Hestia Capital could be preparing to shake up the board at Pitney Bowes

Business: Pitney Bowes is simply a planetary shipping and mailing institution that provides technology, logistics, and fiscal services to businesses, including much than 90% of the Fortune 500, retailers and authorities clients astir the world. It operates done 3 concern segments: (i) Global Ecommerce, (ii) Presort Services and (iii) SendTech Solutions.

Stock Market Value: $666M ($3.83 per share)

Percentage Ownership:  6.90%

Average Cost: $3.59

Activist Commentary: Hestia is not an activistic investor. Rather, the steadfast is simply a heavy worth capitalist that volition usage activism arsenic a past resort. Kurtis Wolf, managing subordinate and main concern serviceman of Hestia is simply a erstwhile strategy advisor and notably worked astatine Relational Investors from 2002 done 2004. The steadfast is experienced successful concern strategy and applies its concern acumen to heavy worth and distressed companies to find which ones person a bully way forward. As a result, Hestia often invests successful companies that mightiness beryllium misunderstood oregon not favored by the market, similar GameStop, Best Buy and Pitney Bowes. The steadfast eschews biotech and commodity-driven companies. Hestia's lone anterior activistic engagement was successful 2020, erstwhile it formed a radical with Permit Capital and ran a palmy proxy fight astatine GameStop.

Pitney Bowes' SendTech solutions concern is the halfway endeavor that the institution is mostly known for: postage meters. This is simply a secularly declining, but not disappearing, concern that generates important currency flow. PBI expanded the SendTech part to see shipping labels, which is simply a maturation business. The shipping labels concern has historically competed with, and often mislaid to, stamps.com, which was built into a immense concern yet acquired by Thoma Bravo for $6.6 billion. The SendTech Solutions conception accounts for 38% of Pitney Bowes' gross and generated $429 cardinal successful net earlier involvement and taxes successful 2021. The postage metre concern comprises 89% of the division's gross and the shipping statement concern comprises the different 11%.

The Global Ecommerce conception is comprised of chiefly 3 components: (i) a integer tech concern that sells the exertion down Pitney Bowes' postage and shipping businesses, giving clients the quality to trim proscription and logistics costs, prime the champion bearer based connected request and cost, amended transportation times and way packages successful existent time; (ii) a planetary cross-border solutions concern that handles each of the shipping and customs procedures of planetary shipping for customers similar eBay; and (iii) a home parcel business, which is simply a niche e-commerce concern handling returns of items and a rival against companies similar FedEx and UPS. Global Ecommerce comprises 46% of Pitney Bowes' gross but mislaid $99 cardinal of EBIT successful 2021.

The Presort Services conception accounts for lone 16% of gross but generated $79 cardinal of EBIT successful 2021. This concern makes its wealth from station offices and simplifies the sorting process for them. Pitney Bowes volition prime up message from businesses successful circumstantial zip codes, benignant the message by zip codification and get it to station offices.

Bottom line, the institution has excessively galore businesses and needs to simplify. The integer exertion and Presort businesses are synergistic with Pitney Bowes' halfway concern arsenic 1 provides it with the exertion to run and the different shares galore of the aforesaid customers and gives them the quality to cross-sell. This means divesting the cross-border solutions concern and the home parcel business. Neither is showing capable levels of maturation oregon profit. The erstwhile has azygous lawsuit attraction hazard arsenic eBay is by acold its largest customer, and the second is competing with overmuch larger companies similar FedEx and UPS. Just closing those 2 businesses would beryllium accretive to shareholders, and they should beryllium capable to get immoderate wealth for them from a strategical acquirer. But the bigger payment would beryllium absorption absorption connected its halfway concern and the quality to much appropriately incentivize management. Management tin absorption connected utilizing the currency from the secularly declining postage metre concern to put successful the increasing shipping statement business. The SendTech and Presort segments unsocial could beryllium worthy $6 to $9 per stock without the distractions and dilution of the different businesses.

Ideally, Hestia would advocator for this program from a committee level. The institution has a nine-person, unstaggered committee with a information deadline opening connected Jan. 2, 2023. Hestia volition apt request much than conscionable 1 committee spot to thrust alteration astatine Pitney Bowes. The institution has been astir for implicit a century, and a bulk of the directors person a 10+ twelvemonth committee tenure. Marc Lautenbach is not needfully the incorrect CEO for this company. He conscionable has mislaid absorption with his attraction being pulled successful truthful galore antithetic directions. A much streamlined halfway concern with him arsenic CEO could enactment precise well. The institution could payment from a shareholder typical with a beardown concern strategy acumen, and we would expect Hestia to see Kurtis Wolf successful its slate of nominees on with immoderate experienced manufacture executives. With the cosmopolitan proxy present successful play, we would expect Hestia to nominate up to 4 directors to springiness shareholders a larger excavation from which to select.

Ken Squire is the laminitis and president of 13D Monitor, an organization probe work connected shareholder activism, and helium is the laminitis and portfolio manager of the 13D Activist Fund, a communal money that invests successful a portfolio of activistic 13D investments. Squire is besides the creator of the AESG™ concern category, an activistic concern benignant focused connected improving ESG practices of portfolio companies.