A proxy struggle is beginning at the technology firm Perion Networks Inc. (Nasdaq:PERI: TASE:PERI). After company shares plummeted 66% in 2016, a minority shareholder is trying to alter the appointment method for the board of directors, in order to eventually change the company management. The shareholder is Ronen Shilo, a co-founder of Conduit, which was merged into Perion in 2013, at a $750 million company valuation for Conduit. At present, Perion's overall market cap is only $95 million. As part of the deal, Conduit shareholders gained Perion shares, leading to Shilo controlling 11.6% of Perion's shares.
Perion, managed by CEO Josef Mandelbaum, develops software and provides services aimed at aiding software and application developers with distribution and monetization.
The invitation to the shareholder's meeting Perion published yesterday included two proposals to change the company's articles of association, the first proposed by the company and the second by Shilo. At present, one third of the company directors are elected at the meeting annually for a three-year term.
The company proposes that at each annual meeting, all directors (excluding external directors) will be elected, to serve until the next annual meeting. If a position on the board becomes available, the board will be able to appoint a replacement member by the next meeting. At the same time, at this stage, the term of office of current directors will not be affected.
On the other hand, Shilo proposes to appoint directors on an annual basis; to revoke the demand for a 2/3 shareholder majority required to remove a director from office; and to prevent the board from appointing directors without the assembly's approval.
Shilo writes, "During the past few years, Perion suffered significant losses, reflecting a sharp and ongoing drop in performance, which led, among other things, to a consistent slump in share prices (-96% from the $14.38 record on 13 May 2013 to $1.42 on 2 August 2016)." He says that this deterioration is due to the lack of suitable management and leadership. "Shareholders have asked the board of directors to replace the management several times, specifically CEO Josef Mandelbaum," Shilo adds.
Shilo has told "Globes", "I do not think that Mandelbaum is doing his job well. During this entire period, the only tool in his toolbox has been acquisitions, and when you examine the history, you see that he has depleted the company's funds without generating any growth strategy."
Furthermore, Shilo says that due to the current director appointment mechanism, the board of directors does not reflect the shareholders, and that the next stage - assuming that his proposal is accepted - would be to produce a board that will reflect them (at his stage, he does not propose any specific candidates).
Shilo adds that in informal talks with other Perion shareholders, "Their dissatisfaction with the company and Josef is generally mentioned. I do not think that blaming it all on market conditions is the right answer."
The company did not provide any official response, but its reply to Shilo's claims appears in the invitation to the meeting. Among other things, Perion claims to have presented relatively good business performance compared with the industry's enormous challenges. "The business foundations are definitely better than two and half years ago, despite the lower revenue and shares prices. The revenue is diversified, costs have been significantly decreased, a strong EBITDA and cash flow have been maintained and we have almost $30 million dollar in cash in our balance sheet. Revenue from searches has been stable for five consecutive quarters while competitors have shown a decline," the company writes.
In the past few years, Perion has been undergoing a transition period: in the past, it had dealt mainly with web searches and gained revenue from cooperation with search engine giants Google and Bing, to which Perion had directed its program users. But market changes had led the company to encounter difficulties, and it had decided to focus more on mobile and marketing. In December 2015, it acquired the New York ad company Undertone, in a $180 million deal.
Published by Globes [online], Israel business news - www.globes-online.com - on August 23, 2016
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