Red Mountain Capital Sends Letter To iRobot $IRBT
In the letter, Red Mountain describes, among other things, the constructive dialogue between iRobot’s and Red Mountain’s respective advisors, and Red Mountain’s willingness to work toward a mutually agreeable settlement that would be in the best interests of iRobot and all shareholders and would avoid an unnecessary election contest at the Company’s upcoming annual meeting.
Red Mountain explained that, at the Board’s request, Red Mountain outlined a framework for a potential settlement, which included, among other things, the immediate appointment of Messrs. Mesdag and Peiros to the Board (each of whom Red Mountain would otherwise expect to nominate for election to the Board at the Company’s upcoming annual meeting), the increase in the size of the Board from eight to nine directors and the formation of a Capital Allocation Committee. Red Mountain expressed its disappointment that it has yet to receive a counterproposal from the Company and encouraged iRobot to enter into a settlement agreement that Red Mountain strongly believes would strengthen the Board and help solidify the Company as a market leader in the home robotics industry.
In addition, Red Mountain reiterated its belief that the Company’s underperformance is primarily attributable to its continuing commitment to its unprofitable Defense and Security and Remote Presence businesses, and its capital allocation decisions with respect to research and development expenditures and cash accumulation. Red Mountain stated that, while it understands that the Board broadly agrees with Red Mountain’s value enhancement plan (as detailed in Red Mountain’s December 1, 2015 letter) and has taken some steps to implement it, the addition of Messrs. Mesdag and Peiros is necessary to ensure that the Company will generate acceptable returns on the capital it invests over time by focusing its resources on its Home Robots business and securing its leading position in the highly competitive home robotics industry. Red Mountain stated that it does not believe that marginally beneficial, one-time actions are the answer to the Company’s sustained underperformance. Red Mountain concluded by expressing hope that iRobot will enter into serious settlement discussions regarding the addition of Red Mountain’s proposed representatives to the Board.