Engaged Capital LLC on Friday, March 25, rejected a potential settlement offer from Quotient Technology Inc. (QUOT), arguing the company’s new move to oust its CEO and set up a strategic M&A committee are all “entrenchment” tactics.
The Glenn Welling-led activist fund is seeking to install a minority slate of two directors on the technology company’s board. In a release Thursday, Quotient said its CEO, Steven Boal, will step down by year’s end and the company’s chief technology officer, Matthew Krepsik, will assume the chief executive role by then. Krepsik is set to join the board at the 2022 annual meeting and Boal will step off the board by the same meeting, expected in June.
The company also is separating its CEO and chairman roles, and it installed existing director Robert McDonald, a former Procter & Gamble Co. (PG) chairman and CEO, in the latter role. Quotient brought on a new director, Eric Higgs, who served as a vice president of marketing operations recently at Bridgestone Americas Inc., to replace Christy Wyatt, who previously said she planned to step down.
Finally, Quotient said it is forming a strategic board committee, and it will retain a financial adviser to help with the panel’s review of strategy and a financial plan and recommendations it expects to make following the review. It didn’t say who will be on the panel except it offered to include Engaged Capital nominee Matthew O’Grady, a former senior executive at Nielsen Holdings plc (NLSN) who managed Quotient competitor Nielsen Catalina Solutions.
The company didn’t offer a board seat to Engaged’s other nominee, the fund’s director of research, Christopher Hetrick. In a letter, Welling said the first he heard of the O’Grady offer was in the company’s press release, adding that no one notified him or O’Grady that an offer was made.
In addition, Welling insisted that Quotient’s strategic committee appears designed to fail, adding that the activist fund has been told by “certain interested strategic buyers” that they will not engage with Quotient if Boal remains involved.
Welling took issue with the company’s board and C-suite shakeup. The fund said it was disappointed with McDonald’s promotion to board chair, arguing that he is “well known to be an outspoken enabler” for Boal. The activist investor also raised concerns about Higgs’ independence, noting that he worked under McDonald for years at Procter & Gamble.
Nevertheless, Colliers Securities analyst Steven Frankel said Thursday in a report that Quotient’s announcement could help unlock shareholder value. He said that based on the company’s share price he sees limited downside risk and material upside potential as “execution improves and/or the company explores strategic alternatives.”
According to relationship mapping service BoardEx, a sister company to The Deal, McDonald and Higgs overlapped at Procter & Gamble for many years, from 1994 to 2012, including the period where McDonald was CEO of the packaged goods company and Higgs served in various positions.
McDonald was Procter & Gamble CEO between 2010 and 2013, after holding senior positions at the packaged food conglomerate. McDonald left P&G in 2013, saying he was retiring to resolve the “distraction” of attention being focused on him; the move reportedly came in response to dissatisfaction expressed by some shareholders, including activist investor Bill Ackman.
With Boal stepping down from the board, Engaged’s two candidates will face McDonald and incoming incumbent board nominee Krepsik.
Quotient declined to comment.