Wattles Seeks Ouster Of Circuit City’s Board
by Alan Wolf -- TWICE, 2/29/2008
Las Vegas — Dissident investor and Ultimate Electronics owner Mark Wattles wants to unseat all 12 of Circuit City’s sitting directors and replace them with the five board candidates he nominated earlier this week.
The proposal was submitted to Circuit City via letter, along with a second proposal to repeal any bylaw amendments or new bylaws that Circuit’s board may adopt without first seeking shareholder approval.
The proposals and nominees will be considered at Circuit City’s annual shareholder meeting on June 24.
In a statement, Circuit City said its board will “review carefully the shareholder’s proposals and the qualifications of the nominees in accordance with its fiduciary duties, mindful that the proposal would give the shareholder absolute control of the entire board, which would be disproportionate to its relative ownership of the company’s shares. The members of Circuit City’s board are experienced, committed to increasing shareholder value, and vital to the successful implementation of the company’s turnaround plan.”
Wattles, who controls 11 million shares, or 6.5 percent, of Circuit City’s common stock through his investment firm, Wattles Capital Management, said he also seeks to improve shareholder returns, albeit by replacing the company’s senior management team.
He notified the company of his intentions in a pair of proxy statements filed with the Securities and Exchange Commission earlier this week. The filings included a Feb. 26 New York Times article in which Wattles took Circuit’s management to task for the company’s mounting losses and a 76 percent decline in the value of its shares last year.
“The current CEO has been president or CEO for three years now,” he told a Times reporter in reference to chairman Phil Schoonover. “The solution is not in changing real estate; the solution is changing the way they operate in existing real estate.”
Wattles said he has no interest in running Circuit City or merging it with Ultimate Electronics, and that he made the board nominations after senior executives rebuffed his requests for a meeting.
The slate includes:
· Anthony Bergamo, who served on the boards of Lone Star Steakhouse & Saloon, the restaurant chain, and the Milstein Hotel Group, a hotel operator;
· Alexander Bond, managing director of Wattles Capital Management and former finance senior VP of Hollywood Entertainment, the video rental chain founded by Wattles;
· Don Kornstein, a financial consultant who served as interim chairman of Bally Total Fitness;
· James Marcum, former chief financial officer of Hollywood Entertainment; and
· Elliott Wahle, a former Toys “R” Us executive who currently heads a private investment firm and a furniture-import business in Canada.
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And how do you know how Ultimate is doing? It's not a public company so most people DON'T know. And when you say they're now profitable, keep in mind they went into bankruptcy and cut half their stores under looser lease cancellation restrictions. Logic says they closed the lousy half. If they kept the best half of their stores, they better be a lot more than just profitable or he did nothing there. I'd like to see the numbers there over the past year or so. Decline in TV prices has to be pretty damaging to them. I do agree their customer service is top notch.
Rudy G - 2008-3-3 20:42:00 EST -
Whether Wattles makes a difference with CC is open to question. Perhaps a new board and upper management the company will be able to reinvent itself. But what's more likely is that after the stockholder meeting, Schoonover will be out, the company will replace all of its top execs (who will get the retention packages since they vest immediately upon a change in control), and become another Ultimate Electronics clone. Not that that's a bad thing, just that getting the share price back to where it was when Schoonover took over will take a lot of pruning. Shrinking the chain by closing marginal stores in weak markets will bring the biggest return to investors. Don't be surprised if CC is half its current size by FYE 2009
Bill Penn - 2008-3-3 10:58:00 EST -
What happened to Crazy Eddies? Wattles understand the business. His board selections will put the right people in executive management at Circuit City. If you look at a Circuit City store today they look like CompUSA. No help no product and uncaring employees. Go into an Ultimate electronics, you have well trained and motivated team members. Ultimate Electronics acts like the underdog they are and Circuit City acts like they are a dominate player in the electronics business. Which they are not. Wattles will give Circuit a breath of fresh air and a realism to tackle the issues that are relevant in todays competitive retail electronics industry. Would you rather put your money on a guy that has taken 3 years and now needs another to turn the company around or on Wattles who turned around Ultimate? My money is on Wattles.
tobin james - 2008-29-2 13:55:00 EST -
Why do you think those people can't run an electronics chain....hmm, how many do I order of napkins and how many pounds of shrimp and chicken isn't any different than how many cheap dvd players do I order. Customers are still customers, and employees are still employees. Sure there would be a small learning curve, but I wouldn't insult those people since they made it high up in their prosective fields. I really want to know how Ultimate is doing now. Their previous owners seemed to be running their company into the ground just like CC has been doing. Maybe the whole industry needs a personnel turnover.
Mike Mazza - 2008-29-2 13:32:00 EST -
Is Wattles kidding? The background of his proposed Board of Directors is not qualified to a run type of CE retailer. I have been in the industry for over 20 years with the industry leading manuf and I would not give them any chance to succeed
Larry R - 2008-29-2 12:33:00 EST
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