Shipping, mailing and e-commerce firm Pitney Bowes Inc. on Monday hit back at an investment firm’s efforts to oust its CEO and launch a proxy fight, contending Hestia Capital Partners knows little about Pitney Bowes’ business and its improvement over the past decade.
In a nine-page shareholder letter, Pitney Bowes (NYSE: PBI) said Hestia wants to install five members to a nine-member board. Should that happen, it would leave the reconstituted board with an average 0.9 years of experience per director. The new board would lack the seasoning needed to fully understand the company’s business operation, Pitney Bowes said.
By contrast, a Pitney Bowes-favored board would have an average tenure of 5.3 years, according to the firm.
Moon, Pennsylvania-based Hestia’s effort to remove Marc Lautenbach, Pitney Bowes’ CEO since 2012, and Robert Dutkowsky, its non-executive chairman, are “unnecessary” and would jeopardize the company’s strategic progress made since then, Pitney Bowes said.
Hestia, which owns 8.4% of the company, also has failed to name a permanent CEO, according to Stamford, Connecticut-based Pitney Bowes. However, such a move would be expected on or before the May 9 annual shareholder meeting.
Lautenbach transformed a business that was in secular decline, stabilizing its core mail business and creating a growing shipping business, Pitney Bowes said. During his tenure, the company has cut $1.7 billion in debt, eliminated several hundred million dollars of expenses and invested $2.8 billion in the firm. Compound revenue growth was 4.9% between 2017 and ’22, compared to an annual revenue loss of minus-8.6% from 2007-12, per Pitney Bowes data.
Pitney acknowledged the transformation process has taken longer than expected. Yet the company currently boasts a strong portfolio designed to support mailing and shipping activities, the company said.
Pitney saved a good deal of vitriol for Hestia’s attacks on the company’s global e-commerce (GEC) business, maintaining it should be focused on “niche” and not on “scale” in a misguided effort to compete with FedEx Corp. (NYSE: FDX) and UPS Inc. (NYSE: UPS). Pitney Bowes pointed out that a 2017 acquisition of Newgistics Inc. was designed to build a U.S. middle-market retail shipping business, rather than a broad-based logistics operation to compete with those behemoths.
“The (GEC) business is now positioned to achieve profitable revenue growth through achievable volume increases,” Pitney Bowes said. It also said Hestia’s “consistently changing views” on what to do with GEC — from selling it to deeming it a valuable asset or shrinking it — “reveal its lack of understanding of the business.”
Pitney Bowes maintained it is “not trying to become a UPS or FedEx as our targeted strategy has enabled us to create a competitive product and scale in the middle market retail segment.” Pitney Bowes defines mid-market as direct-to-consumer and pure-play e-commerce brands.
Hestia is also unaware that when Pitney Bowes competes against the big players, it is not doing it alone, according to Pitney. Its last-mile delivery partnership with the U.S. Postal Service provides it with the resources to “compete effectively against larger businesses within our targeted market,” according to Pitney Bowes.
Pitney Bowes also hit back at Hestia for saying it had not been responsive to the firm’s demands since the process began. According to Pitney, it has met with Hestia more than 20 times and interviewed four director candidates. Pitney has made offers to three new directors, including a former top UPS executive, Steve Brill. It also announced the retirement of three members, including Michael Roth, who had served as chairman.
Over the past few decades, Pitney Bowes has seen its fortunes decline along with a secular drop in mail volumes. In recent years, the company has shifted its value proposition to electronic parcel processing. But it has not been enough to destroy about 25 years of shareholder value. Shares changed hands early Monday at about $6.40 a share. They traded in the low-$70 range in 1998.
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