A New York hedge fund that owns a big stake in Pier 1 Imports is stepping up pressure for change at the Fort Worth-based retailer, sending a highly critical letter to the company’s board and requesting that its president be added as a member.
In the letter, Alden Global Capital’s Heath Freeman says he met twice with Pier 1’s Chairman Terry London and top executives in recent weeks, including on Oct. 4 at the Fort Worth headquarters.
He said shareholder representation on the board is “imperative” as they search for a new CEO to replace Alex Smith, who announced last month that he will leave the company at the end of the year.
We disagree with your laissez-faire approach to board responsibilities and believe the company would benefit from the rigor, direction, and shareholder-alignment that comes with having an ‘ownership perspective’ on the board, Alden Global Capital’s Heath Freeman
“We have identified several external candidates with the requisite industry experience, leadership skills, and track record of creating shareholder value who could ably serve as directors of Pier 1,” Freeman said in the letter. “We disagree with your laissez-faire approach to board responsibilities and believe the company would benefit from the rigor, direction, and shareholder-alignment that comes with having an ‘ownership perspective’ on the board.”
Last month, Alden Global Capital disclosed that it had acquired a 9.5 percent stake in Pier 1 stock, saying it wanted to open a dialogue on the retailer’s operations and representation on the board.
Pier 1’s board responded a week later by instituting a “poison pill” shareholder rights plan, which would allow existing shareholders to buy more shares if the stake exceeds 10 percent, making a takeover more expensive.
Freeman said the poison pill was “a clear overreaction to our involvement and further evidences that you may be more interested in protecting your director positions and fees than working constructively with one of your largest shareholders.”
He claimed that the Pier 1 board collectively owns just 0.5 percent of Pier 1’s shares, and says London has never directly purchased Pier 1 stock despite having served on the board since 2003.
“It seems apparent to us that with so little ‘skin in the game’ and not enough confidence in the company to engage in meaningful stock purchases, the board does not have the same commitment to shareholder value as we do,” the letter states.
Alden Global Capital, known for investing in distressed companies, has made headlines in recent years by buying into several newspaper companies. It acquired a controlling stake in Digital First Media, which owns papers including the Los Angeles Daily News, The Denver Post and The Orange County Register.
A union representing workers at the papers, the NewsGuild-Communications Workers of America, has criticized the investors, alleging they have been seizing assets by selling real estate, slashing staff in newsrooms and outsourcing work.