Iron Mountain hit by hedge fund attack
Stop digital and international growth
Data-vaulting company Iron Mountain has been hit by a hedge fund shareholder attack that accuses management of disastrous forays into digital data storage and international expansion. It should become a real estate-focused company delivering cash to shareholders instead of wasting it on fruitless growth ambitions, says the fund.
Iron Mountain has reported dreadful results in its eDiscovery business with a near £300m goodwill impairment charge and restructuring of the sales force.
Elliot Management is the hedge fund in question. It is run by Paul Singer, and owns almost 5 per cent of Iron Mountain stock. Elliot has sent an open letter strongly criticising Iron Mountain CEO Bob Brennan's strategy of growing the company by expanding its physical paper and tape storage operations overseas, and also by setting up a digital data storage and eDiscovery business. The latter has lost money, Elliot claims, and the former delivers dismal returns.
Elliot wants four new directors on Iron Mountain's board and, through their efforts, a change in the company's strategy such that it maximises the creation of shareholder value by recognising it runs a mature, real estate-focused business. It should become an operator of a REIT (Real Estate Investment Trust) which would provide significantly lower US tax obligations and return profits to shareholders, according to Elliot. As such it could also be run more efficiently, meaning lower costs.
A presentation has been made available on the SEC website explaining Elliot's analysis and the justification for its REIT proposal.
If Elliot gets its way and persuades a majority of shareholders to back its proposals, then Brennan's future as Iron Mountain CEO could be curtailed. The company has said it is evaluating the Elliot proposals. ®