|[February 20, 2014]
Sensient Announces Response to Activist Hedge Fund
MILWAUKEE --(Business Wire)--
Sensient Technologies Corporation ("Sensient" or the "Company")(NYSE:
SXT) has received a letter from FrontFour Master Fund, Ltd., an exempted
company formed under the laws of the Cayman Islands, expressing its
intention to nominate four individuals to Sensient's Board of Directors
at the 2014 Annual Meeting of Shareholders. Sensient has not announced
the date of the 2014 Annual Meeting of Shareholders.
FrontFour Capital Group LLC ("FrontFour"), investment manager of
FrontFour Master Fund, Ltd., is a self-described "event-driven" activist
hedge fund from Greenwich, Connecticut. FrontFour and its affiliates
only recently acquired an interest in Sensient beginning in July 2013.
As of December 31, 2013, FrontFour and its affiliates reported control
of approximately 0.7% of Sensient's outstanding shares of common stock.
Since December 31, 2013, FrontFour and its affiliates have acquired
control over additional shares and currently appear to control
approximately 1.5% of Sensient's outstanding shares of common stock.
In the event FrontFour were to file a proxy statement in support of its
proposed slate of directors, the Board of Directors of Sensient
Technologies Corporation would strongly oppose FrontFour's four director
candidates. FrontFour is plainly seeking to exploit Sensient's strong
financial position and industry-leading businesses for short-term gains
that are not in the long-term interests of Sensient's shareholders and
other stakeholders. FrontFour's stated plans would be disruptive and
would imperil the continued successful implementation of Sensient's
strategy. Furthermore, FrontFour's opinion that the Company's capital
structure is sub-optimal is incorrect, as it completely ignores the
clear benefits of Sensient's very strong balance sheet and credit
Sensient recently reported its fourth consecutive year of record revenue
and earnings. Since 2009, Sensient has grown its diluted earnings per
share, before restructuring expenses, at a compound annual growth rate
of 9%. During this period Sensient has made strategic investments and
operational improvements that position the Company for future growth. In
2013, Sensient's management realigned its businesses to accelerate
growth, increase margins and generate attractive returns to
shareholders. Sensient's fourth quarter 2013 earnings per share,
excluding restructuring charges, were up 15% over the prior year's
results. Profits and margins in both the Color Group and in the Flavors
& Fragrances Group were higher in the fourth quarter of 2013 compared to
the prior year. Indeed, FrontFour and its affiliates have realized
approximately a 33% annualized return on shares of Sensient's common
stock purchased in July 2013. Sensient's strategy is delivering results
and it will continue to drive growth in profits and margins over the
next year and beyond.
Over the last twelve months, Sensient has successfully implemented a
broad and strategic restructuring plan to generate significant savings
and create a more efficient organization. The plan, which was
successfully completed in less than twelve months, will deliver
annualized pre-tax savings in excess of $12 million.
Sensient also continues to strengthen its Flavors & Fragrances business.
During 2013, Sensient completed a global realignment of its Flavor
business around the three key customer segments of Sweet, Savory and
Beverage. The realignment of the Flavor organization better focuses
commercial and technical activities to leverage our global expertise and
deliver innovation to customers. Sensient also relocated its Flavors &
Fragrances global headquarters and U.S. management to a new
state-of-the-art facility in the Chicago suburb of Hoffman (News - Alert) Estates. The
new location provide better access to customers and employee talent. As
a result of these actions in 2013, Sensient's Flavors & Fragrances
business has bright prospects for growth in 2014 and beyond.
In February 2014, the Board of Directors elected Paul Manning to the
position of President and Chief Executive Officer because of his track
record creating exceptional and sustainable growth within Sensient's
Color Group. Since 2009, the Color Group's operating income has grown at
a compound annual rate of 15%. The Color Group's operating margin in
2013 reached 21%, its highest level in over ten years. Paul Manning's
effective leadership of Sensient's Color Group irrefutably demonstrates
that he is the business leader best able to lead the strategic growth
and development of Sensient and its Flavors & Fragrances business.
And that strategy is already succeeding. Sensient's shareholder base has
been very receptive of Sensient's strategy to grow the business,
particularly its strategy to improve the Flavors & Fragrances business.
Over the last twelve months, Sensient has generated a total return to
shareholders of 37.3%. This return was in excess of the returns earned
by the Russell 2000 index, the S&P Midcap 400 index and Sensient's
specialty chemical peers, including International Flavors & Fragrances.
Sensient's strategy will continue to focus on increasing returns to
shareholders. In addition to strategic investments that will grow the
Company's operating profit, Sensient has consistently returned capital
to shareholders. Sensient's annual dividend payments to shareholders
have increased in each of the last eight years. Over this period,
Sensient's quarterly dividend payment has increased 53%.
In short, Sensient is an extremely strong company with a very healthy
balance sheet. As a result, it is an attractive target for short-term
investors looking to "extract" value through an "event" without any
consideration for the long-term financial strength of Sensient.
FrontFour's letter suggests several possible "events" that would be in
its own self-interest, but plainly not in the best interests of
Sensient's long-term shareholders, customers, employees and other
stakeholders. An unduly large stock buyback or the sale of one or more
business units at this time would create uncertainty and a lack of
financial flexibility as Sensient continues to invest in its businesses.
Any such event would create an enormous obstacle to the continued
implementation of the Company's strategy.
Additionally, based upon a preliminary analysis, FrontFour's nominees
for Sensient's Board of Directors appear to be career activists with
very close relationships to FrontFour, spotty track records on creating
shareholder value, questionable motives and little to no experience in
the very Flavors and Fragrances business they are allegedly aiming to
"fix." Furthermore, their attributes, skills and experience pale in
comparison to those of Sensient's current Board of Directors and
potential future directors that have been and will continue to be vetted
by Sensient's Nominating and Corporate Governance Committee.
Significantly, FrontFour has never approached Sensient with any concerns
about our results, financial condition, strategy or any other business
issue. Instead, FrontFour has chosen to spring its alleged concerns on
Sensient in an abrupt manner calculated to cause disruption and to
promote FrontFour's self-interested agenda.
In connection with its 2014 Annual Meeting of Shareholders, Sensient
will file a proxy statement and other documents regarding the 2014
Annual Meeting of Shareholders with the Securities and Exchange
Commission ("SEC (News - Alert)") and will mail the definitive proxy statement and a
proxy card to each shareholder of record entitled to vote at the 2014
Annual Meeting of Shareholders.
SHAREHOLDERS ARE ENCOURAGED TO READ THE PROXY STATEMENT AND ANY OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE. THEY
WILL CONTAIN IMPORTANT INFORMATION.
Investors and security holders will be able to obtain the documents free
of charge at the SEC's website, www.sec.gov,
from Sensient at its website, www.sensient.com,
or by writing to Sensient Technologies Corporation, 777 East Wisconsin
Avenue, Milwaukee, WI 53202, Attention: Investor Relations.
Participants in Solicitation
The Company and its directors and executive officers may be deemed to be
participants in the solicitation of proxies in connection with the 2014
Annual Meeting. Information concerning the Company's participants is set
forth in the proxy statement, dated March 15, 2013, for its 2013 Annual
Meeting of Shareholders as filed with the SEC on Schedule 14A.
Additional information regarding the interests of participants of the
Company in the solicitation of proxies in respect of the 2014 Annual
Meeting of Shareholders and other relevant materials will be filed with
the SEC when they become available.
This release contains forward-looking statements (as that term is
defined in the Private Securities Litigation Reform Act of 1995) that
reflect management's current assumptions and estimates of future
economic circumstances, industry conditions, Company performance and
financial results. A variety of factors could cause the Company's
actual results and experience to differ materially from the anticipated
results, including, but not limited to the factors noted in this press
release and in the Management's Discussion and Analysis in our most
recently filed annual report on Form 10-K for the year ended December
31, 2012, and quarterly report on Form 10-Q for the quarter ended
September 30, 2013. The forward-looking statements in this press release
speak only as to the date of this release. Sensient Technologies
Corporation expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to such statements to reflect any
change in its expectations upon which such statements are based.
ABOUT SENSIENT TECHNOLOGIES
Sensient Technologies Corporation is a leading global manufacturer and
marketer of colors, flavors and fragrances. Sensient employs advanced
technologies at facilities around the world to develop specialty food
and beverage systems, cosmetic and pharmaceutical systems, inkjet and
specialty inks and colors, and other specialty and fine chemicals. The
Company's customers include major international manufacturers
representing most of the world's best-known brands. Sensient is
headquartered in Milwaukee, Wisconsin.
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