Genesco Inc., the parent of Journeys and Lids, announced that the company has entered into an agreement with an activist shareholder group that to will result in the company adding two independent board directors.
The agreement was made with Legion Partners Asset Management LLC and 4010 Capital LLC, which beneficially owns approximately 5.3 percent of the company’s outstanding common stock.
Genesco agreed to increase the size of the board by two directors and immediately appoint two new independent directors, Marjorie L. Bowen and Joshua E. Schechter, to the company’s board. The company has also agreed to nominate Bowen and Schechter at the company’s 2018 annual meeting of shareholders and appoint Bowen and Schechter to the board’s strategic alternatives committee. The strategic alternatives committee will undertake an updated review of strategic alternatives.
Genesco said the board has agreed to consider in good faith and with the advice of the company’s financial advisors returning all or a substantial portion of the net proceeds from the sale of Lids Sports Group to shareholders, including through share repurchases and/or a special dividend. The company has also agreed to reduce the size of the board by one director at the 2018 annual meeting of shareholders so that immediately following the 2018 annual meeting of shareholders, the board will be fixed at 11 directors.
In addition, pursuant to the agreement, Legion Partners Asset Management and 4010 Capital has agreed to vote their shares in support of any director nominated and recommended by the board at the company’s 2018 annual meeting of shareholders, in addition to certain customary standstill provisions and other voting agreements. The investment firms have also agreed to certain non-disparagement obligations.
“We are pleased to welcome Marjorie and Josh to the company’s board. We look forward to working together as we advance our goal of enhancing shareholder value,” said Robert J. Dennis, chairman, president and chief executive officer of Genesco Inc.
“We are pleased to have reached this agreement with Genesco,” said Chris Kiper, managing director of Legion Partners Asset Management. “We believe that Marjorie and Josh will work collaboratively with the other directors to reduce the discount that we believe currently exists between the company’s intrinsic value and market price.”
In a regulatory filing that arrived in January, Legion Partners Asset Management and 4010 Capital wrote that the companies believed “the current market price of [Genesco] shares does not reflect the issuer’s intrinsic value. In [Legion Partners’ and 4010 Capital’s] view, one of the key areas that does not appear to be well understood or fully appreciated by the market is the opportunity for [Genesco] to monetize certain segments of its business and return a significant amount of capital to shareholders.”
The investment firms further added that “such transactions have become even more actionable” given the recent changes to federal tax law, which is expected to be a boon to major corporations. (Walmart, Target and others have addressed their initial plans for new tax kickbacks.)
“[We] are highly focused on collaborating with [Genesco’s] management and board of directors to significantly improve returns on invested capital,” the companies said, noting that they may seek to nominate new members for Genesco’s board.
Genesco responded at the time by saying the company had held talks and would continue discussions with Legion Partners to explore ways to increase shareholder value.
On February 13, Genesco announced the company was initiating a formal process to explore the sale of its Lids Sports Group business.
About Marjorie L. Bowen
Bowen is an experienced public company director who possesses significant governance experience as both an advisor and a director. From May 1989 to January 2008, Bowen held positions of increasing responsibility with Houlihan Lokey Howard & Zukin, Inc., an international, advisory-focused investment banking firm. While at Houlihan Lokey, Bowen served as a managing director, where she advised an extensive number of public company boards of directors, providing transactional and financial advisory services in a wide range of corporate matters, including mergers and acquisitions, debt and equity reorganizations and other financial and strategic transactions, governance and shareholder issues and shareholder value maximization.
Bowen was also a member of Houlihan Lokey’s Management Committee for Financial Advisory Services, and headed the firm’s Fairness Opinion Practice. Bowen currently serves on the board of directors and the audit committee of privately-held V Global Holdings, the parent company of Vertellus, a specialty chemical company with operations in the U.S., Europe and Asia.
Since 2008, Bowen has served on a dozen boards of public and private companies. Recently Bowen served on the board of ShoreTel and was a member of its Strategic Alternatives Committee prior to the sale of ShoreTel in the Fall 2017. Bowen also served on the board of privately held SquareTwo Financial prior to its sale in 2017. Prior public company directorships include The Talbots, Inc., Hansen Medical and Texas Industries. She also served as the Special Independent Director for a wholly-owned subsidiary of Dynegy, Inc. Bowen’s private company directorships span numerous industries. With more than 20 years of corporate finance and transactional experience, much of it focused on advising boards of directors across a broad range of industry sectors. Bowen brings considerable strategic planning expertise, financial and strategic transactional experience and broad knowledge on financial and governance matters.
About Joshua E. Schechter
Joshua Schechter has been a director and chairman of the board of Support.com, a provider of cloud-based software and services for technology support, since 2016, as well as a member of its Compensation, Nominating and Governance and Audit Committees. Schechter has served as a director of Viad, Inc., an S&P SmallCap 600 international experiential services company with operations in the United States, Canada, the United Kingdom, continental Europe and the United Arab Emirates. He is a member of the Audit and Nominating and Governance Committees.
From 2008 to 2015, he served as a director of Aderans Co., Ltd. (“Aderans”), a multinational company engaged in hair-related business, and was the Executive Chairman of Aderans America Holdings, Inc., Aderans’ U.S. holding company. From 2001 to 2013, Schechter served as managing director of Steel Partners Ltd., a privately-owned hedge fund sponsor, and from 2008 to 2013, Schechter served as co-president of Steel Partners Japan Asset Management LP, a private company offering investment services. Schechter previously served on the Board of Directors of The Pantry, Inc., a leading, independently-operated convenience store chain in the southeastern United States and one of the largest independently-operated convenience store chains in the country, from 2014 until the completion of the company’s public sale in March 2015.
The complete agreement will be included as an exhibit to a Current Report on Form 8-K filed by the company with the Securities and Exchange Commission.
Bass, Berry & Sims, PLC is serving as legal counsel to Genesco.