Philly Inc: USA Technologies faces second proxy fight in three years

It's been a while since we've had a proxy fight over a Philadelphia company.

In fact, it was 2010 and Airgas Inc. was busy repelling an unwanted takeover offer by Air Products & Chemicals Inc. Radnor-based Airgas was successful in remaining independent. (Airgas even has the last laugh: Its stock price is up 30 percent over the last 52 weeks, while Allentown-based Air Products has fallen 12 percent.)

In a proxy fight, an investor group buys up shares of a company and then nominates its own slate of board candidates to replace the current corporate board through the election of directors that happens annually. Control the board and you control the company.

Over the last decade, there were on average 82 proxy fights waged each year. According to data provided by FactSet Research Systems Inc., the number of proxy fights against U.S. companies reached a recent peak of 133 in 2009 and declined to 100 in 2010 and 93 in 2011. The tally is 63 so far in 2012.

Another proxy battle in 2010 involved USA Technologies Inc., a Malvern provider of cashless-payment systems for vending machines. It ended peacefully in February 2010 with the tiny company adding to its board two directors who'd been backed by the dissident investors and making certain corporate governance changes.

Now, in 2012, the battle is on again for control of the nine-member board of USA Technologies, an unprofitable company with $21.1 million in annual revenue for the nine months ended March 31.

Back for the attack is Bradley M. Tirpak, an activist investor who'd been added to the USA Technologies board, but who resigned as a member March 2. The company said that other board members had asked him to step down. On April 13, the 42-year-old Tirpak served notice that he intended to nominate himself and six other people as candidates for election to the board.

On April 24, USA Technologies said the move "would effectively represent a hostile takeover of USA Technologies with zero control premium to its shareholders."

In regulatory filings, Tirpak's group, called S.A.V.E. Partners IV Inc., disclosed that it owned 3.07 million shares, or a 9.3 percent stake, in USA Technologies, making it the company's largest shareholder. In its proxy statement, S.A.V.E. listed concerns over the company's negative cash flows, board compensation practices, and stock price, which had declined 47 percent in the 52 weeks ended May 18.

On May 3, USA Technologies filed a lawsuit in U.S. District Court in Philadelphia against Tirpak and his group over its "campaign of misinformation." The investors responded that, in their view, the company is using shareholder money to "disrupt shareholder democracy."

Look for more such rhetoric as both sides try to sway shareholders to vote their way at the company's annual shareholders meeting scheduled for June 28.

Contact Mike Armstrong at 215-854-2980 or marmstrong@phillynews.com, or @PhillyInc on Twitter. Read his blog, "PhillyInc," at www.phillyinc.biz.