Iron Mountain caves in to investors
Iron Mountain's returning CEO has moved quickly to reach an accommodation with activist investor Elliot Management, being willing to sell-off the digital business, close unprofitable international operations, return cash to shareholders, and evaluate becoming a REIT.
Scenting that stockholder opinion was in line with that of Elliot Management in wanting no more wasteful ventures, Richard Reese, the replacement and returning Iron Mountain CEO, has agreed a comprehensive strategic plan that meets Elliot's concerns. It includes:
- Supporting an Elliot nominee director at the 2011 annual meeting, and an independent director agreed with Elliot after that meeting
- Returning $2.2bn to stock holders through 2013
- Looking at alternatives for the digital business including selling it off
- Closing unprofitable international operations but growing the profitable ones and ones with realistic prospects
- Forming a board committee to evaluate Iron Mountain becoming a Real Estate Investment Trust (REIT) and hopefully thereby lowering its tax burden.
This course of action implies that Iron Mountain's Mimosa acquisition was a waste of cash. Possible buyers for the digital business are few. EMC's VMware operation, now running EMC's cloud IT services business, might be interested as might cloud storage provider Nirvanix.
The previous executive management's strategy has now been found wanting and Iron Mountain reminded that building shareholder value means exactly that; the board must not be an executive management team's poodle. ®
Not completely crazy
I believe the proposal is to create a REIT to own the buildings (and occasional iron mine) and an operating company to actually run the business. The operating company then pays rent to the real estate company. The overall structure has benefits due to how REITs are taxes. I would imagine that the bulk of the cost of running records storage is in the real estate. Certainly all of the investment is in building warehouses that can store 1+ million cubic feet of paper.
If I remember correctly all their secure storage facilities mean that they actually are the owner of a massive amount of real-estate, enough to qualify them as a REIT. They can still do their core business, even if they change corporate types...
investors = owners for a company that is publicly owned. That's the way it works in the real corporate world like it or not laddies.