InfoUSA responds to Dolphin hedge fund attacks
InfoUSA Inc. has issued a statement rebutting a series of attacks by hedge fund Dolphin Limited Partnership and Don Netter.
Dolphin Limited Partnership and Dolphin Financial Partners, which together own two million shares, or 3.6 percent, of infoUSA, recently sent a letter to all infoUSA shareholders. In the letter, Dolphin calls on all shareholders to vote against the 2007 Omnibus Incentive Plan, withhold votes on all of management's nominees and support the Shareholder Bill of Rights.
"At last year's Annual Meeting, unaffiliated shareholders overwhelmingly rejected the Company's director nominees - including Chairman Vinod Gupta. Over 90 percent of the shareholders other than Mr. Gupta and his affiliates voted with Dolphin and against Mr. Vinod Gupta - a greater than 12:1 margin," the letter reads. "The Board's nominees were elected by a whisker-thin majority, with Mr. Gupta and his affiliates supplying over 92 percent of their own support.
"You would think that Mr. Gupta and the infoUSA Board would take notice of this extraordinary statement of share holder discontent," the letter says. "They have not."
The letter also outlines the following reasons not to support the board. The letter says:
-Last year over 90 percent of unaffiliated shareholders voted against management.
-Last year all three major independent proxy advisory services opposed the company's slate and supported Dolphin.
-InfoUSA's share price is down 12.3 percent year-over-year and has done nothing for 10 years.
-The board has done nothing to eliminate the exclusive exemption for Mr. Gupta from the Company's Stockholder Rights Plan. Both the plan and Mr. Gupta's standstill letter expire on July 21, 2007 - after that Mr. Gupta will be free to continue his creeping takeover of the Company.
-InfoUSA, located in Omaha, Nebraska, continues to spend shareholder funds on an 80-foot yacht for which no evidence of business usage has ever been provided.
-The board has failed to recover from Mr. Gupta and his affiliates' significant shareholder funds spent on personal benefits - use of the yacht, jet planes, home subsidies, luxury cars and use of other now company-owned assets - even after a 2005 report by Vasant Raval, chair of the company's own audit committee, identified charges that "will be borne by the CEO."
However, InfoUSA claims that the past year has been a successful one for the company as it made four acquisitions and grew revenue to $39 million.
The company had an organic growth of 4 percent.
In its statement infoUSA said, "You may have also received a letter from an activist, billion-dollar hedge fund controlled by Dolphin Associates, LLC, and its front man, Don Netter, attacking infoUSA and its Board. These attacks are nothing more than a rehash of the same baseless allegations that were rejected at last year's annual meeting. Obviously, they are no more meritorious today than they were then. And Dolphin apparently knows this - unlike last year, it is not asking you to support a competing slate of directors or any other proposal, making its letter to you nothing more than a mud-slinging device."
InfoUSA says that Mr. Netter's claims to be a long-term investor are far from true since hedge funds make money by capitalizing on short-term swings in share prices that have nothing to do with long-term value.
The company also said that Dolphin had bet that an unannounced transaction would have been completed in hopes of capitalizing on a quick gain. The transaction didn't happen, so Dolphin is trying to make things difficult for the company, infoUSA said. This is what Wall Street people call "greenmail," the company said.
InfoUSA claims that representatives of Mr. Netter's hedge fund have repeatedly contacted infoUSA with a threat that infoUSA either pay them off or the hedge fund would continue this alleged harassment.
At this year's annual meeting, shareholders are being asked to vote for three independent and highly qualified director nominees.
The infoUSA annual meeting of shareholders will take place June 7. T he company said it is pleading for the support of its shareholders regardless of Mr. Netter's claims.