Jana Partners launches proxy fight at Zendesk, nominates four to board

Momentive Global

16/02/2022 15:02

By Svea Herbst-Bayliss
    BOSTON, Feb 16 (Reuters) - Jana Partners has nominated four
directors to the board of Zendesk  ZEN.N , arguing the company
must be rehabilitated after an unpopular attempt to buy
Momentive Global  MNTV.O , parent of web-survey company
SurveyMonkey, according to a letter seen by Reuters.
    Jana Partners launched the proxy contest a week before
Zendesk shareholders are scheduled to vote on the company's
proposed acquisition of Momentive Global on Feb. 25. 
    It also comes only a few days after Zendesk said it had
rebuffed an approximately $17 billion bid from a consortium of
private equity firms looking to acquire the customer service
software company.
    Even with the Momentive deal facing a likely rejection by
shareholders, Jana said in the letter that lasting damage had
been done. 
    "We believe the board must either be replaced with capable
fiduciaries, or reverse course and engage with interested
strategic and financial buyers to sell the company," Jana
Partners Managing Director Barry Rosenstein wrote in the letter
to the board on Wednesday.
    The activist nominated Quincy Allen, Felicia Alvaro and
Jeffrey Fox, executives with expertise in the software and
technology industries, as well as experience in mergers and
acquisitions and finance.
    It also nominated Scott Ostfeld, a partner and a
co-portfolio manager at Jana Partners.
    A Zendesk representative was not immediately available for
comment. 
    The four candidates would run against Zendesk's four
directors who are slated for election this year, including two
of the three Zendesk directors who served on a transaction
committee that spearheaded the Momentive transaction.
    
    PERSISTENT DISCOUNT 
    The company's 10-member board has eight independent
directors but only a portion stand for reelection each year.
    "We believe the board has all but assured that Zendesk will
suffer a persistent discount to its intrinsic value," the letter
said.
    In October, Zendesk agreed to buy Momentive in an all-stock
deal worth roughly $4 billion. Zendesk's stock price fell after
the acquisition announcement and remained more than 20% below
its pre-deal price until Nov. 30, when Jana wrote a letter
publicly opposing the plans and urged the company to abandon the
acquisition.
    Other Zendesk investors, including Janus Henderson,
Neuberger Berman and Florida's pension system Florida State
Board of Administration, also said they would vote against the
acquisition, citing procedural, strategic and financial
concerns. 
    Proxy advisory firms Institutional Shareholder Services and
Glass Lewis last week advised Zendesk investors to vote the deal
down.
    It is unusual for Jana to run a proxy contest as the firm
has spent more than two decades cementing a reputation for
working collaboratively and behind the scenes with target
companies.
    The prospect of a potential proxy fight is already
resonating with some investors. 
    A portfolio manager at a prominent mutual fund company, who
is not authorized to speak about the matter publicly, has told
Reuters he would support replacing board members and would also
like to see management replaced.     

 (Reporting by Svea Herbst-Bayliss; Additional reporting by
Chibuike Oguh; Editing by David Holmes)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))