Starboard Value Letter To Mellanox Technologies, Ltd. (MLNX)
Mellanox is looking to wrongfully delay the 2018 annual meeting of shareholders (the “2018 Annual Meeting”) by three months. This is a transparent attempt to delay the right of shareholders to vote on the election of directors. Instead of holding the 2018 Annual Meeting in a timely manner, the Company is instead proposing to hold an unnecessary extraordinary general meeting of shareholders (“EGM”) in May 2018 to vote on two corporate governance changes – (i) the implementation of plurality voting in contested elections, and (ii) the use of a universal proxy card in contested elections. Although neither of these proposals is specifically problematic, there is absolutely no need to delay the 2018 Annual Meeting by three months to accomplish the Company’s goal of implementing these changes. Under separate cover, Starboard will be delivering to Mellanox and its advisors today a proposal that would allow both of these governance reforms to be implemented with our support and without the unnecessary three-month delay.
Check out our H2 hedge fund letters here.
There is no good reason for Mellanox not to work with us to efficiently and expeditiously agree on the terms of these proposals and, in doing so, avoid a three-month delay in holding the 2018 Annual Meeting. Any unwillingness to implement these proposals will confirm for us, and should for all shareholders, that the only reason Mellanox is proposing the EGM is to purposely delay the 2018 Meeting in order to entrench the current management team and Board.
If it is not clear to you that the sole purpose of the EGM is to delay the 2018 as long as possible, keep in mind that Mellanox has disclosed its intention not to hold the 2018 Annual Meeting until July 25th, 2018, which is the last possible day permitted under Israeli law, and a full three months later than the expected meeting date of April 25th. Again, if they were to hold the meeting just one day later, they would be in violation of Israeli law.
This is an obvious and thinly veiled attempt to justify an unnecessary delay in holding the 2018 Annual Meeting for the purpose of perpetuating the status quo for as long as possible. This is terrible corporate governance, and shareholders should not be fooled.
As mentioned above, we are delivering a letter to Mellanox and its advisors today laying out the specific terms under which we are willing to (i) support the use of a universal proxy card and (ii) commit to supporting the implementation of a plurality voting standard for contested elections. The letter includes Starboard's commitment to have our nominees deliver the consents required to be named as a nominee for election in any proxy statement or proxy card relating to the 2018 Annual Meeting, on the condition that the Company's nominees likewise furnish such consents to us, and to agree to the logistics of such a universal proxy card as Mellanox has set forth in its preliminary proxy for the EGM. We also commit our public support for the approval of a plurality voting standard as the first agenda item at the 2018 Annual Meeting, which is virtually certain to be approved, and thereby effective, for the election of directors at the 2018 Annual Meeting.
This accomplishes both goals: implementing the Company's desired governance reforms and holding the 2018 Annual Meeting in a timely manner. In this way, an EGM to amend the Company's articles of association (the "Articles") to require the use of a universal proxy card at the 2018 Annual Meeting would not be necessary, and a three-month delay in holding the 2018 Annual Meeting can be avoided entirely. There is absolutely no need to hold an EGM and delay the 2018 Annual Meeting for months solely to implement a universal proxy card and establish a new voting standard.
Despite making claims that management and the Board are focused on driving shareholder value creation, spending millions of dollars to hold two separate shareholder meetings appears to be a very poor use of shareholder capital. These meetings take time, energy, and focus away from the Company's first priority, which should be creating long-term shareholder value, not entrenching the current Board and disenfranchising shareholders.
We are disappointed to see the current Board resort to such transparent defensive measures rather than allow shareholders to exercise their rights in a timely manner. We support the goal of improving Mellanox's corporate governance and would have been happy to work with the Company to do so while still holding the 2018 Annual Meeting on time.
Now more than ever, we remain committed to seeking change at the 2018 Annual Meeting. Thank you for your continued support, and we look forward to communicating our detailed plans for Mellanox over the coming weeks and months.
Article by Activist Stocks