58 percent drop from profits in the same quarter last year. But $15.8 million in one-time charges weighed on results, which many analysts anticipated.

New Leadership, Direction

In the letter, Ubben also said, "It is clear to us that there is an urgent need for a fundamental change in the company's strategic direction. It is also clear that the only way to bring about that change is by replacing Acxiom's leadership."

On Oct. 4 ValueAct countered Acxiom's previous claims that the investment firm lacked the expertise to manage a data company by proposing that three industry veterans run the company.

Under ValueAct's plan, Lou Andreozzi, former president and CEO of LexisNexis' legal research division, would replace Charles Morgan as Acxiom's chief executive if ValueAct successfully acquired Acxiom.

Otherwise, Andreozzi; Michael Lawrie, former CEO of Siebel Systems Inc.; and Michael Wood, former chief financial officer of Worldspan LP will compete for open seats on Acxiom's board of directors in next year's election, ValueAct said.

Those seats are now held by Morgan, former U.S. Postmaster General William Henderson and Ann Die Hasselmo, former president of Hendrix College in Conway.

'Misleading' Reporting

Ubben also accused Acxiom of misleading financial reporting.

"While management trumpets top-line growth and pro forma profits, the significant decline in true free cash flows tells a dramatically different story," Ubben wrote. "Acxiom's purported 'free cash flow' calculation materially understates the cash obligations that the current management team is imposing on the company and, ultimately, its shareholders, to fund its misguided and costly capital expenditures."

At least two of the capital expenditures Ubben is referring to is last year's acquisition of two of Europe's largest data companies, Claritas Europe from VNU N.V. of Haarlem, The Netherlands, and Consodata from Seat P.G., which has operations in England, France and Spain.

The two companies cost Acxiom a total of $76.4 million but have done little for its international business thus far.

In August, at Acxiom's annual meeting, Chief Operations Leader Lee Hodges said Acxiom should have anticipated the complexities of merging with Claritas Europe and Consodata. But Acxiom said last week in an earnings conference call that it was optimistic about the performance of its European business this quarter, which is typically strong in that market.

Competing with IBM

Ubben also criticized Acxiom's management for emphasizing its IT management segment, which does not produce the same margins as the company's services and data segment.

"The company won another large, highly capital intensive outsourcing contract in a head-to-head competition with IBM," Ubben wrote. "Should we believe that Acxiom has a lower cost of capital than IBM? Or that Acxiom is more efficient than IBM? Does anyone really believe that it is a sound long-term strategy to attempt to compete with IBM in the outsourcing business?"

In September Acxiom announced a large IT outsourcing contract with NDCHealth Corp. of Atlanta. The IT management services sector accounts for about a quarter of Acxiom's revenue.

Bob Williams, senior vice president and managing director of Delta Trust Investments Inc. in Little Rock, said some of Ubben's criticisms were valid. But Williams said he believed that the market's reaction to the new offer did not indicate $25 per share would be enough to get the deal done.