November 21, 2014
(Editor’s Note: This post is an excerpt from an article appearing in Practitioner Insights on WestlawNext)
Oplink Communications Inc. has become the latest company to agree to sell itself amid pressure from activist shareholders, after the company agreed to be taken private by Koch Industries Inc. in a $244 million transaction. Whether or not these activists are happy with the deal, however, remains to be seen.
The optical communication supplier has been facing pressure for months from two activist shareholders in particular: Engaged Capital LLC and Voce Capital Management LLC. The activists teamed up in July and disclosed in two jointly filed Schedules 13D that they acquired approximately 6.2 percent of the company’s outstanding shares.
In their filings, the activists disclosed that they were particularly concerned with how one of Oplink’s units — Oplink Connected — was performing and that such business was diluting the company’s earnings. The activists also divulged that they had been discussing with Oplink “strategic alternatives” for the division, such as spinning-off or selling the unit.
In apparent response to the pressure, Oplink announced a series of initiatives to enhance shareholder value on July 29, which included beginning “a process to seek strategic alternatives for Oplink Connected, including a possible sale of all or part of the business.”
Concern over Oplink board’s expertise and skills
Oplink’s response was apparently not satisfactory to Engaged and Voce, however, because the activists nominated two candidates to the company’s board to be considered for election at its 2014 annual shareholders meeting. Engaged and Voce also demanded that Oplink refrain from pursuing strategic alternatives until after the company holds its upcoming annual meeting because, they argued, the company’s current board “lacks the sophistication, expertise and independence to properly evaluate and execute these important strategic initiatives.”