TODAY'S PAPER
Good Afternoon
Good Afternoon
BusinessTechnology

Comtech parries proxy challenge with $100M investment

The deal calls for White Hat Capital Partners

The deal calls for White Hat Capital Partners LP and Magnetar Capital LLC to buy $100 million in newly issued convertible preferred stock and add White Hat managing partner Mark Quinlan to Comtech's board of directors. Credit: Newsday / David Trotman-Wilkins

Comtech Telecommunications Corp., facing a proxy challenge, Monday announced a $100 million deal with investors aligned with incumbent management and plans to expand the board of directors.

Shares of Melville-based Comtech, with a market capitalization of about $616 million, fell 5.9% to close Monday at $22.83.

The deal calls for White Hat Capital Partners LP and Magnetar Capital LLC to buy $100 million in newly issued convertible preferred stock and add White Hat managing partner Mark Quinlan to Comtech's board of directors.

"Magnetar and White Hat fully support Comtech’s strategy and the recently announced and well-thought-out leadership transition plan," Quinlan said in a statement.

Activist investor Outerbridge Capital Management LLC has issued critiques of incumbent management and in September announced the nomination of a three-member slate to Comtech's board of directors.

"While we are still evaluating the announcement, at first blush it appears to be a blatant entrenchment maneuver designed only to benefit Comtech’s incumbent directors and the two participating funds," an Outerbridge spokesman said Monday afternoon. "As the negative share price reaction today demonstrates, we believe other shareholders feel similarly."

The Outerbridge slate, if elected, would constitute a minority in a newly expanded board of directors. With Quinlan and the addition of president Michael Porcelain, the board would grow from five directors to seven.

Earlier this month, Comtech responded to Outerbridge's proxy challenge by announcing a plan to promote Porcelain to CEO by year's end and give him a director's seat.

Current CEO Fred Kornberg is expected to become nonexecutive chairman of the board, Comtech said.

"As an existing Comtech shareholder with a long-term investment horizon, White Hat understands our company and the markets we serve," Kornberg said in a statement.

The convertible preferred stock issued to Manhattan-based White Hat and Evanston, Illinois-based Magnetar would carry a 6.5% dividend and would be convertible to common stock at a price of $24.50 to $26 per share based on the company's fiscal 2022 financial performance.

The investment is expected to close this month.

In a news release, Comtech, a maker of satellite base stations and advanced 911 communications systems, said the investment would:

•Help finance manufacturing satellite technology facilities in Chandler, Arizona, and Basingstoke, United Kingdom;

•Expand its efforts to secure contracts as municipalities upgrade their 911 systems;

•Identify merger and acquisition targets.

More news