SAN FRANCISCO--()--Voce Capital Management LLC (“Voce”), which led the successful campaign to defeat the poison pill at the annual meeting of Obagi Medical Products, Inc. (“Obagi”) (Nasdaq:OMPI) earlier this year, today updates its fellow shareholders on events at the company since the June 6 meeting.
“The company’s lack of competence to pursue such a strategy is evident in its addiction to high-priced external consultants for every phase of the project and in the constantly shifting explanations for how it will operate”
Obagi’s stock price currently trades significantly below its level following the shareholder vote and prior to the company’s second quarter earnings call.
J. Daniel Plants, Voce’s Managing Partner, stated that “in my address at the shareholder meeting, I admonished the Board to heed the strong message sent by shareholders. While we have stood down since then, we cannot remain silent any longer in the face of the Obagi Board’s continued destructive stewardship of this company.”
The Board’s first action after losing the poison pill vote was to award itself a substantial raise. It has continued to direct payments to affiliates of a private company controlled and run by the Obagi CEO. Despite Voce’s requests for Board reform, none of the existing directors have been removed, and the company has refused to make its one new director (appointed without a shareholder vote) available to meet with Voce.
Voce further notes that Obagi has announced its intention to spend more than $11 million of shareholder capital in 2012 in pursuit of its ‘direct-to-consumer’ internet scheme. “The company’s lack of competence to pursue such a strategy is evident in its addiction to high-priced external consultants for every phase of the project and in the constantly shifting explanations for how it will operate,” said Mr. Plants.
Mr. Plants went on: “As a long-term shareholder of Obagi, we are concerned about the potential deterioration of the Obagi franchise under the current Board’s watch. We no longer trust that a review of strategic alternatives by this Board can be conducted fairly or credibly, given its continued entrenchment.”
Mr. Plants concluded: “We remind the Obagi Board that all of its actions are being scrutinized by the company’s shareholders, and that their decisions will ultimately be measured against their fiduciary duties. We specifically caution the Board not to pursue a ‘scorched earth’ policy by attempting an acquisition or a balance sheet restructuring intended to repel potential suitors. In the meantime we continue to review every available option to maximize – and protect – value for all Obagi shareholders.”
About Voce Capital Management
Voce Capital Management LLC is an employee-owned investment manager and the adviser to Voce Catalyst Partners LP, a private investment partnership.