Apparently concerned about a shareholder activist and a sagging stock price, Commvault has adopted a limited-duration shareholder rights plan. The move essentially is designed to discourage investors from making lowball bids for the data protection, backup and disaster recovery (BDR) software provider. Still, Commvault's board says the plan is "not intended to deter offers that are fair and otherwise in the best interest of the Company’s shareholders."
The Commvault poison pill plan is effective through April 1, 2021. It comes roughly one week after activist investor Starboard Value LP disclosed that it has acquired a 9.3 percent stake in Commvault. It’s unclear if Starboard is planning additional moves related to the investment.
Shareholder Plan: Commvault Statement
In a statement about the shareholder rights plan, Commvault said the move is:
"intended to protect the interest of the Company and its shareholders by reducing the likelihood that any person or group gains control of Commvault through open market accumulation or other tactics without paying an appropriate control premium. The Rights Plan also helps ensure that the Board has sufficient time to make informed decisions that are in the best interests of the Company and all Commvault shareholders. The Rights Plan applies equally to all current and future shareholders and is not intended to deter offers that are fair and otherwise in the best interest of the Company’s shareholders."
A poison pill shareholder plans is a type of defense tactic utilized by a target company to prevent or discourage attempts of a hostile takeover by an acquirer, Investopia notes. Such plans allow existing shareholders the right to purchase additional shares at a discount, effectively diluting the ownership interest of any new, hostile party, the definition adds.
Commvault Data Protection Business Evolution
Commvault over the past two-plus years has been pushing hard into cloud and recurring revenue subscription services.
- CEO Sanjay Mirchandani arrived in February 2019, and disclosed a three-step business transformation plan in April 2019.
- Mirchandani explained key areas of progress and areas of challenge by July 2019.
- And more recently, Commvault unveiled a Customer Care Program to help customers and partners navigate the COVID-19 pandemic. New products and services have also arrived.
The business transformation remains a work in progress. Commvault revenue was $176.4 million for the third quarter of fiscal 2020, down 4 percent year-over-year, the company disclosed in January 2020. Net income was a $650,000 loss, competed to a $13.4 million profit in the corresponding quarter one year earlier.
During the quarter, Commvault launched a new SaaS offering (called Metallic) and integrated the Hedvig software-defined storage acquisition into its business, Mirchandani noted at the time. Also, subscription-type services surged during the quarter.