Pitney Bowes dismisses Hestia proxy battle, citing erratic behavior by the activist firm

Efforts to oust CEO, non-executive chairman called ‘unnecessary’

Pitney Bowes hits back at Hestia proxy fight by saying the company doesn’t understand Pitney’s business (Photo: Shutterstock)

Pitney Bowes Inc. has defended CEO Marc Lautenbach and the company's improvements over the past decade in response to an investment firm's attempt to remove him. In a letter to shareholders, the company criticized Hestia Capital Partners, an 8.4% shareholder, for wanting to replace five of the nine board members. Pitney Bowes asserts that the new board lacks the necessary business experience to fully comprehend the company's operations.

A Board with an average of 0.9 years of Director Experience?

Should Hestia Capital Partners' efforts be successful, the average tenure of each board member would be just 0.9 years. In contrast, a board selected by Pitney Bowes would have an average tenure of 5,3 years. Hestia's attempt to remove Marc Lautenbach and Robert Dutkowsky, the non-executive chairman, according to Pitney Bowes, is unnecessary and would jeopardize the company's strategic progress since Lautenbach's appointment in 2012.

Transformation Currently Underway

Pitney Bowes has undergone a substantial transformation, which the company acknowledges has taken longer than anticipated. The Stamford, Connecticut-based company now has a robust portfolio designed to support mailing and shipping activities. During his tenure, Lautenbach stabilized the core mail business and established a growing shipping business, reducing debt by $1.7 billion, cutting expenses by several hundred million dollars, and investing $2.8 billion in the company. Pitney Bowes data indicates that compound revenue growth was 4.9% between 2017 and 2022, compared to an annual revenue loss of -8.6% from 2007 to 2012.

The expansion of the global e-commerce market

Hestia's attacks on the company's global e-commerce (GEC) business were also criticized by Pitney Bowes. In a misguided effort to compete with FedEx Corp. and UPS Inc., the company asserted that Hestia should focus on "niche" rather than "scale." Pitney Bowes stated that the 2017 acquisition of Newgistics Inc. was intended to build a U.S. middle-market retail shipping business, not a comprehensive logistics operation to compete with these behemoths.

According to Pitney Bowes, the GEC business is now positioned to achieve profitable revenue growth through attainable volume increases. It also stated that Hestia's "constantly shifting views" on what to do with GEC demonstrate its lack of business acumen. Pitney Bowes asserts that it is "not trying to become a UPS or FedEx" because its targeted strategy has enabled it to create a competitive product and achieve scale in the middle market retail segment.

Competing with the Major Players

According to Pitney, Hestia is unaware that Pitney Bowes is not alone in competing with the major players. Its partnership with the U.S. Postal Service for last-mile delivery gives it the resources to "compete effectively with larger businesses in our targeted market."

Meeting Hestia's Demands

Pitney Bowes responded to Hestia's claim that it had not been responsive to the company's demands since the beginning of the process. Pitney has reportedly met with Hestia over twenty times and interviewed four director candidates. Pitney has extended offers to three new directors, including Steve Brill, a former senior executive at UPS. In addition, three members, including chairman Michael Roth, announced their retirement.

Pitney Bowes' Downfall

Along with a secular decline in mail volumes, Pitney Bowes's fortunes have declined over the past three decades. In recent years, the company's value proposition has shifted towards electronic parcel processing. However, this has not been sufficient to reverse the approximately 25-year decline in shareholder value. Monday morning, shares of the company changed hands for approximately $6.40 per share. In 1998, they traded in the low-$70 range.

Longstanding experience in the mailing industry gives the company a distinct advantage in the market for electronic parcel processing. Pitney Bowes has made strategic acquisitions in recent years to expand its e-commerce logistics offerings. Focusing on the middle market retail segment has allowed the company to build a competitive product and expand in the market.

The ongoing proxy battle with Hestia Capital Partners will likely have a substantial impact on the company's future direction. Pitney Bowes is confident in its CEO and the company's ability to continue its growth trajectory under his direction. With a focused strategy and a concentration on the middle market retail segment, the company is optimistic about its prospects in the rapidly evolving e-commerce logistics industry.

MintN