• by Richard Whitman , Columnist, June 30, 2021

MDC shareholder Indaba Capital Management issued an open letter earlier this week blasting MDC CEO and Stagwell Founder Mark Penn for refusing to discuss new merger terms directly with the investment company in connection with the proposed MDC-Stagwell combination.

The letter, issued Monday and signed by Indaba managing partner Derek Schrier called Penn’s “dismissive and obstinate posture” the reason it went public in May with its decision to vote against the merger, now scheduled to be voted on July 19. Indaba is MDC’s largest independent shareholder with about a 15% stake.

Schrier wrote that Penn had refused to meet with Indaba since March when it told Penn privately that it would not support the merger on its current terms.

MDC’s response to the letter was an SEC filing on Tuesday that referenced a June 17 email from Penn to Indaba that said he’d prefer to wait for MDC to fully review revised offer terms before talking but “If you feel strongly otherwise, I will be around next week.”

Schrier added that “instead of speaking with us at any point over the past three months, you have spent an inestimable amount of time trying to execute a divide-and-conquer strategy with the very shareholders to whom you owe fiduciary duties. This gives us – and presumably many other shareholders – a great deal of concern about how you would treat minority investors once a potential deal is completed.”

The Indaba manager went on to say “It strikes us as a corporate governance worst practice for you to be dismissing and ignoring our good faith efforts to open up a constructive dialogue. We expect other large shareholders and independent proxy advisory firms will look quite unfavorably upon the decision to continue to stiff-arm us while the Special Committee [at MDC tasked with evaluating the merger offer] presumably pursues another fairness opinion that supports Stagwell’s latest insufficient offer.”

Schrier said Indaba is “very comfortable with MDC remaining an independent entity, building on recent momentum and pursuing growth as the industry continues to spring back from the pandemic. While our preference is to see an equitable deal come to fruition, we believe a standalone MDC is a superior alternative to a conflict-ridden land grab.”