Secure wireless communications specialist TeleCommunication Systems Inc. (TCS) (NASDAQ: TSYS) has retained Lazard to explore strategic alternatives for the company.
The company’s board of directors has established a special committee comprised…
Secure wireless communications specialist TeleCommunication Systems Inc. (TCS) (NASDAQ: TSYS) has retained Lazard to explore strategic alternatives for the company.
The company’s board of directors has established a special committee comprised solely of independent directors to work with the bank in identifying options that will create shareholder value.
No timetable has been set for the review and TCS stated that there is no certainty that it will lead to any particular transaction.
The move comes six months after Becker Drapkin Management, a hedge fund with a 6.2% stake in the company, demanded changes to the TCS board in order to improve shareholder value. TCS ultimately agreed to the request, expanding the board from eight to nine and increasing the proportion of independent directors.
At the beginning of March, the company appointed Don Bell and Michael Madon as new directors while Weldon Latham was elected lead independent director. Simultaneously, TCS’ chief operating officer Richard Young resigned from the board.
Maurice Tose, chairman, president and CEO of TCS, said at the time: “We are always open to the inputs of our shareholders and are pleased that this agreement could be reached. This agreement allows us to inject new ideas and expertise into our board while avoiding the expense and distraction of a proxy battle.”
Becker Drapkin Management is TCS’ second largest shareholder behind Dimensional Fund Advisors, which owns 6.3%. It was the largest but sold 187,025 shares (equivalent to 0.5%) in the first quarter. Blackrock is the next largest shareholder with 5.7%.
TCS’ revenues have been hit by the recent decline in government spending. The company reported a 4% year-on-year decline in first quarter revenues in April 2015 while adjusted EBITDA was flat at US$8m and GAAP net income was breakeven.
The growth in its commercial segment, with Q1 revenues up 13% and gross profit up 8.5%, was offset by an 18.6% decline in revenues and 26.8% fall in gross profits in the government business.
