The Catalyst Portal offers a look into news developments in the event-driven space through editorial commentary. The newsletter is focused on developing actionable ideas, pointing out overlooked details, identifying trends and speculating on forward-looking developments. SeaWorld CEO Resigns
SeaWorld Entertainment CEO Serge Rivera has
resigned, effective immediately, after only five months in the role. It is the fifth CEO change the board has made since February 2018. The board’s inability to stick with a leader could make it difficult for the theme park operator to attract a top tier replacement.
CFO Marc Swanson has been named interim CEO for the second time. He also was
appointed interim CEO after Gustavo Antorcha resigned in September 2019 until Rivera’s
appointment in November 2019.
Hill Path Capital Partners
owns 34.6% of SeaWorld. Hill Path founder Scott Ross was
appointed chairman of SeaWorld in May 2019 after the activist increased its stake with the purchase of 5.6 million shares. In connection with the investment, SeaWorld agreed to appoint three director designees from Hill Path to the board inclusive of Ross, who had previously been
appointed as a director in 2017.
In addition to worries about too much board oversight and job security, any incoming CEO also faces the daunting challenge of dealing with the impact of Covid-19 on SeaWorld. The company’s stock has fallen 74% over the past two months, and on March 27 SeaWorld
disclosed it had temporarily furloughed more than 90% of its employees indefinitely.
SeaWorld
had $40 million in cash at the end of 2019 and could turn to private equity for any liquidity needs just like Dave & Buster's Entertainment. The restaurant and arcade operator is said to be exploring options with private equity firms for a private investment in public equity (PIPE) transaction,
according to
Reuters. SeaWorld already has connections to private equity. Prior to founding Hill Path in 2014, Ross was a partner at Apollo Global Management. Additionally, SeaWorld was formerly owned by private equity firm Blackstone, which took it public in 2013. Blackstone sold its remaining stake to China’s Zhonghong Zhuoye Group in 2017, which in turn lost its shares to its security agent in 2019 after it
defaulted on a loan.
Commvault Adopts Poison Pill
Commvault has
adopted a shareholder rights plan in a potential reaction to Starboard Value’s recent
purchase of a 9.3% stake in the data management software company.
The one-year plan has a trigger of 10% for active investors (including derivatives) and 20% for passive ones. Commvault said it wants to maintain its focus on the health and safety of its employees as it navigates the impact of the Covid-19 pandemic. It noted its current valuation does “not reflect the company's inherent value or business performance.” Shares of Commvault are down about 13% year-to-date, and it currently trades at just above 2x LTM enterprise value-to-revenue.
Starboard disclosed its position in Commvault on March 30 and was
added to Reorg’s M&A Pre-Deal Watchlist. The activist said it may be interested in discussing “potential business combinations or dispositions” involving the company. While Starboard may seek a sale of the company, it is more likely to seek board representation to affect operational changes as it has done with several past investments. Starboard is perhaps most well known for replacing the entire board of Darden Restaurants in 2014.
The activist could focus on helping the company improve revenue growth and margins. Commvault
reported third-quarter revenue decreased 4% to $176.4 million. Its GAAP operating margin was negative 0.3%, while its non-GAAP EBIT margin was 16.4%. In October 2018, Commvault
announced that it was targeting non-GAAP operating margins of more than 20% in fiscal year 2020 and over 25% in FY21.
This is not the first time Commvault has been targeted by an activist. The company came to an
agreement with Elliott Management in May 2018 which saw Chairman Robert Hammer relinquish his role as CEO and two Elliott designees appointed to the board. In February, Elliott decreased its ownership in Commvault to 5.5% from 8.3%. Its board
appointees, Martha Bejar and Charles Moran, still serve on the board.
Commvault is not the only company to have both activists involved. Starboard recently
launched a proxy contest at e-commerce company eBay, where Elliott has one board representative.
--Justin Zacks