Corrected November 11 2013, at 2:45 p.m.
Vocal Voce Capital Management issued a long and critical letter against New York medical device maker ConMed (NSDQ:CNMD), demanding that the company take steps toward a strategic exit and end "a culture of nepotism, patronage and dystopian corporate governance."
So-called ‘activist investment firm’ Voce Capital didn’t mince words in its illustration of ConMed, which has posted a few weak quarters, with falling sales and a lowered outlook for 2013. Voce, which owns about 1% interest in ConMed, described the company as one run and ruined by the Corasanti family.
ConMed CFO Robert Shallish issued a brief response to the Voce’s diatribe, saying that the company plans to go through the press release in time.
"We will be responding to the Voce Capital press announcement with a thoughtful response in due course," Shallish said in an email sent to MassDevice.com today. "It is interesting to note that we still have not received the letter that they say they have delivered to us."
"We believe that the Voce press release contains numerous inaccuracies, is one sided and fails to recognize CONMED’s significant returns to our shareholders in the form of superior free cash flow, increasing earnings over the last several years, cash dividends and share buy-backs," Shallish added.
Voce has been a big talker in the past, having recently taken similarly severe positions against Solta Medical (NSDQ:SLTM) and taking on the board of Obagi Medical Products. The investment firm now has its eyes firmly set on ConMed, which Voce had a few choice words for.
"ConMed is unquestionably family-run – the Corasanti clan members pull all the strings and pamper themselves royally – yet it’s not family-owned, as they hold very little of its stock," according to the 11-page letter Voce publicly issued to ConMed today. "Their hegemony over ConMed could have never occurred without the docile cooperation of the very fiduciaries who were elected to protect shareholder interests: You, its Board of Directors."
Voce reamed ConMed’s employee roster, highlighting several high-level officers with ties to company founder, former CEO, and current board chairman and vice chairman Eugene Corasanti, who in 2006 handed the corner office to his son, Joseph Corasanti.
Voce went on to question the Corasantis’ loyalty to the company’s shareholders, given that the Corasantis collectively hold about 0.7% of ConMed’s shares, and further thrashed the company’s M&A strategy, which Voce says is based on "more sentimental than economic value."
"ConMed is a strategically attractive asset trapped within a dysfunctional public vehicle that will never achieve its potential in current form," Voce wrote. "[S]hareholders have witnessed years of sub-par operational performance, lethargic leadership and missed opportunities. Serial acquisitions have obscured weak organic growth and provided cover for poor execution. As a result, ConMed today is an overly complex, subscale player surrounded by much larger and more successful competitors."
ConMed has had a few tough quarters, but managed to get some Wall Street love today after issuing its 3rd-quarter financial report. ConMed missed analysts’ expectations for the quarter amid sliding sales and tanking profits, further lowering its forecast for the year.
The Utica, N.Y.-based device maker posted profits of $5.7 million, or 21¢ per diluted share, on sales of $179.3 million during the 3 months ended Sept. 30, 2013. That compared with profits of $9.3 million, or 32¢ per diluted share, on sales of $181.9 million during the same period last year. Adjusted earnings were reported at 40¢, on par with analysts’ expectations.*
ConMed also lowered its 2013 guidance, now expecting Q4 sales in the range of $195-$200 million. That brings the full-year forecast to $754-$759 million, versus the previously projected forecast of $770-$775 million.
CNMD shares nonetheless jumped more than 3 points today, trading at a 3.6% increase at $37.55 as of about 4 p.m. today.
*Correction: Due to a reporter’s error this article mistakenly swapped EPS data for 2012 and 2013.