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TSR agrees to buy stock back from dissident shareholders

TSR of Hauppauge, seen here on May 31,

TSR of Hauppauge, seen here on May 31, 2017 is in talks to settle lawsuits and avert a proxy showdown at its annual meeting. Credit: Steve Pfost

TSR Inc. and its chief executive have agreed to buy almost half of the company's stock from dissident shareholders, averting a Sept. 13 proxy showdown.

Shares in TSR, a Hauppauge-based provider of technology staffing and consulting services, fell 6.8 percent to close at $4 on Tuesday, the first day of trading after the announcement Friday evening.

The agreement calls for chairman and CEO Christopher Hughes and the company to pay $5.96 million in cash, or $6.25 per share, for the 48.6 percent of shares held by dissident shareholders.

Hughes, who succeeded his father and company founder Joseph Hughes as chairman and CEO in July 2017, defied his parents after they called on the board of directors to sell the company in June 2018.

The following month, his parents, Joseph and Winifred Hughes, sold 41.8 percent of the company's outstanding shares at $6.25 per share to the shareholder group that later issued the proxy and legal challenges. 

In September 2018, Christopher Hughes' sister, Regina Dowd, resigned from the board of directors.

Under the deal, TSR, which was founded in 1969, also agreed to pay the shareholders $1.5 million to settle pending lawsuits.

The settlement also calls for one of the dissident shareholders, Manhattan-based Zeff Capital LP, to withdraw its board of directors slate from consideration at the company's annual meeting, which would be pushed back from Sept. 13 to Oct. 22. 

If TSR fails make the payments to buy the shares and settle the lawsuits, however, it agreed to withdraw its own director nominees and support the slate proposed by Zeff Capital. 

In a news release, Hughes said TSR pursued a settlement because of the "cost and uncertainty of prolonged litigation, as well as the continued instability and business disruption during the proxy contest."

Christopher Hughes said he was unable to comment beyond what was included in a news release except to say that a government filing with further details was pending.

A statement by Daniel Zeff said the settlement would end the financial drain on TSR from litigation and the disruption of the company's business operations.

A phone call to Daniel Zeff seeking further comment was not returned.

Craig Ferrantino, president of Melville-based Craig James Financial Services LLC, said it was difficult to interpret the stock market's reaction to the deal because TSR shares are thinly traded, meaning a modest transaction can have an outsized impact on the price.

"It's hard to gauge what the market is saying," he said.

The per share price in the settlement is in line with a November offer by QAR Industries of Mineral Wells, Texas, to acquire TSR for $6.25 per share. That bid was rejected by TSR.

TSR, Long Island's 33rd largest public company based on 2018 revenue of $65 million, had received a delisting notice from the Nasdaq Stock Market because the company failed to hold an annual meeting within 12 months of the end of the fiscal year on May 31.

A call to the Nasdaq Stock Market inquiring about the impact of the October annual meeting date was not immediately returned.

TSR Inc.

Top executive: Christopher Hughes, chairman, CEO and president

Founder: Joseph Hughes (Christopher's father)

Year founded: 1969

Employees: 389 as of May 31

Leased properties in Hauppauge, Manhattan and Edison, New Jersey

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