Activist investor challenges Melville satellite equipment maker

An activist investor has laid down a proxy challenge to Comtech Telecommunications Corp., a maker of equipment for 911 emergency dispatch systems and satellite communications.

Outerbridge Capital Management LLC announced it is nominating three independent candidates to the board of the Melville company. The Manhattan investment firm also issued an open letter repeating earlier criticism about the "long stagnation" of Comtech's shares compared to the Russell 2000 Index of small-capitalization stocks.

On Thursday, a day after Outerbridge disclosed its slate of candidates, Comtech issued a statement saying that it had been engaged in "a good faith dialogue" about two potential director candidates proposed by the activist investor.

Comtech, however, said that the trio nominated by Outerbridge had never been mentioned in those talks. Comtech also said that Outerbridge "has exhibited little understanding" of the company's business and its moves "to enhance shareholder value."

The company said it will present its own recommended director nominees in a government filing in advance of the annual meeting, expected to be held in December.

"We are confident we have the right mix of skills, experience and perspectives on our board to deliver on our value creation opportunity," a company spokesman said in an email Friday.

On Friday, Comtech shares fell 1.4% to $24.89.

The top Comtech shareholders as of June 29 were Blackrock Inc., with 16.15% of shares outstanding and Vanguard Group Inc., with 6.73%. Outerbridge has about 4.6% of Comtech shares.

Outerbridge said its director nominees are well versed in Comtech's 911, commercial satellite and government communications businesses.

The nominees are: Wendi B. Carpenter, a retired U.S. Navy rear admiral and former president of SUNY's New York Maritime College; Sidney E. Fuchs, chairman at Eutelsat America Corp., a satellite communications company; and Jonathan D. Wackrow, chief operating officer at Teneo Risk Advisory, a unit of management consulting firm Teneo Holdings LLC.

In June, Outerbridge began its campaign to shake up Comtech's management by issuing an open letter to board members that cited what it called shortcomings in management, transparency, corporate governance and capital allocation.

The price of Comtech shares "are little changed from levels first reached nearly 20 years ago," the letter said, while the Russell 2000 Index has appreciated by 400%.

Outerbridge also faulted Comtech for failing to alert investors about risks to the company related to the United States' withdrawal from Afghanistan, which had been telegraphed by the Biden and Trump administrations. .

Comtech shares tumbled by nearly 14% on June 9 after the company cited the withdrawal in lowering its revenue forecast for fiscal 2022.

In July, a month after the initial Outerbridge overture, Comtech announced that three board members would retire after the annual meeting expected in December, reducing the board's size to five members.

In Melville, Comtech has a 9,600-square-foot headquarters building and a 45,000-square feet manufacturing facility. The factory is leased from a partnership controlled by Comtech chairman and chief executive Fred Kornberg.

The company's domestic locations also include: Tempe, Arizona; Seattle; Orlando, Florida and Santa Clara, California. Foreign facilities are in Gatineau, Quebec, Canada and Hampshire, United Kingdom.

As of July 31, 2020, the company had 2,034 employees, including contractors and temporary workers, with 326 based abroad. About 180 employees are based in Melville.

Joe Gomes, an analyst for Noble Capital Markets Inc., a broker-dealer that provides company-sponsored research, said that it was unclear whether major institutional shareholders would vote for the Outerbridge slate.

"It's hard to handicap," he said.

Ultimately, he said, Outerbridge could push Comtech to pursue "strategic alternatives."

Those could include a merger, acquisition or the sale of part or all of the company.

By Ken Schachter

kenneth.schachter@newsday.comkschach

Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.