Engaged Capital, LLC (“Engaged Capital”), an investment firm
specializing in small and mid-cap North American equities and beneficial
owner of approximately 5.1 percent of the common stock of AeroVironment,
Inc. (“AeroVironment” or the “Company”) (NASDAQ:AVAV), today sent a
letter to the Company’s Board of Directors (the “Board”), included below
and also filed today with an amendment to its Schedule 13-D.
In its letter, Engaged Capital notes the Board’s behavior since
receiving its director nomination notice in June reflects a disregard
for independent shareholders and obliviousness to the responsibilities
of public company directors. The Board’s self-serving actions have led
Engaged Capital to conclude that a single Board seat is not adequate to
address the concerns of AVAV’s independent shareholders.
Rather than obtaining only one Board seat, Engaged Capital believes it
can be more effective holding the Board accountable over the next twelve
months by freely communicating with shareholders, analysts, and
financial advisors. Accordingly, Engaged Capital has decided to withdraw
its nomination of a single candidate for election at this year’s annual
meeting. In its letter, Engaged Capital noted its decision to withhold
votes for all three director nominees at the Company’s upcoming annual
meeting as Engaged Capital does not consider these candidates to be
independent.
Glenn Welling, Principal and Chief Investment Officer of Engaged
Capital, commented, “We are disappointed AeroVironment’s Board has
chosen to continually thwart our efforts to work constructively to
correct the Company’s valuation discount. Boards should work
collaboratively with their largest shareholders and we have attempted,
repeatedly, to convince this Board of the same. However, this Board’s
indifference for independent shareholders demonstrates exactly why
change is necessary to prevent further leakage of value. We are
committed to exercising all of our rights on behalf of shareholders to
challenge the status quo and eliminate the impediments that have
deprived AVAV shareholders of the full value of this great company.”
Engaged Capital’s Schedule 13-D filing can be found in its entirety here:
http://www.sec.gov/Archives/edgar/data/1559771/000092189513001884/0000921895-13-001884-index.htm
Full letter text:
September 11, 2013
Members of the Board of Directors
AeroVironment, Inc.
181 W.
Huntington Drive, Suite 202
Monrovia, CA 91016
Dear Members of the Board,
We are extremely disappointed with the way our interactions have
progressed over the past several months. Since receiving our nomination
notice in June, the decisions of the board of directors (the “Board”) of
AeroVironment, Inc. (“AVAV” or the “Company”) have visibly reaffirmed
the Board’s disregard for independent shareholders and obliviousness to
the responsibilities of public company directors. As one of AVAV’s
largest shareholders, it is frustrating to witness the Board’s lack of
interest in challenging the status quo or desire to explore new
strategies. The Board’s “circle the wagons” response to our involvement
is particularly troubling given the fact that AVAV has created no
shareholder value since the Company’s IPO over six years ago.
As with all of our investments, our intent since first taking a position
in AVAV almost a year ago has been to work constructively with the Board
and management to maximize shareholder value. However, our recent
experience with the incumbent Board has led us to doubt that this is a
possibility. Barring a change in the Board’s position, we believe more
than one Board seat will be needed to adequately address the concerns of
AVAV’s independent shareholders. Accordingly, we are withdrawing our
nomination for the election of a single candidate at this year’s annual
meeting. We have concluded that, rather than having one Board seat, we
can be more effective in holding this Board accountable over the next
twelve months by freely communicating with shareholders, analysts,
advisors, and the financial community at large.
We remain committed to improving the corporate governance profile of the
Company for the benefit of all shareholders. The recent nominations of
Messrs. Burbage and Muller to the Board are a step in the wrong
direction. Given the close ties we believe they have to existing
directors, combined with the candidacy of Mr. Holland, an acknowledged
insider due to the consulting fees he earns from the Company, Engaged
Capital intends to withhold its votes with respect to the election of
all three of this year’s nominees. Further, we reiterate our call for
the Board to proactively begin the declassification process, rather than
wait for a shareholder proposal, which is inevitable.
This process has been needlessly difficult for both parties given that
our interests should be aligned. We urge the Board and management to
broaden their perspective and implement our suggestions for shareholder
value creation in order to avoid a contested situation next year. We are
resolute in our determination to ensure this Board acts in the best
interest of shareholders such that the Company’s equity valuation
finally reflects the great business that we collectively own. We look
forward to working constructively with you towards that end over the
next twelve months.
Sincerely,
Glenn W. Welling
About Engaged Capital:
Engaged Capital, LLC, (“Engaged Capital”) was established in 2012 by a
group of professionals with significant experience in activist investing
in North America and was seeded by Grosvenor Capital Management, L.P.,
one of the oldest and largest global alternative investment managers.
Engaged Capital is a limited liability company owned by its principals
and formed to create long-term shareholder value by bringing an owner’s
perspective to the managements and boards of under-valued public
companies. Engaged Capital manages both a long-only and long/short North
American equity fund. Engaged Capital’s efforts and resources are
dedicated to a single investment style, “Constructive Activism” with a
focus on delivering superior, long-term, risk-adjusted returns for
investors. Engaged Capital is based in Newport Beach, California.
Copyright Business Wire 2013