Ebix Inc., a software supplier to the insurance industry, is being targeted by activist investor Barington Capital Group LP, which is seeking talks to nominate additional board members.
Barington suggested four independent director nominees including the activist fund’s founder, James Mitarotonda, and requested talks after acquiring a “significant” stake in Ebix, according to a letter dated Nov.11.
Ebix has underperformed its public peers for at least five years, weighed down by unresolved regulatory probes, lawsuits and the need for improved disclosures and governance, Mitarotonda wrote.
“It does not appear to us that the board of directors of Ebix has been taking adequate steps to protect shareholder interests and promptly resolve the concerns,” Mitarotonda said in his letter to Ebix Chairman and Chief Executive Robin Raina.
It’s “imperative that board oversight be improved in order to ensure that shareholder interests are protected and to enhance the company’s credibility with investors, regulators and the marketplace,” he wrote.
New York-based Barington, co-founded by Mitarotonda, invests in companies it considers undervalued and in need of improvements. The hedge fund recently targeted Darden Restaurants Inc., owner of the Olive Garden chain, alongside fellow activist Starboard Value LP, which last month persuaded investors to replace that company’s entire 12-director board after an unpopular sale of its Red Lobster chain to Golden Gate Capital.
Nasdaq-listed Ebix, based in Atlanta, provides software to insurers in Australia, Brazil, Canada, India, New Zealand, Singapore, the U.S. and U.K. The stock has climbed 6.1 percent this year, giving the company a market value of $572 million.
In today’s letter, Barington questions an abandoned go- private deal with Goldman Sachs Group Inc. The $20-a-share deal was announced May 1, 2013, and terminated June 19 the same year amid regulatory probes and investor lawsuits.
The fund also questions Ebix’s CEO compensation structure, communication on the status of probes, and the company’s “modest” organic revenue growth versus focus on acquisitions, among other issues.
Activist investors generally amass a stake in a company’s public stock and pressure management and directors make changes they believe will boost shareholder returns.
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