One of the top shareholders at the eDiscovery provider Epiq Systems on Friday said that a proxy fight for control of the board, including litigation, looks imminent.
“We’d like to get our proposed slate [of candidates on the board], but there’ll be some litigation – I’m sure,” George Young, a partner at the investment fund St. Denis J. Villere & Co. told Big Law Business. “It would be a proxy battle.”
Young added, “This is an evolving situation. I would suggest you keep an eye on the news today and Monday.”
Based in Kansas City, Epiq Systems provides managed eDiscovery services, and also works on claims administration for class actions and bankruptcy cases. Through a spokeswoman, Epiq declined to comment.
It marks the latest sign of turmoil at Epiq: In December, Villere & Co, which owns 14.01 percent of the company’s shares, communicated its intent via a 13D filing with the Securities and Exchange Commission to nominate six candidates to the nine-member board of directors.
In the filing, Villere & Co. stated that it believes Epiq is “deeply undervalued” and that management has overlooked “significant” opportunities to create value for the company’s “increasingly dissatisfied shareholders.”
“The Villere Group believes that this chronic underperformance is an unfortunate yet predictable result of the unchanging composition of the Board and management,” the filing states. “Accordingly, the Villere Group has concluded that change is therefore needed on the Board to help ensure that appropriate actions are taken to improve execution, drive better financial performance, hold management accountable and maximize value for all shareholders.”
Villere & Co. had previously written a letter to the board in September 2014, after Epiq rejected a $1.1 billion takeover offer from one of its other largest shareholders, P2 Capital Partners. In its letter, Villere & Co. urged the board to consider a buyout and raised the prospect of nominating a slate of directors to the board at that time.
Ultimately, Epiq and Villere & Co reached a standstill agreement in which the company agreed to undertake a strategic review and to put Kevin L. Robert, the former CEO of Wolters Kluwer Tax & Accounting, on the company’s board. Villere & Co. in exchange agreed not to move forward with the nominations.
Now, Young, the partner at Villere & Co., said that the standstill agreement has expired and that his firm is free to propose a slate of candidates for the board.
The directors proposed by Villere & Co. include Young as well as Gregory H. Browne, Barry D. LeBlanc, Greg Share, Jeffrey Galgano and Richard Blum, although it did not provide any other details on who the individuals are. Overall, if succesful, Villere would have seven out of nine directors on the board.
Young, who said his company has been a shareholder for close to a decade, noted after the buyout offer from P2, in September 2014, the board adopted a “Rights Agreement” that it said would protect against “coercive” or unfair takeover attempts. Young characterized the agreement as a series of “onerous” corporate bylaws that worked to silence shareholders.
The bylaws expired July 7, 2015 and are no longer in effect, according to an Epiq spokeswoman.
Young, however, said Epiq CEO Tom Olofson isn’t interested in listening to his investors.
“You’ve got a lot of yes men that are listening to Tom and Tom doesn’t want to be challenged,” he said.
Asked what opportunities Olofson had overlooked, Young pointed to the rejection of P2’s proposed buyout in late 2014, which offered $20 per share.
“The stock is now languishing at 13, 14 dollars per share,” he said. “At the time, I thought it was worth some more, but I was happy to see [P2] put in a $20 bid.”
Young added that other shareholders have expressed dissatisfaction in the past, and expected they would support his bid to take control of the company. In particular, he said Olofson’s son Chris — former co-Chief Operating Officer — who resigned in December 2014 may support Villere & Co’s bid for control of the board.
“It’s a little dicey,” he said. “Family members don’t always get along. They’ll be more coming on that later.”
Neither Olofson nor his son could be reached for comment.
Epiq’s stock opened on Friday at $13.80, down from its 52-week high of $19.10. In November it declared a 9 cents dividend. That month, it also announced that Noah Ornstein, a Kirkland & Ellis restructuring partner was appointed as a managing director to oversee the expansion of new products.
Villere & Co is represented by counsel, John Anjier of Liskow & Lewis in New Orleans. Epiq had at one point retained Kirkland & Ellis, though recent filings do not make mention of its outside counsel.
(UPDATED: This article was updated to include comment from an Epiq Systems spokeswoman.)