PARIS — Satellite antenna and mobile communications equipment provider EMS Technologies, which for months has been in a battle with a minority shareholder urging that the company be sold, on April 19 agreed to postpone its annual meeting to review acquisition offers.
The decision would appear to be a victory for MMI Investments LLP of New York, a hedge fund that owns 7.8 percent of Atlanta-based EMS’s outstanding stock. MMI has publicly accused EMS’s current executive team of “mismanagement” that has caused EMS shares to lag the broader market in recent years.
The April 19 announcement drove the stock sharply upward. Traded on the Nasdaq exchange, EMS shares rose by 15.7 percent. EMS said its annual shareholder meeting, which had been scheduled for May 12 and had promised to feature a battle between MMI and EMS over seats on the company’s board of directors, is postponed to June 30.
In a statement, the company said it “has received inquiries from potentially interested acquirers” and “will evaluate the existing inquiries and seek proposals from other potentially interested parties.”
EMS Chairman Jack Mowell said the company’s board remains persuaded that “the successful execution of EMS’s strategic plan is creating significant value for our shareholders” and will give a full hearing to those inquiring about a possible purchase of EMS. EMS cautioned that the decision does not mean a sale is imminent or inevitable.
MMI, which purchased its EMS shares in early 2010, had been seeking to oust Mowell and three other directors on EMS’s 10-member board, replacing them with MMI candidates. “We believe mismanagement has been a major contributor to the poor performance” of EMS stock, MMI said in a March 28 letter to EMS shareholders.
EMS management has responded by accusing the hedge fund of “a narrow, uninformed and short-term focus” that would trade the company’s longer-term success for a quick profit.
In its own letter to shareholders, dated April 1, EMS said its stock has outperformed the broader market, including a basket of defense and space companies, since November 2009 and now expects its revenue to grow by 13-17 percent per year, on average, over the next five years, with adjusted gross profit to rise by 15-20 percent annually in the same period.
EMS reported revenue of $355 million in 2010, down slightly from 2009. For 2011, the company is forecasting revenue of between $385 million and $405 million. The company drew attention to the last three months of 2010 as an indication of its current trajectory. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were a record $12.2 million for the fourth quarter. Revenue was $98.1 million, up 15.4 percent over the same period a year earlier. Operating cash flow was a record $17.4 million.
EMS’s current chief executive, Neil Mackay, was appointed to his post in November 2009 and since then has sought to persuade investors that what he calls “the new EMS” is on the road to increased growth and profitability.
MMI countered that EMS’s recent performance neglects the longer-term picture. The stock nose-dived in late 2009 following the company’s loss of a key contract and has badly trailed its competitors’ stock in recent years.
EMS makes satellite antenna and beam-management systems, aeronautical satellite communications gear and personal satellite-tracking hardware. Recent contracts include on-board gear for the Wideband Global Satcom X- and Ka-band satellite system for the U.S. Air Force, for which Boeing is prime contractor; and for the Iridium Next constellation of low-orbiting mobile communications satellites. EMS will provide switches for the 81 Iridium Next satellites under a contract with Iridium Next builder Thales Alenia Space of France.
