The David of shareholder activists is taking on another Goliath. Guy Adams surprised many when he won a 2002 proxy fight to oust Lone Star Steakhouse & Saloon CEO Jamie Coulter from the restaurant chain’s board, despite owning just 1,100 shares and conducting the campaign on a shoestring budget. Now Adams is targeting Fremont, Californiabased semiconductor maker Exar Corp.
The odds aren’t quite as long this time around, but Adams’s latest fight will still be a tough one. The $20 million investment fund he raised after winning the Lone Star battle, GWA Capital Partners, owns 250,000 Exar shares worth an estimated $3.8 million. That’s only about six tenths of 1 percent of the total outstanding.
Adams hopes he’ll win shareholder votes by pointing out what he says has been horrific performance and corporate governance at Exar. In a proxy statement filed June 1, GWA objected primarily to the rich compensation awarded to senior management over the past four years -- including options grants that it said were equal to 30 percent of the current shares outstanding -- even as Exar’s sales plunged by 49 percent and its market cap dropped by $912 million.
Adams has urged the company to expand its board from eight to nine members by adding himself and Silicon Valley venture capitalist Richard Leza (83-year-old incumbent director Raimon Conlisk, an Exar vice chairman, is expected to retire soon). He says he vetted the proposal with several big Exar shareholders. If the company refuses, GWA will nominate an additional dissident candidate to stand with Adams and Leza against the three directors who are up for reelection at Exar’s annual meeting, which has been delayed from July 28 until sometime next month.
“This has been a bloodbath for shareholders,” says Adams, 54, a Louisiana native and former oil driller who got into money management after graduating from Harvard Business School in the mid-1980s. “We don’t want to take this to a proxy fight, but if the company doesn’t address our concerns, we’ll have no choice.”
Since Adams arrived on the scene, Exar has made some concessions to shareholders, including rescinding its poison pill and completing a $120 million share buyback. The company declines to comment on the board controversy.
Even if he fails to win a board seat, Adams is likely to emerge from the fight in good shape: He amassed his Exar stake between January and April at an estimated average price of $13.42 per share. Late last month, partly in response to his campaign, the stock had jumped to $15.21. For Adams that works out to a 13 percent gain for a few months’ work.
