News that satellite ground-systems integrator Integral Systems Inc. has hired an investment banking firm to aid in a potential sale of the company has quieted some objections from shareholders who have been advocating the company’s sale for months.
An April 11 filing with the U.S. Securities and Exchange Commission (SEC) signed by Steven Chamberlain, Lanham, Md.-based Integral’s chief executive officer, said the company had engaged BB&T Capital Markets/Windsor Group, a division of Richmond, Va.-based Scott & Stringfellow Inc., “to explore strategic alternatives, including a possible sale of the company, in order to maximize shareholder value.”
Integral spokeswoman Tory Walker did not return calls seeking comment.
“The company’s going to get sold,” said William “Mickey” Harley , chief executive officer of Mellon HBV Alternative Strategies LLC, which owns 12 percent of Integral’s shares, in an interview April 13. “It really has had a very good hold on its niche, and we expect there will be a very aggressive amount of interest.”
But the question up until now has been when the sale will take place.
The news that BB&T has been brought in to facilitate a sale comes at a time when the company has faced a variety of troubles over the past few months. Chamberlain was charged last November with two felony charges of sexual offenses involving a minor. He faces trial July 24 in Howard County, Md. Chamberlain has stated repeatedly that he is innocent of the charges.
Integral board member Bonnie Wachtel informed her fellow board members in a Jan. 9 letter that she would not seek re-election, citing concerns about the company’s leadership and her opinion that the company should be put up for sale. Wachtel resigned from the board April 5 in another letter stating those concerns in more detail, saying among other things that a new chief executive officer is needed, as a result of both the charges against Chamberlain and his financial and governance choices.
“To the best of my knowledge, not a moment has been spent in the board room discussing the effect on the company of this development,” Wachtel said in the April 5 letter of the charges against Chamberlain. “My current concern regarding Mr. Chamberlain, however, is not focused on the criminal charges but on the enigmatic quality of certain of his recent decisions.”
In an April 5 SEC filing, Integral President Thomas Gough said “the company disagrees with Ms. Wachtel’s assessment of these issues.”
Mellon HBV entered the picture in February, when it purchased 12 percent of Integral’s shares, sensing a sale on the horizon, Harley said. Through discussions with the company, Harley said that Integral indicated it would pursue a sale and be open to an independent, shareholder-appointed board of directors.
“We all agreed we were going to move down this path, hand-in-hand, and then they changed the rules of the game,” Harley said.
Integral instead changed its charter and bylaws in March, making it more difficult for shareholders to call special meetings and replace board members.
A March 13 SEC filing outlines changes in the bylaws, which now state that a two-thirds vote is required to remove a director from the board, and that it can only be done “for cause,” which Harley said is legally difficult to prove. The changes outlined in the March filing also require the approval of a a majority of the company’s shareholders to call a special meeting. Harley said the previous rules required the approval of only 10 percent of the company’s shareholders.
Harley is still waiting to see whether Integral will appoint someone to replace Wachtel, a move that he had hoped would happen during an April 12 shareholders meeting. Harley said he believes from what he has learned in recent private conversations that the company will make that move soon. Mellon HBV has advocated for Bill Leimkuhler, a manager with Semaphore Capital Advisors LLC of Stamford, Conn., to get a spot on the board. He said his firm is still evaluating how much time it will give Integral to make such a move before possibly pursuing legal action, which it hopes to avoid.
“If we go through and file a lawsuit, that will be very public and ugly and that doesn’t help anybody,” Harley said.
Harley was encouraged by news of the partnership with BB&T Capital, which did not return calls seeking comment for this article. Harley said he thinks a sale of the company could come within the next 90 days or so.
“I’m going to suspect that this should be pretty straightforward,” Harley said. “There’s very strong guidance and earnings this year, and I think next year could even be tremendously higher than this year. These are investment bankers very well-steeped in this industry, and they’ve already been contracted by a number of interested parties.”
The company’s first-quarter 2006 financial results, announced in a press release Feb. 9, revealed that Integral had brought in a historic high of $29.3 million in revenue, an increase of 33.5 percent from first-quarter 2005.
Chamberlain told The Washington Post April 13 that he planned to retire “soon” from his position, but he would not specify when, and would be succeeded by Peter J. Gaffney, the company’s chief operating officer.