Adaptec shareholder garners support of two proxy advisory firms

By Lisa Kerner

Charlotte, N.C., Oct. 22 - RiskMetrics Group/ISS and Proxy Governance, Inc. both recommended that Adaptec, Inc. stockholders vote in support of Steel Partners II, LP's consent solicitation to remove legacy director and chief executive officer S. "Sundi" Sundaresh and legacy director Robert J. Loarie, Steel Partners announced on Thursday.

"In summary, given the history of poor financial and share price performance, coupled with recent questionable governance actions, the dissidents have made a valid case for greater management and board oversight," a RiskMetrics report said, according to a Steel Partners news release.

Steel Partners said Proxy Governance wrote in its report: "The proponents have demonstrated a compelling case that the legacy directors on the board are unwilling or unable to hold management accountable for its failure to increase shareholder value."

An independent financial adviser hired by Adaptec's board earlier in the year recommended the company consider selling its current operating business, intellectual property and real estate. The adviser, according to Steel Partners, also suggested Adaptec then consider redeploying the capital to maximize the value of its net operating loss carry forwards.

Steel Partners said it is concerned that Adaptec's legacy directors will not follow the financial adviser's recommendations.

"We find it hard to believe the lame-duck legacy directors continue to breach their fiduciary duties to Adaptec shareholders, and ignore the recommendations of the company's own independent financial adviser and engage in other questionable governance actions," Steel Partners' Warren Lichtenstein said in the release.

In a statement on Thursday, Douglas E. Van Houweling, chairman of Adaptec's governance and nominating committee, said Adaptec is "puzzled at recommendations that stockholders consent to proposals that would give a hedge fund, Steel Partners II LP, highly disproportionate control of the Adaptec board."

Glass Lewis weighs in

Adaptec cited a report by Glass, Lewis & Co. that said the hedge fund has "[no] substantive plan for improvement other than a sale of the company's operating business."

Glass Lewis recommended that stockholders reject all of the proposals solicited by Steel Partners, according to the Adaptec statement.

As previously reported, Glass Lewis recommended that shareholders elect all seven of the company's nominees to the Adaptec board at the annual meeting on Nov. 10.

Adaptec is a Milpitas, Calif., data storage company.

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