(Reuters) - Activist investor Marcato Capital Management on Tuesday warned Deckers Outdoor Corp (DECK.N) that it seeks to shake up management and the board by replacing all directors unless the footwear maker sells itself at an attractive price.
In a letter to the board, the San Francisco-based hedge fund said Deckers management has long ignored shareholders’ suggestions to improve performance and is worried that Deckers’ current review to sell itself may not result in the best deal for shareholders.
Marcato owns nearly 6 percent of Deckers, the maker of UGG boots and apparel, and is its fifth largest investor.
“We will be prepared to seek significant board change at the company’s next annual meeting by nominating a slate of director candidates to replace the entire board,” Marcato’s portfolio manager, Mick McGuire, wrote.
Deckers said in April that it was exploring a sale as part of a review of strategic options.. On Tuesday, the company said in a statement: “As always, our board of directors will continue to take actions that are in the best interests of the company and all stockholders.”
McGuire, fresh from winning board seats and ousting the long-serving chief executive officer at Buffalo Wild Wings Inc (BWLD.O) this month, laid out management’s missteps and underscored the unhappiness of other large investors.
A least six shareholders have urged the company to sell itself but their suggestions have been “consistently ignored,” McGuire said, adding that there has been a “total collapse in shareholders’ confidence in the company’s board of directors and management team.”
Although Deckers has engaged an investment bank to explore a sale, the process has been too secretive for Marcato. The fund manager also criticized the company’s board, citing its lack of any big investors, lack of expertise in mergers and acquisitions and lack of “meaningful stockholder representation.”
While the company has promised to cut $100 million in costs, McGuire said the savings should be at least twice that and said Marcato lacks confidence that current management and the board can get the job done.
Investment management firm Red Mountain Capital Partners LLC in March pushed Deckers for a sale, saying its stock had underperformed due to management’s “consistently poor capital allocation decisions.”
Deckers’ shares, which have climbed 22 percent this year, closed up 1.17 percent at $67.72 on Tuesday.
Marcato’s main fund has returned 8 percent through the middle of June while its Encore International fund is up 18.3 percent.
Reporting by Sruthi Ramakrishnan in Bengaluru and Svea Herbst-Bayliss in Boston; Editing by Leslie Adler and Bill Trott