Destination Maternity has gone public with comments about a surprise proxy fight, asking its shareholders to vote for the current board of directors, and to reject calls to unseat the board that have been made by the company with which the Moorestown-based retailer unsuccessfully tried to merge last year.
French children’s-clothing retailer Orchestra-Prémaman — which made an offer to acquire Destination in October 2015, then entered into a later-terminated merger agreement in December 2016 – “now seeks to compel the resignation of the company’s four directors eligible for reelection at this year’s annual meeting” on Oct. 19, Destination said in a statement.
“Not once during the board’s interactions did Orchestra raise concerns. Instead, they have elected to initiate a costly and distracting proxy fight that is devoid of any tangible, concrete recommendations on how to enhance Destination’s operations or maximize value for stockholders. This behavior raises concerns about Orchestra’s motivations,” Ronald J. Masciantonio, chief administrative officer at Destination Maternity, said Tuesday.
Orchestra has not recommended any alternative candidates to serve in the existing directors’ place, and “has interests that are not aligned with those of the other Destination stockholders,” Destination Maternity said in an Oct. 4 news release.
Orchestra did not respond Tuesday to a request for comment.
Last month, Orchestra issued a “stop, look and listen” letter to Destination shareholders, recommending they vote against the incumbent board, saying directors “have under-performed during their tenure; the company has repeatedly missed important targets while reporting its financial information in an unclear way”; and that “it would be a mistake for shareholders to reward poor results by re-electing these directors.” (Allen Weinstein, an independent director of the company, was named interim chief executive officer in September. The Destination board is searching for a permanent CEO.)
Orchestra owns 1,921,820 shares, or 13.8 percent, of Destination Maternity stock and informed shareholders it would wage a proxy fight to unseat the board. Destination’s annual meeting is set for 9:15 a.m. Oct. 19 at corporate headquarters, 232 Strawbridge Dr., Moorestown.
For Destination, a proxy fight is just the latest battle to be waged. Challenges include the public’s switch to online shopping and store closings by Macy’s, Kohl’s and Sears, as well as the bankruptcy filing of Gordmans Stores. The company leases departments in such stores, so when retailers close, so does Destination Maternity’s business there.
According to the Wall Street Journal, Destination Maternity leases nearly 650 department-store locations and more than 1,150 retail locations in the United States, Canada and Puerto Rico under the brand names Destination Maternity, Motherhood Maternity, and A Pea in the Pod.
After the Orchestra merger was called off, Destination’s stock price fell roughly 40 percent. Over the last three years, it has dropped from $15 a share to $1.87, the closing price on Tuesday.