Jana piles the pressure on TSA

Jana piles the pressure on TSA

Electronic payments outfit Transaction Systems Architects (TSA) is coming under further pressure from hedge fund Jana Partners to expand its stock buyback programme and consider a possible sale of the company.

Jana, which owns about 4.9% of TSA stock, has engaged in a damaging public slanging match with TSA directors over the future strategic direction of the company. The two parties first went public with their disagreements two weeks ago when Jana called on TSA to extend its share buyback programme through a Dutch auction tender offer and called on the company to consider a possible sale or merger with a strategic partner.

In its statement, Jana said: "This company has been overcapitalized and unfocused for far too long."

TSA responded by redbuffing Jana's approach and queried the hedge fund's suggestion that it knew of at least two credible strategic buyers that had expressed interest in buying TSA at a "meaningful premium" to its current stock price.

In a letter sent today to Harlan Seymour, TSA chairman, Jana accused the firm of relying on semantics in its denials.

"In a recent phone conversation, Mr. Derkacht (TSA CEO) confirmed to three members of the Jana Partners investment staff that he has had preliminary discussions with at least one interested strategic buyer but has not received approval from the board to continue these discussions. Furthermore, Mr. Derkacht encouraged us to send two separate private letters to the board to support the view that discussions with this known strategic buyer should continue (neither of which has produced a response to us from the company). Any statement otherwise is an outright lie."

The letter, co-signed by Jana's Barry Rosenstein and Salil Mehta, continues: "If TSAI wants to hide behind their definition of credible strategic buyers and what constitutes interest, then the best interest of shareholders is being hijacked. There is unequivocally a strategic buyer with a current interest in buying TSAI. This company has completed due diligence using publicly available data and has concluded that initial cost synergies, future potential revenue synergies and the opportunity to restructure the combined capital structure of the two companies are sufficiently compelling to warrant further discussion. They wish to continue discussion and would like to complete a more formal due diligence. Consistent with its pattern of not engaging us in meaningful discussion, the board has not acknowledged the active interest of this strategic buyer."

It ends with a threat to oust the board: "For some inexplicable reason, you seem to think that by treating us so shabbily, we will go away. You are mistaken: we will remove you from the board if you continue to behave imprudently."

TSA has yet to respond.

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