Monday, 16 February 2009

Gladstone/Constellation battle rumbles on

Failed bidder Constellation Software Inc continues its battle to win a place on its target, Gladstone’s Board, and after a technical hiccup, has succeeded in getting an EGM to be held on 16 March to vote on its proposal for Constellation’s CEO, Mark Leonard, to be appointed to as a Director of Gladstone.

Gladstone has
two main arguments against this, firstly that Constellation is a competitor (for both its main membership systems and fledgling education products), and secondly that it might enable Constellation to obtain information that would enable it to buy Gladstone “on the cheap”. In both cases, Gladstone argues that having a Constellation representative on the Board would endanger the interests of all other Shareholders.

Constellation has yet to respond to make its case for a Board position, but it will no doubt focus on the existing Board’s failure to exploit its dominant market position more fully, and its relatively poor returns to shareholders.

Unfortunately, I do not see this stalemate resolving itself. From the (very few) discussions I’ve had with Gladstone shareholders, it seems that – as with their failed takeover bid – Constellation will not get the shareholder backing necessary to get a place on the Gladstone Board. Meanwhile, Gladstone’s management will have to expend some considerable time and money in repelling this request, an unwanted diversion from running the main business......

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