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. 


/s/ Stephen E. Loukas



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").


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.

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

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
DXWorldEXPO LLC announced today that Dez Blanchfield joined the faculty of CloudEXPO's "10-Year Anniversary Event" which will take place on November 11-13, 2018 in New York City. Dez is a strategic leader in business and digital transformation with 25 years of experience in the IT and telecommunications industries developing strategies and implementing business initiatives. He has a breadth of expertise spanning technologies such as cloud computing, big data and analytics, cognitive computing, m...
Digital Transformation and Disruption, Amazon Style - What You Can Learn. Chris Kocher is a co-founder of Grey Heron, a management and strategic marketing consulting firm. He has 25+ years in both strategic and hands-on operating experience helping executives and investors build revenues and shareholder value. He has consulted with over 130 companies on innovating with new business models, product strategies and monetization. Chris has held management positions at HP and Symantec in addition to ...
Cloud-enabled transformation has evolved from cost saving measure to business innovation strategy -- one that combines the cloud with cognitive capabilities to drive market disruption. Learn how you can achieve the insight and agility you need to gain a competitive advantage. Industry-acclaimed CTO and cloud expert, Shankar Kalyana presents. Only the most exceptional IBMers are appointed with the rare distinction of IBM Fellow, the highest technical honor in the company. Shankar has also receive...
DXWorldEXPO LLC announced today that Kevin Jackson joined the faculty of CloudEXPO's "10-Year Anniversary Event" which will take place on November 11-13, 2018 in New York City. Kevin L. Jackson is a globally recognized cloud computing expert and Founder/Author of the award winning "Cloud Musings" blog. Mr. Jackson has also been recognized as a "Top 100 Cybersecurity Influencer and Brand" by Onalytica (2015), a Huffington Post "Top 100 Cloud Computing Experts on Twitter" (2013) and a "Top 50 C...
There is a huge demand for responsive, real-time mobile and web experiences, but current architectural patterns do not easily accommodate applications that respond to events in real time. Common solutions using message queues or HTTP long-polling quickly lead to resiliency, scalability and development velocity challenges. In his session at 21st Cloud Expo, Ryland Degnan, a Senior Software Engineer on the Netflix Edge Platform team, will discuss how by leveraging a reactive stream-based protocol,...
Enterprises have taken advantage of IoT to achieve important revenue and cost advantages. What is less apparent is how incumbent enterprises operating at scale have, following success with IoT, built analytic, operations management and software development capabilities - ranging from autonomous vehicles to manageable robotics installations. They have embraced these capabilities as if they were Silicon Valley startups.
Daniel Jones is CTO of EngineerBetter, helping enterprises deliver value faster. Previously he was an IT consultant, indie video games developer, head of web development in the finance sector, and an award-winning martial artist. Continuous Delivery makes it possible to exploit findings of cognitive psychology and neuroscience to increase the productivity and happiness of our teams.
Poor data quality and analytics drive down business value. In fact, Gartner estimated that the average financial impact of poor data quality on organizations is $9.7 million per year. But bad data is much more than a cost center. By eroding trust in information, analytics and the business decisions based on these, it is a serious impediment to digital transformation.
The standardization of container runtimes and images has sparked the creation of an almost overwhelming number of new open source projects that build on and otherwise work with these specifications. Of course, there's Kubernetes, which orchestrates and manages collections of containers. It was one of the first and best-known examples of projects that make containers truly useful for production use. However, more recently, the container ecosystem has truly exploded. A service mesh like Istio addr...
As DevOps methodologies expand their reach across the enterprise, organizations face the daunting challenge of adapting related cloud strategies to ensure optimal alignment, from managing complexity to ensuring proper governance. How can culture, automation, legacy apps and even budget be reexamined to enable this ongoing shift within the modern software factory? In her Day 2 Keynote at @DevOpsSummit at 21st Cloud Expo, Aruna Ravichandran, VP, DevOps Solutions Marketing, CA Technologies, was jo...
Predicting the future has never been more challenging - not because of the lack of data but because of the flood of ungoverned and risk laden information. Microsoft states that 2.5 exabytes of data are created every day. Expectations and reliance on data are being pushed to the limits, as demands around hybrid options continue to grow.
Business professionals no longer wonder if they'll migrate to the cloud; it's now a matter of when. The cloud environment has proved to be a major force in transitioning to an agile business model that enables quick decisions and fast implementation that solidify customer relationships. And when the cloud is combined with the power of cognitive computing, it drives innovation and transformation that achieves astounding competitive advantage.
Digital Transformation: Preparing Cloud & IoT Security for the Age of Artificial Intelligence. As automation and artificial intelligence (AI) power solution development and delivery, many businesses need to build backend cloud capabilities. Well-poised organizations, marketing smart devices with AI and BlockChain capabilities prepare to refine compliance and regulatory capabilities in 2018. Volumes of health, financial, technical and privacy data, along with tightening compliance requirements by...
As IoT continues to increase momentum, so does the associated risk. Secure Device Lifecycle Management (DLM) is ranked as one of the most important technology areas of IoT. Driving this trend is the realization that secure support for IoT devices provides companies the ability to deliver high-quality, reliable, secure offerings faster, create new revenue streams, and reduce support costs, all while building a competitive advantage in their markets. In this session, we will use customer use cases...
The IoT Will Grow: In what might be the most obvious prediction of the decade, the IoT will continue to expand next year, with more and more devices coming online every single day. What isn’t so obvious about this prediction: where that growth will occur. The retail, healthcare, and industrial/supply chain industries will likely see the greatest growth. Forrester Research has predicted the IoT will become “the backbone” of customer value as it continues to grow. It is no surprise that retail is ...