Unedited press release follows:
Arcadia Capital Advisors, LLC Demands Immediate Special Cash Dividend From Rimage Corporation Board
“Shareholders have spoken, and it is clear that they are unhappy with the direction Rimage is headed.” – Richard S. Rofé, Managing Director, Arcadia Capital Advisors, LLC
NEW YORK, July 20, 2011 — Arcadia Capital Advisors, LLC (“Arcadia”), through its Managing Director, Richard S. Rofé (“Rofé”), has sent an open letter to Rimage Corporation (“Rimage” or the “Company”) (Nasdaq:RIMG) and its Board of Directors (the “Board”). On June 22, 2011, Arcadia issued an open letter to shareholders outlining the dangers it believed that the Company would encounter in pursuit of a virtual publishing solution, and advocated for a return of cash to shareholders. After the June letter was released, Arcadia stated that it was contacted by a significant number of shareholders who indicated they have similar views and concerns as Arcadia.
“In the current letter, we ask that the Board immediately issue a special dividend funded with $85M or more in cash from the Rimage balance sheet, which is approximately $9.00 cash per share,” stated Rofé. “We would rather have that cash in our pocket today, than face the risk that Management will burn through it attempting to execute on an over-valued acquisition target that is also far afield from the Company’s core business.”
“A special dividend makes sense because it will immediately alleviate the discount that the market has assigned to a potentially dilutive acquisition,” Rofé explained. “We believe a special dividend will also be a good sign that that the Board is in fact sensitive to the concerns and demands of shareholders.”
“Since our original letter, a significant number of shareholders have reached out to us to express their displeasure with Rimage’s current acquisition strategy and have similar views as Arcadia regarding a return of value to shareholders in some form,” Rofé continued. “Seeking to convene a special meeting may be the only option left to shareholders to ensure our voice is heard. However, we would prefer to work constructively with the Company, instead of having to travel down that path.”
“Again, we ask the Board to fulfill its fiduciary duties and to abide by the mandate set by Rimage’s corporate governance guidelines, and immediately issue a large special cash dividend,” concluded Rofé. “We look forward to working with Rimage’s management and its Board, but we are prepared to defend shareholders’ interests if we meet resistance. We are emboldened by the fact that other shareholders are similarly displeased with Rimage’s current direction, and we are committed to protecting our investment and shareholder value.”
About Arcadia Capital Advisors, LLC
Arcadia Capital Advisors, LLC is a private investment firm based in New York that employs a value-oriented investment philosophy in the management of long/short hedge funds focused on small and micro-cap companies. The firm is led by Richard Rofé and is sponsored by M.D.
July 19, 2011
Board of Directors, Rimage Corporation
7725 Washington Avenue South
Minneapolis, MN 55439
Attention: James L. Reissner, Chairman
This letter is intended for the immediate attention of the Board of Directors of Rimage Corporation.
Arcadia Capital Advisors, LLC, through its affiliated funds (“Arcadia” or “we”), is the beneficial owner of common stock of Rimage Corporation (Nasdaq: RIMG) (“Rimage” or the “Company”).
On June 22, 2011, we released a public letter expressing our deep concern over the Company’s intention to invest cash on hand into the virtual publishing space. In that same letter, we also urged the Rimage Board of Directors (the “Board”) and senior management (“Management”) to consider alternative strategies in order to protect shareholder value. We reiterate our concern and hereby appeal directly to the Board to give due consideration to our recommendation that Rimage immediately implement a significant special cash dividend.
In our prior letter, we highlighted the danger of shareholder value destruction if Rimage continues the unbridled pursuit of the Company’s stated strategy—a strategy that will simultaneously drain cash on hand and change focus away from present business competency.
Since the release of our earlier letter, a significant number of other shareholders of the Company have contacted us to express their similar frustration with the apparent indifference to shareholder value by both Management and Board and their growing concern over the Company’s current stated strategy.
A fundamental duty of the Board is to preserve shareholder value. Therefore, we implore the Board once again to take immediate steps to implement and carry out a special cash dividend, distributing upwards of $85 million from the cash available on the Company balance sheet. Based on the 9.5M shares of common stock outstanding as of April 30, 2011 listed in the most recent SEC 10-Q filing, this would translate to shareholders receiving approximately $9.00/share in cash.
Rationale for Special Cash Dividend
We believe a special cash dividend today makes sense for several reasons. As we indicated in our previous letter, it is clear that the market has sharply discounted Rimage’s stock price based on fear of Management’s misguided use of cash. The special cash dividend we recommend will eliminate the fear overhang on the Company’s stock price arising from the uncertainty related to a potential acquisition, and will also ensure shareholders undiluted value of balance sheet cash.
A cash dividend will also serve to restore shareholder and the market’s confidence in Management and the Board as custodians of shareholder value. To date, Management’s words and actions have all but ignored shareholder sentiment. A special cash dividend will demonstrate the Company’s alignment with shareholder expectations.
Reducing the available cash on the balance sheet would also serve to focus the Management team on managing the cashflow of the Company’s core business. Arcadia believes that a special cash distribution to shareholders will create the added benefit of forcing the Company to realize the value of its present business model; a reduction of “dry powder” (i.e., cash on hand) will ultimately drive Management and the Board to execute on the Company’s core business, and will not allow room for distractions that are likely to destroy shareholder value.
Avoiding a Special Meeting
Arcadia is keenly aware that escalating shareholder dissent can become one of the more distracting things to a public company’s day-to-day business efforts. Legal battles predicated on technical constraints and requirements of company governance documents are often costly and could be time-consuming. At the same time, Arcadia recognizes that these governance documents may, at times, be the only way to rein in a management team and/or board of directors callous to shareholder objectives.
Given the inattention to our concerns shown thus far by Management and Board and the level of dissatisfaction expressed to us by other shareholders, we believe that convening a special meeting of shareholders may be necessary to ensure the shareholder voice is heard and to follow through with the steps needed to realize the actions we are advocating herein. Arcadia believes, however, that a more efficient path would be to engage the Company constructively, to work with the cooperation of Management and the Board in optimizing shareholder value. To that end, we invite and wish to promote productive dialogue with the Company.
For reasons stated above, Arcadia strongly urges Rimage to heed our call for a special cash dividend. We remind the Board of its fiduciary duty to shareholders. We look forward to hearing from, and working with, the Company’s Management and Board for what is anticipated to be productive discourse that will achieve optimal benefit for Rimage and its shareholders.
Very truly yours,
Richard S. Rofé, Managing Director
Arcadia Capital Advisors, LLC
The analyses and conclusions of Arcadia contained in this letter are based on publicly available information. Arcadia recognizes that there may be confidential or otherwise non‐public information in the possession of the companies discussed in this letter that could lead these companies or others to disagree with Arcadia’s conclusions.
The analyses provided may include certain statements, assumptions, estimates and projections prepared with respect to, among other things, the historical and/or anticipated operating performance of the companies. Such statements, assumptions, estimates, and projections reflect various assumptions by Arcadia concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations express or implied, are made as to the accuracy or completeness of such statements, assumptions, estimates or projections or with respect to any other materials herein. Actual results may vary materially from the estimates and projected results contained herein, and no decision or action should be made relying solely on information herein or the accuracy thereof. Arcadia disclaims any obligation to update this letter.
Funds managed by Arcadia and/or its affiliates own Rimage common stock as of the date of this letter. Arcadia manages funds that are in the business of actively trading ‐ buying and selling ‐ securities and other financial instruments. Arcadia has, and in the future may, change its investment position in Rimage and possibly increase, decrease, dispose of, or change the form of its investment for any or no reason.
This letter should not be considered a recommendation to buy, sell, or hold any investment. In addition, this letter is neither an offer to purchase nor a solicitation of an offer to sell any securities of the companies. This letter is not a solicitation of proxies. Arcadia and its affiliates retain the right to vote on any matters relating to each or any of the companies discussed herein including, without limitation, for or against any transaction.