Elliott Management Questions Iron Mountain's (IRM) 'Poison Pill' Move
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Elliott Management Corp. sent the following letter to Iron Mountain's (NYSE: IRM) Board of Directors regarding the recent addition of a "Poison Pill."
Elliott owns about 5% of total Iron Mountain common stock.
From the release:
" April 4, 2011
The Board of DirectorsIron Mountain Incorporated745 Atlantic AvenueBoston, MA 02111
Dear Members of the Board of Directors:
We want to draw your attention to several recent actions which we believe are out of step with Iron Mountain’s past practices and are inconsistent with our shared goal of maximizing shareholder value. As stewards of shareholder interests, we think it is appropriate for the Board to evaluate these actions and consider instructing the company’s management to change course.
On March 23, thirteen days ago, Iron Mountain installed a Shareholder Rights Plan (so-called “Poison Pill”) immediately following public comments by Davis Advisors, IRM’s largest shareholder and one of the world’s most renowned mutual funds, indicating support for Elliott’s recommended Board nominees.* When asked to comment on the Poison Pill by the Financial Times, this same shareholder referred to it as “heinous corporate governance.” We strongly agree.
According to the Financial Times, IRM said the Poison Pill was in response to unusually high option volume – equal to over 10 percent of shares outstanding. Elliott remains incredulous that such a sophisticated group of people would react in such an overly dramatic and shareholder unfriendly fashion to what we understand to have been a common dividend trade by options market makers – IRM stock went ex-dividend on March 23.
Nonetheless, if option volume was truly the justification for IRM's Poison Pill then a new ‘mystery buyer’ would have had to file a Schedule 13D in the requisite 10-day period expiring last Friday, and Davis Advisors’ 13D filings shows it was not the purchaser.
The fact that no such filing has been made strongly suggests the company’s true intent is entrenchment and stifling dissent. Should the company wish to convince its shareholders that this is not the case, the Board can easily retract the Poison Pill. Institutional Shareholder Services (“ISS”) and other leading governance advisory firms have repeatedly expressed their concerns about Poison Pills given the significant risk and long history of managements using them to entrench themselves at the expense of shareholders.
In addition, Elliott remains highly concerned about several of the company’s other recent tactics, which the Board may or may not be aware of. These include:
We hope that you will consider these facts in the Board’s continuing deliberations and we look forward to engaging with the Board in the coming weeks as all shareholders get an opportunity to decide the future of Iron Mountain at the upcoming Annual Meeting.
Sincerely,
Elliott Management"
Elliott owns about 5% of total Iron Mountain common stock.
From the release:
" April 4, 2011
The Board of DirectorsIron Mountain Incorporated745 Atlantic AvenueBoston, MA 02111
Dear Members of the Board of Directors:
We want to draw your attention to several recent actions which we believe are out of step with Iron Mountain’s past practices and are inconsistent with our shared goal of maximizing shareholder value. As stewards of shareholder interests, we think it is appropriate for the Board to evaluate these actions and consider instructing the company’s management to change course.
On March 23, thirteen days ago, Iron Mountain installed a Shareholder Rights Plan (so-called “Poison Pill”) immediately following public comments by Davis Advisors, IRM’s largest shareholder and one of the world’s most renowned mutual funds, indicating support for Elliott’s recommended Board nominees.* When asked to comment on the Poison Pill by the Financial Times, this same shareholder referred to it as “heinous corporate governance.” We strongly agree.
According to the Financial Times, IRM said the Poison Pill was in response to unusually high option volume – equal to over 10 percent of shares outstanding. Elliott remains incredulous that such a sophisticated group of people would react in such an overly dramatic and shareholder unfriendly fashion to what we understand to have been a common dividend trade by options market makers – IRM stock went ex-dividend on March 23.
Nonetheless, if option volume was truly the justification for IRM's Poison Pill then a new ‘mystery buyer’ would have had to file a Schedule 13D in the requisite 10-day period expiring last Friday, and Davis Advisors’ 13D filings shows it was not the purchaser.
The fact that no such filing has been made strongly suggests the company’s true intent is entrenchment and stifling dissent. Should the company wish to convince its shareholders that this is not the case, the Board can easily retract the Poison Pill. Institutional Shareholder Services (“ISS”) and other leading governance advisory firms have repeatedly expressed their concerns about Poison Pills given the significant risk and long history of managements using them to entrench themselves at the expense of shareholders.
In addition, Elliott remains highly concerned about several of the company’s other recent tactics, which the Board may or may not be aware of. These include:
- Failing to publicly announce that the company has told brokers that April 12, 2011 will be the record date, which makes April 7, 2011 the last day to purchase shares with voting rights.
- Implying in a company press release that owning only 35% of its real estate would interfere with the company’s ability to enjoy the tax benefits of REIT status – when it is clear that leaseholds qualify as good REIT assets and all rental income, whether from owned or leased realty, qualifies as good REIT income.
- Removing the 2010 Investor Day audio from the company’s website – the only recorded event where investors could actually hear other investors express their discontent with the company’s Return on Invested Capital and Capital Allocation.
We hope that you will consider these facts in the Board’s continuing deliberations and we look forward to engaging with the Board in the coming weeks as all shareholders get an opportunity to decide the future of Iron Mountain at the upcoming Annual Meeting.
Sincerely,
Elliott Management"
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