Two shareholders in CDI Corp. (NYSE: CDI) called on the engineering and IT staffing provider to evaluate strategic alternatives, including a possible sale, and announced they intend to nominate independent directors for election at CDI’s 2017 annual meeting of shareholders.
Bradley Radoff and Joshua Schechter on Wednesday issued an open letter to CDI Board Chairman Walter Garrison stating that combined, they are the beneficial owners of approximately 7.8% of the outstanding shares of CDI and its largest unaffiliated shareholder group.
The letter cited, “disappointing operating performance, poor corporate governance and significant share price underperformance.” It referred to CDI’s long-term share price performance as “abysmal” and said CDI’s “woeful share price performance is particularly striking,” with CDI’s shares trading below its price in 1995 while two of the company’s peers, Jacobs Engineering and Robert Half, are up over tenfold during the same timeframe.
“CDI’s failure to create value for its shareholders can be directly related to a montage of poor corporate governance, conflicts of interest and excessive compensation at the board level,” the investors wrote.
CDI’s revenue fell 10.0% year over year in the third quarter to $220 million.
“We strongly believe the best course of action is for the board to immediately engage a financial advisor to explore strategic alternatives including a sale or a merger to the highest bidder,” the investors wrote. “Since our initial Schedule 13D filing, we have been contacted by multiple parties that have attempted to engage CDI in potential acquisition discussions. We are confident that there is significant value that can be realized through a sale of CDI which would exceed any purported risk adjusted standalone plan, especially a plan that relies on the same board whose long-term performance has been a disaster for shareholders.”
As part of a strategic alternatives review, the shareholders also demanded the board suspend its search for a permanent CEO. In September, President and CEO Scott Freidheim resigned from the Philadelphia-based firm; CFO Michael Castleman was promoted to president and interim CEO.
