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Commvault Installs Starboard-Backed Directors

By Ronald Orol

Commvault Systems Inc. (CVLT) on Monday, June 8, announced it had settled a proxy fight with Jeff Smith’s Starboard Value LP in a deal that will install three new directors — including at least two with connections to activists — on the data management, cloud and information protection company’s 11-person board.

The settlement concludes a public battle for board seats that launched in April and was scheduled to go to a shareholder vote this summer.

As part of the settlement, Commvault agreed to remove three incumbent directors and add Todd Bradley, Allison Pickens and Arlen Shenkman to its board. In addition, the company set up a new operating committee overseen by Shenkman to oversee its budget process and to establish and release margin targets by the time the company releases its fiscal third quarter earnings in January or February 2021.

Bradley, a previous CEO of cloud-based mobile payment provider Mozido, was on Starboard’s dissident director slate. Bradley also previously served as a director at Eastman Kodak Co. (KODK) and Mattel Inc. (MAT). The other two, Pickens and Shenkman, were not on Starboard’s slate.

Shenkman is executive vice president and CFO of Citrix Systems Inc. (CTXS) while Pickens has had prior private equity and venture capital experience working previously at Bain Capital Private Equity and Bessemer Venture Partners.

Shenkman’s role at Citrix – he was installed as CFO in September — is notable, in part, because another activist, Elliott Management’s head of U.S. activism, Jesse Cohn, holds a seat on the board there. Elliott, in 2018, reached a settlement with Commvault that added two directors to its board, both of which still hold their seats.

Pickens has 24 second-degree connections with Elliott’s Cohn and 12 second-degree connections Starboard’s Smith, according to relationship mapping service BoardEx, a sister company of The Deal.

Also as part of the agreement, three incumbent directors, Alan Bunte, Frank Fanzilli and Daniel Pulver, will step down.

Starboard, which has a 9.3% stake, announced in April that it was seeking to install four of six dissident director candidates it had up for election to Commvault’s board.

The activist fund never explained what it was seeking to accomplish at Commvault. However, The Deal reported April 2, that the activist fund had privately agitated amid investor concerns about the company’s acquisition of Hedvig Inc. for $225 million in 2019. Commvault installed a poison pill on April 6.

Starboard typically launches more director fights annually than any other activist.

The numbers ring true in 2020 amid the coronavirus, as a number of other activists have retreated in the shadows.

Commvault is represented the fifth proxy fight for Starboard in 2020 at companies with a market cap above $1 billion. On Friday, Mednax Inc. (MD), also a Starboard target, announced it planned to sell its radiology solutions unit. Smith’s fund had been seeking a sale of all or part of the healthcare services company.

Late last month, Starboard took control of the board of GCP Applied Technologies Inc. (GCP) in its first control contest to go the distance since its 2014 battle at Darden Restaurants Inc. (DRI).

One analyst following the company said he believes Starboard is likely to be pleased with Shenkman’s addition to the board and chair of the operations subcommittee. “[Shenkman] is an operations-focused CFO,” the analyst said. “I think Starboard is happy with [Shenkman] being part of this. He has experience with term subscription transitions and SaaS transitions.”

Commvault delayed their earnings amidst the Covid-19 pandemic, and in May reported quarterly earnings that missed already lowered expectations.

“What is going to be interesting is see how they handle competitive pressure alongside the macro pressures,” the analyst said. “They will look to get efficiency in line and make changes on the sales compensation side.”

It was unlikely that any of the large U.S. primary storage vendors would seek to buy Commvault before they consider acquisitions of “new up-and-comer” rivals of Commvault, including Cohesity Inc. and Rubrik Inc., which Commvault is suing over patent infringement.

Private equity may be a better fit for Commvault and Pickens background at Bain, Boston Consulting Group and Bessemer will help in that area, the analyst noted.

“A sale of the company to a private sponsor could be the longer-term play,” the analyst noted.

Commvault looked to Centerview Partners LLC’s David Handler and Tyler Brooke for financial advice and Paul, Weiss, Rifkind, Wharton & Garrison LLP’s Scott Barshay and Steven Williams for legal counsel.

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