Hestia Capital Makes Board Nominations, Pitney Bowes Responds

Liz Morton
Liz Morton


UPDATE 3-7-23

The back and forth between Pitney Bowes and Hestia continues as proxy fight looms. Hestia has increased their position in the company even further, now owning 8.4% of shares, and is continuing to push for a complete leadership overhaul.

Pitney Bowes recently announced board changes and filed a preliminary proxy statement, calling out Hestia for not being sincere in efforts to resolve disagreements.

Pitney Bowes Files Preliminary Proxy Statement and Announces Board Changes
Pitney Bowes (NYSE:PBI), a global shipping and mailing company that provides technology, logistics, and financial services, today announced that it ha

In connection with the filing of the preliminary proxy materials, the Board disclosed its slate of director candidates for the 2023 Annual Meeting, including two new independent directors, Darrell Thomas and Steve Brill, who have been appointed to the Board, effective immediately.

Directors Michael I. Roth, S. Douglas Hutcheson, and David L. Shedlarz will not stand for re-election at the Company’s 2023 Annual Meeting. Michael Roth has also decided to step down from the Chairmanship now, rather than at the end of his term as director, in light of the limited time between now and the end of his term and because he believes the incoming Non-Executive Chairman should lead discussions on future Board leadership in support of the Company’s next phase of transformation.

Accordingly, the Board has elected Robert M. Dutkowsky to assume the role of Non-Executive Chairman, effective immediately...

...As you know, Pitney Bowes engages in open and regular communication with stockholders and welcomes constructive input on how to enhance long-term stockholder value. To that end, we have been in regular communication with Hestia Capital since 2021. However, despite our best efforts to find a reasonable path forward, and over the course of our extensive engagement, we have found that Hestia has continuously changed its views on the company and its proposals to resolve our disagreements.

As set forth in more detail in the background section of the proxy statement, it appears to us that Hestia has not engaged in good faith in our discussions and has made numerous pivots which have impeded an amicable resolution. Pitney Bowes has made every effort to work amicably with Hestia for the benefit of all stockholders and to avoid a disruptive and unnecessary proxy fight, including by offering the appointment of three new independent directors and the departure of at least two incumbent directors.

However, Hestia has been unwilling to accept any proposal and most recently has insisted on the departure of our CEO and the appointment of three of its own nominees to our Board. This latest demand represented a significant departure from all of Hestia’s prior demands, suggesting that Hestia has never been sincere about trying to resolve this matter short of a distracting proxy fight.

Further, it is recommending a slate of nominees, some of whose business experience appears to be adverse either to us or our key partners, some who are not additive, and/or other still who appear to lack the necessary skills to oversee execution of our long-term strategy. As always, the Board remains open to constructive dialogue with the goal of enhancing value for all stockholders and we will continue to act in their best interests.

Hestia hit back, saying the board refresh "fails to address the Company’s value-destructive strategy and failed leadership while perpetuating certain governance issues" and raising concerns about Dutkowsky's qualifications and possible close personal ties to CEO Marc Lautenbach.

Hestia Capital is Filing a Preliminary Proxy Statement in Connection with Pitney Bowes’ 2023 Annual Meeting of Stockholders
Hestia Capital Management, LLC (collectively with its affiliates, “Hestia” or “we”), which is the third largest stockholder of Pitney Bowes, Inc. (NYS

Although Pitney Bowes validated our case for change by announcing plans to replace three extremely long-tenured directors, we believe the Board’s marginally positive refresh fails to address the Company’s value-destructive strategy and failed leadership while perpetuating certain governance issues.

The Board actually doubled down on Chief Executive Officer Marc Lautenbach despite his apparent commitment to running a capital-intensive and seemingly failed strategy that has resulted in many years of cash flow deterioration, credit downgrades and negative stockholder returns. To make matters worse, the Board has appointed Robert M. Dutkowsky as Chair despite his apparent interlocks through their past at IBM, and likely close personal ties to Mr. Lautenbach.

Further, Mr. Dutkowsky currently holds four public company director roles and maintains two public company chairmanships. Mr. Dutkowsky, who failed to avert a very costly proxy fight at U.S. Foods Holding Corp. last year and resisted changing a failed strategy there, appears to have an array of other commitments with organizations in the Tampa Bay area and did not seem to distinguish himself as an advocate for stockholders when serving on important Pitney Bowes committees.

It is also important to note that the Board’s refresh was not accompanied by commitments to address glaring issues, including Pitney Bowes’ six credit downgrades and $1.7 billion in debt maturities over the next six years, that we have raised since our private engagement began with the Company last summer.

While our proxy statement details four separate attempts to reach productive compromises with Pitney Bowes, the Board’s apparent inflexibility and unwavering commitment to Mr. Lautenbach has made meaningful compromise impossible in our view, compelling us to run five director candidates for election at the Annual Meeting.

We have modified our slate to include five highly qualified, independent director candidates with the exact backgrounds and skills Pitney Bowes needs:

  • Capital allocation and debt reduction acumen;
  • Strategic planning and company turnaround expertise;
  • Governance insight and prior boardroom experience;
  • Leadership and prior c-level experience;
  • Vast postage, shipping and technology knowledge;
  • Recruitment, human capital management and succession planning knowhow;
  • Broad and valuable industry relationships, and;
  • Ownership perspectives.

Our candidates look forward to working with the incumbent directors, including new appointees Steven Brill and Darrell Thomas, to implement a viable long-term strategy that prioritizes core, cash-generating segments that have margin expansion and growth opportunities.

We have actionable ideas for immediately helping Pitney Bowes accelerate profitability in Global Ecommerce and make targeted investments in SendTech and Presort to restore financial strength ahead of significant upcoming debt maturities. We believe any objective review of Pitney Bowes’ financial position, strategy, failed execution and overall trajectory should reveal there is still a need for urgent and meaningful change beyond just the appointment of Hestia nominee Katie May.

With all of this said, we remain willing to compromise with the Board if Mr. Lautenbach departs as part of a well-run succession process and there is a commitment to finally adjust the corporate strategy.

Hestia Capital continues to throw its significant stake in Pitney Bowes around after announcing their intentions to attempt to take over the board and push for a review of the company's capital allocation and e-commerce strategy, including possibly selling off less profitable global ecommerce segments of the business.

Hestia Pushes Pitney Bowes To Sell Global Ecommerce Business
Hestia Capital, which has a 6.9% stake in Pitney Bowes, wants to sell off ecommerce segment of the business.

Hestia put forward seven nominations to the board earlier today:

Hestia Capital Management, LLC, which is the third largest stockholder of Pitney Bowes, Inc. (PBI) and has a beneficial ownership position of approximately 7.2% of the Company's outstanding shares, announced Monday that it has nominated seven highly qualified and independent candidates for election to the Company's nine-member Board of Directors at the Company's 2023 Annual Meeting of Stockholders.

Hestia has nominated seven candidates in order to enable two incumbents to continue to serve for continuity purposes. The Hestia slate includes Milena Alberti-Perez, Todd Everett, Carl Grassi, Katie May, Ken McBride, Lance Rosenzweig and Kurt Wolf.

Hestia said it has purposefully recruited a well-rounded slate of director candidates that possesses capital allocation acumen, corporate governance expertise, relevant sector backgrounds, operating and transaction experience and ownership perspectives - all of which are needed at Pitney Bowes.

Pitney Bowes responded later in the day, confirming they are interested in considering well-qualified candidates and had offered to appoint two candidates proposed by Hestia to the Board in December, but Hestia was unwilling to reach a reasonable compromise.

Pitney Bowes had tough words for Hestia, saying their public announcements show they are more interested in fighting than in engaging in constructive conversations to benefit all shareholders.

Pitney Bowes Comments on Hestia Actions
Pitney Bowes (NYSE:PBI, the “Company” or “Pitney Bowes”), a global shipping and mailing company that provides technology, logistics, and financial ser

Pitney Bowes (NYSE:PBI, the “Company” or “Pitney Bowes”), a global shipping and mailing company that provides technology, logistics, and financial services, today acknowledged receipt of Hestia Capital’s (“Hestia”) notice of nomination of seven director candidates, constituting a majority slate of director candidates, to the Pitney Bowes Board of Directors (the “Board”) in connection with the Company’s upcoming annual meeting of shareholders.

Consistent with its fiduciary duty to shareholders and the Company’s governing documents, the Board will review any properly noticed nominations in due course. Shareholders are not required to take any action at this time.

The Board and management team have engaged in an open and good faith dialogue with Hestia over many months. Contrary to Hestia’s assertion, Pitney Bowes is always interested in considering well-qualified candidates to join the Board. Moreover, the Board offered to appoint two candidates proposed by Hestia to the Board in December.

However, Hestia was unwilling to reach a reasonable compromise. Instead, both their current and prior public announcements demonstrate that they are more interested in fighting than in engaging in constructive conversations to benefit all shareholders, not just themselves.

Furthermore, throughout discussions with Hestia, they demonstrated a fundamental misunderstanding of the Company and have failed to articulate a strategy that would justify ceding control of the Company to them.

Pitney Bowes will continue to seek the right path forward that is in the best interests of all shareholders, including potential additions of well qualified candidates to the Board of Directors. The Company will not let Hestia’s unwillingness to seek common ground stand in the way.

Pitney Bowes also pushed back on Hestia's suggestion to explore a sale of the Global Ecommerce segment of the business, saying while growth had not progressed as quickly as they had hoped, they have seen significant improvements and believe that segment will see future success.

The Board and management team remain focused on delivering sustainable future value for all stakeholders and executing the strategy of the Company. As CEO over the past decade, Mr. Lautenbach has overseen and directed fundamental transformation of the business, taking decisive actions to create long-term value for shareholders, and laid the foundation for sustainable, profitable growth.

These actions are expected to drive revenue and EBIT growth over the next several years and the Company has seen investments in SendTech and Presort lead to stabilization and indeed potential for growth. Although results in Global Ecommerce have not progressed at the pace hoped for, over the last year the Company has seen significant improvements in run rate volumes, service levels, and cost, all of which bode well for future success.

The Board and the Company have consistently looked for opportunities to unlock shareholder value. This includes proactively looking for opportunities and reacting to inbound inquiries alongside financial and legal counsel. The sale of Borderfree in 2022 demonstrates the foresight and willingness of the Company’s leadership team to be flexible and open to new ideas and opportunities regarding how best to monetize the business.

Pitney Bowes has a strong, engaged, and diverse Board, with a balanced mix of experience, skills, and leadership expertise to enhance value for shareholders. The Board is made up of nine directors, eight of whom are independent, and has seen significant refreshment over the past several years, with five longer tenured directors stepping down and adding three new directors since 2018.

Throughout this process, shareholder value creation remains the top priority for the Company and Board, and the Company will continue to keep shareholders updated as appropriate.

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Liz Morton is a seasoned ecommerce pro with 17 years of online marketplace sales experience, providing commentary, analysis & news about eBay, Etsy, Amazon, Shopify & more at Value Added Resource!

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