Lloyd Miller Takes Emerson Radio To Task
Late filings of reports with the Securities and Exchange Commission. Mr. Miller believes that shareholders continue to be harmed by oversight and disclosure failings at the Company. Emerson’s most recent annual report on Form 10-K was delayed, apparently in connection with a tax settlement with the IRS of more than $3 million. Then, in November 2015, Emerson filed a non-timely Form 10-Q with two adverse disclosures: a net loss of $0.9 million for the quarter and the loss of a key customer, who will discontinue retailing Emerson-branded microwave oven and compact refrigeration products.
No annual meeting of stockholders held in 2015. The annual meeting of stockholders was last held in October 2014, and no annual meeting has been held to date in 2015. Based on disclosure in the most recent Form 10-K/A, shareholder proposals for the next annual meeting may be submitted until a reasonable time before the Company begins to print and mail its next proxy materials. In light of recent business declines and the potential for shareholder proposals, Mr. Miller believes that the Board of Directors should proactively adopt governance reforms and pursue a sale of the Company, as described below.
Continued uncertainties surrounding bankruptcy of controlling shareholder. As described in Emerson’s SEC filings, a controlling block of Emerson’s common stock is held by Grande Holdings Limited (Provisional Liquidators Appointed), the Company’s controlling shareholder, which has been subject to bankruptcy and restructuring proceedings since 2011. In its late-filed Form 10-K, Emerson discloses the risk that “actions taken by the Provisional Liquidators over Grande could affect in an adverse way a number of significant aspects of the Company’s business.”
Controlled company and reduced governance requirements. As disclosed in its late-filed Form 10-K, Emerson is a controlled company as defined in the NYSE MKT Rules. As a result, Emerson is not required to comply with all listing standards and governance requirements that would otherwise apply to a public listed company. Mr. Miller believes that shareholder value is impaired by the ongoing overhang of Grande control.
Related Person relationships with Grande. As a long-term investor, Mr. Miller believes that each member of the Board has a duty to minority public stockholders, including directors who have relationships with Grande Holdings and its Provisional Liquidators. Emerson has a long history of related party transactions and accounting failures, as well as litigation and tax disputes that created risks to shareholder value, many of them related to control by Grande and its affiliates.
Mr. Miller believes that the Board should actively pursue a sale of the Company or business combination. As a matter of urgency, Mr. Miller believes that the Board of Directors of Emerson should actively pursue a sale of the Company or other strategic transaction. The 2015 tax settlement with the IRS can be expected to increase valuation for purposes of a near-term sale of the Company. Mr. Miller believes that the rights of minority stockholders will continue to be compromised by uncertainties over the control block of shares held by Grande.
Review of strategic alternatives. As previously stated, Mr. Miller believes that a sale of the Company would benefit all shareholders, including Grande. Mr. Miller further notes that a sale of the Company would provide significant value, liquidity and other benefits to Grande and its creditors during Grande’s pending restructuring. Mr. Miller notes with approval that Emerson’s CEO indicated in its recent earnings release that the Company is identifying strategic courses of action for consideration. Mr. Miller urges the Board of Directors to be mindful of the rights of minority public stockholders during this strategic review.
Mr. Miller believes that the Board should continue to return value to stockholders through additional cash dividends rather than maintain excessive cash balances, especially while control of the Company is in question. Mr. Miller has urged Emerson to return value to stockholders. Mr. Miller continues to favor additional cash dividends to enhance shareholder value, subject to appropriate tax provisions with respect to the Grande shares.
In view of prior lawsuits against Emerson insiders in
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