Milwaukee-based ARI Network Services Inc. directors William Mortimore and Robert Newell IV were re-elected to the company’s board Thursday, ending a proxy fight with a private investment firm that included accusations of fraudulent accounting and character assassination.
Mortimore, the founder of Merge Healthcare and current president of Milwaukee-based Keystone Insights Inc., was among the targets of Dallas-based Park City Capital LLC, which owns about 5.7 percent of ARI’s shares.
The two sides sparred over Mortimore’s time at Merge and his involvement in an accounting fraud scheme the company settled with the SEC in 2009.
The larger proxy fight was over whether the company’s board and management have done enough to create shareholder value. The company provides software and services that help dealers, distributors and OEMs sell their products, including motorcycles, boats, RVs, parts and accessories.
Michael J. Fox, Park City founder and chief executive officer, told ARI shareholders Thursday he believed ARI should retain a financial advisor to explore strategic options, including selling the company.
“We believe there are ample interested parties and both private equity and strategic buyers would be very interested in bidding for the company,” Fox said, suggesting “a robust process” could result in an offer of $8 to $10 per share, while the company has been trading around $5.50 per share.
Roy Olivier, CEO of ARI, largely did not acknowledge the proxy fight in remarks to shareholders after the vote.
“Our strategic foundations remain unchanged,” Olivier said.
That foundation includes retaining existing customers, driving organic growth through innovations and geographic expansion, integrating with related platforms and executing acquisitions that align with the core strategy, he said.
Fox, speaking ahead of the vote, said the company should be making larger and more frequent acquisitions, but lacks the access to capital.
“If ARI was acquired by a private equity firm, the buyer could infuse a large amount of capital into ARI and it could better capitalize on its likely robust pipeline of larger acquisitions, and we believe ARI could be a $100 million revenue company within 12 months,” he said.
ARI reported $47.7 million in revenue in fiscal 2016, an 18 percent increase over the previous year. Company executives have said if ARI continues on its current growth trajectory it could reach $100 million in five years and have a stock price around $15 per share.
“While $15 per share sounds great, five years is a long time and we believe there are significant risks that could cause a lot of value destruction if management is left to pursue its status quo strategy over that time period,” Fox said.
He acknowledged it looked like Park City would lose out in the proxy fight, accusing management of using “mis-truths and ‘clever language’” to win.
“We will be watching closely and will hold the board and management accountable,” Fox said, pledging to continue to communicate with other shareholders.
