Welcome!

News Feed Item

FrontFour Nominates Four Highly-Qualified Independent Director Candidates for Election to the Board of Directors of Sensient Technologies Corporation

Issues Open Letter to Shareholders of Sensient

GREENWICH, Conn., Feb. 19, 2014 /PRNewswire/ -- FrontFour Capital Group LLC, together with its affiliates ("FrontFour"), announced today that it has notified Sensient Technologies Corporation (the "Company") (NYSE: SXT) of its intention to nominate four highly-qualified individuals for election to the Board of Directors of the Company at the 2014 Annual Meeting of Shareholders. 

FrontFour's four independent director nominees are James R. Henderson, James E. Hyman, Stephen E. Loukas and William E. Redmond, Jr.

FrontFour also issued an open letter to shareholders of the Company.  The full text of the letter follows.

FrontFour Capital Group LLC
35 Mason Street, 4th Floor
Greenwich, CT 06830

February 19, 2014

Dear Fellow Shareholders:

FrontFour Capital Group LLC ("FrontFour"), together with their affiliates, are substantial shareholders of Sensient Technologies Corporation ("Sensient" or the "Company").  We are writing to you today due to our serious concerns about the Company's continued operational shortfalls in the Flavors & Fragrances ("F&F") division, sub-optimal capital structure resulting in poor returns on equity and invested capital and significant corporate governance shortfalls.

The Company's operating performance and margins continue to be lackluster relative to both its peers and even management's stated expectations.  Sensient has long promised that the combination of increasing capital expenditures ("CAPEX") to modernize and expand their facilities and increasing SG&A to expand the salesforce, extend the distribution system and augment their technical specialties would result in higher margins for the F&F division.  Unfortunately, the exact opposite has occurred.  Operating income ("EBIT") margins have declined within the F&F segment in each of the last four fiscal years, from 16.1% in 2009 to 13.9% in 2013.  During this same period, the Company's free cash flow has declined significantly from $90.6 million in 2009 to $49.3 million in 2013, as CAPEX more than doubled from $47.7 million in 2009 to $104.2 million in 2013.  Alarmingly, F&F margins have declined on a year-over-year basis in 14 of the last 16 quarters.  Management has failed to execute on their stated objective of closing the gap between both European and North American F&F margins, along with F&F and Color segment margins.  Gross margins have significantly lagged the competition even when adjusting for dehydrated flavors.  Sensient has also failed to leverage their leading position as a provider of natural and synthetic colors to the food & beverage industry to drive sales for the F&F business as part of a one-stop shop solution. We believe these operational shortfalls are reflected in Sensient's stock price which has significantly underperformed over the past 3 and 5 years vs. the Russell 2000 as well as when directly compared against the Company's U.S. peer, International Flavors & Fragrances. 

Aside from the operational issues plaguing Sensient, we are extremely concerned with the revolving door of the COO position over the recent years and the quick ascension of Chairman Ken Manning's son, Paul Manning, to the CEO position despite lacking any meaningful outside experience within the F&F segment.  Sensient has reached a critical juncture as it commits further capital in its attempt to upgrade the F&F business and shift its strategy from ingredients to higher margin, value-added compounds.  We believe it is imperative that a reconstituted Board begins to engender strong, independent operational and financial oversight at Sensient.  To this end, we have nominated a slate of highly qualified director nominees, consisting of James Henderson, James Hyman, Stephen Loukas and William Redmond, for election at the 2014 annual meeting of shareholders of the Company.  Our nominees are leading executives who have track records of creating shareholder value and will offer new perspectives and insights to enhance sustainable long-term value and optimize the business for the benefit of all shareholders.

Sensient is a strong business with a great product offering.  However, much work is needed for the Company to reach its full potential.  Significant opportunities exist to streamline the Company's cost structure as the 20+ acquisitions that have created the current-day Sensient have in our view never properly been integrated.  Additionally, Sensient's SG&A has increased significantly over the last 5 years in stark contrast to most other specialty chemical companies which shed costs aggressively coming out of the credit crisis.  Given the stability of Sensient's cash flow, we believe the Company can lever up to 2.5x total Debt/EBITDA to return $350 million of capital to shareholders through a stock buyback representing approximately 14% of total shares outstanding while maintaining an investment grade credit rating.   We note that Sensient was levered 3.5x+ total Debt/EBITDA during the last decade.  We also believe R&D spending should be streamlined into near-term market opportunities that play to Sensient's respective portfolio strengths.  The Company should also endeavor to optimize its working capital position.  We also believe that all or parts of the Sensient portfolio would be very attractive to potential suitors given the strong potential of the Company's assets.

2014 is a pivotal year for Sensient.  With a new CEO with limited experience and a shift in strategy in the F&F division, shareholders must act now to protect their interests through the addition of meaningful, independent representation on the Board.  With a reinvigorated independent Board, Sensient can transform and emerge as a formidable competitor in both Flavors and Fragrances and remain a leader in Colors.  The candidates nominated by FrontFour would bring much-needed attributes, skills and experience to the Board to help successfully create shareholder value for all Sensient shareholders. 

In conclusion, with proper Board oversight, Sensient will be well-positioned to improve and grow its product offering, gain market share and deliver to its shareholders improved profit margins and cash flow.  The opportunity to transform our Company and create value is now. 

Sincerely,

/s/ Stephen E. Loukas

 

CERTAIN INFORMATION CONCERNING PARTICIPANTS

FrontFour Capital Group LLC ("FrontFour Capital"), together with the other Participants (as defined below), intends to make a preliminary filing with the Securities and Exchange Commission ("SEC") of a proxy statement and accompanying proxy card to be used to solicit votes for the election of director nominees at the 2014 annual meeting of shareholders of Sensient Technologies Corporation, a Wisconsin corporation (the "Company").

FRONTFOUR CAPITAL STRONGLY ADVISES ALL SHAREHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.  SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV.  IN ADDITION, THE PARTICIPANTS IN THE PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE UPON REQUEST.

The Participants in the proxy solicitation are anticipated to be FrontFour Capital, FrontFour Master Fund, Ltd. ("FrontFour Master"), Event Driven Portfolio, a series of Underlying Funds Trust (the "Event Driven Portfolio"), FrontFour Capital Corp., FrontFour Opportunity Fund Ltd. (the "Canadian Fund"), Stephen E. Loukas, David A. Lorber, Zachary George, James R. Henderson, James E. Hyman and William E. Redmond (collectively, the "Participants").

As of the date hereof, the Participants may be deemed to collectively beneficially own an aggregate of 733,435 shares of Common Stock of the Company, consisting of 435,930 shares beneficially owned directly by FrontFour Master, including 37,200 shares of Common Stock underlying certain call options exercisable within 60 days of the date hereof, 157,610 shares beneficially owned directly by the Event Driven Portfolio, including 2,200 shares of Common Stock underlying certain call options exercisable within 60 days of the date hereof, 63,065 shares beneficially owned directly by the Canadian Fund, including 5,500 shares of Common Stock underlying certain call options exercisable within 60 days of the date hereof, and 76,830 shares beneficially owned directly by accounts managed by FrontFour Capital, including 7,100 shares of Common Stock underlying certain call options exercisable within 60 days of the date hereof.

As members of a "group" for the purposes of Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as amended, each of the Participants may be deemed to beneficially own the shares of Common Stock of the Company beneficially owned in the aggregate by the other Participants.  Each of the Participants disclaims beneficial ownership of such shares of Common Stock except to the extent of his or its pecuniary interest therein.

Contact:
Stephen Loukas
FrontFour Capital Group LLC
35 Mason Street, 4th Floor
Greenwich, CT 06830
203-274-9050

SOURCE FrontFour Capital Group LLC

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
A critical component of any IoT project is what to do with all the data being generated. This data needs to be captured, processed, structured, and stored in a way to facilitate different kinds of queries. Traditional data warehouse and analytical systems are mature technologies that can be used to handle certain kinds of queries, but they are not always well suited to many problems, particularly when there is a need for real-time insights.
Choosing the right cloud for your workloads is a balancing act that can cost your organization time, money and aggravation - unless you get it right the first time. Economics, speed, performance, accessibility, administrative needs and security all play a vital role in dictating your approach to the cloud. Without knowing the right questions to ask, you could wind up paying for capacity you'll never need or underestimating the resources required to run your applications.
Enterprise networks are complex. Moreover, they were designed and deployed to meet a specific set of business requirements at a specific point in time. But, the adoption of cloud services, new business applications and intensifying security policies, among other factors, require IT organizations to continuously deploy configuration changes. Therefore, enterprises are looking for better ways to automate the management of their networks while still leveraging existing capabilities, optimizing perf...
"Software-defined storage is a big problem in this industry because so many people have different definitions as they see fit to use it," stated Peter McCallum, VP of Datacenter Solutions at FalconStor Software, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
The best-practices for building IoT applications with Go Code that attendees can use to build their own IoT applications. In his session at @ThingsExpo, Indraneel Mitra, Senior Solutions Architect & Technology Evangelist at Cognizant, provided valuable information and resources for both novice and experienced developers on how to get started with IoT and Golang in a day. He also provided information on how to use Intel Arduino Kit, Go Robotics API and AWS IoT stack to build an application tha...
IoT generates lots of temporal data. But how do you unlock its value? You need to discover patterns that are repeatable in vast quantities of data, understand their meaning, and implement scalable monitoring across multiple data streams in order to monetize the discoveries and insights. Motif discovery and deep learning platforms are emerging to visualize sensor data, to search for patterns and to build application that can monitor real time streams efficiently. In his session at @ThingsExpo, ...
Manufacturers are embracing the Industrial Internet the same way consumers are leveraging Fitbits – to improve overall health and wellness. Both can provide consistent measurement, visibility, and suggest performance improvements customized to help reach goals. Fitbit users can view real-time data and make adjustments to increase their activity. In his session at @ThingsExpo, Mark Bernardo Professional Services Leader, Americas, at GE Digital, discussed how leveraging the Industrial Internet a...
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
Extracting business value from Internet of Things (IoT) data doesn’t happen overnight. There are several requirements that must be satisfied, including IoT device enablement, data analysis, real-time detection of complex events and automated orchestration of actions. Unfortunately, too many companies fall short in achieving their business goals by implementing incomplete solutions or not focusing on tangible use cases. In his general session at @ThingsExpo, Dave McCarthy, Director of Products...
WebRTC is bringing significant change to the communications landscape that will bridge the worlds of web and telephony, making the Internet the new standard for communications. Cloud9 took the road less traveled and used WebRTC to create a downloadable enterprise-grade communications platform that is changing the communication dynamic in the financial sector. In his session at @ThingsExpo, Leo Papadopoulos, CTO of Cloud9, discussed the importance of WebRTC and how it enables companies to focus...
Amazon has gradually rolled out parts of its IoT offerings in the last year, but these are just the tip of the iceberg. In addition to optimizing their back-end AWS offerings, Amazon is laying the ground work to be a major force in IoT – especially in the connected home and office. Amazon is extending its reach by building on its dominant Cloud IoT platform, its Dash Button strategy, recently announced Replenishment Services, the Echo/Alexa voice recognition control platform, the 6-7 strategic...
Aspose.Total for .NET is the most complete package of all file format APIs for .NET as offered by Aspose. It empowers developers to create, edit, render, print and convert between a wide range of popular document formats within any .NET, C#, ASP.NET and VB.NET applications. Aspose compiles all .NET APIs on a daily basis to ensure that it contains the most up to date versions of each of Aspose .NET APIs. If a new .NET API or a new version of existing APIs is released during the subscription peri...
Verizon Communications Inc. (NYSE, Nasdaq: VZ) and Yahoo! Inc. (Nasdaq: YHOO) have entered into a definitive agreement under which Verizon will acquire Yahoo's operating business for approximately $4.83 billion in cash, subject to customary closing adjustments. Yahoo informs, connects and entertains a global audience of more than 1 billion monthly active users** -- including 600 million monthly active mobile users*** through its search, communications and digital content products. Yahoo also co...
Ixia (Nasdaq: XXIA) has announced that NoviFlow Inc.has deployed IxNetwork® to validate the company’s designs and accelerate the delivery of its proven, reliable products. Based in Montréal, NoviFlow Inc. supports network carriers, hyperscale data center operators, and enterprises seeking greater network control and flexibility, network scalability, and the capacity to handle extremely large numbers of flows, while maintaining maximum network performance. To meet these requirements, NoviFlow in...
As companies gain momentum, the need to maintain high quality products can outstrip their development team’s bandwidth for QA. Building out a large QA team (whether in-house or outsourced) can slow down development and significantly increases costs. This eBook takes QA profiles from 5 companies who successfully scaled up production without building a large QA team and includes: What to consider when choosing CI/CD tools How culture and communication can make or break implementation