WASHINGTON-Motient Corp. last week said company Chairman Steven Singer and four other directors would not seek re-election at the wireless company’s annual meeting, a development that comes at a time when Highland Capital Management L.P.-the largest single investor in Motient-is lodging a proxy fight to overhaul the board.
Motient, with a legacy wireless data network and significant ownership in two mobile satellite service companies, said board changes are not a response to Highland’s campaign to oust Motient’s entire board of directors. Last Monday, RCR Wireless News reported on internal and external challenges facing Motient-a Pink Sheets stock with a $1.4 billion market capitalization-as it attempts to leverage regulatory changes giving struggling MSS licensees greater flexibility in how they can use valuable spectrum received they received for free.
“In preparation for the 2006 annual meeting of our stockholders, our nominating committee has decided to reconstitute the board to best support Motient’s strategic direction and protect and serve our stockholder’s interests,” said Motient. “Gerald Goldsmith, Gerald Kittner, Steven Singer, Jonelle St. John and Barry Williamson provided Motient with invaluable expertise and insight over the last few years and we thank them for their contributions. Despite Highland’s meritless allegations, they are departing with successful track records of service.”
Highland, a Dallas-based hedge fund which manages $20 billion in assets, has filed various lawsuits-the most recent on April 25 in Delaware-accusing Motient of gross mismanagement, extensive board and management self-dealing, financial reporting deficiencies, poor operating performance and conflicts of interest.
On April 12, Highland sent Motient a letter demanding to inspect its books and records. When Motient refused, Highland filed suit in the Delaware Court of Chancery to force the issue.
Motient gave notice of board departures and proposed replacements in filings last week at the Securities and Exchange Commission. Motient said it plans shortly to set a date for its annual shareholders meeting.
“As we move forward with our strategic plan, a board composed of individuals who bring new perspectives and industry expertise to the task of guiding the pursuit of our next phase of development will enhance our efforts. Raymond Steele, David Meltzer, Jacques Leduc, David Grain and David Andonian come to Motient with a wealth of industry and operational expertise that is directly relevant to the needs of Motient and our interests in MSV and TerreStar.” The five men are current board members. The new board pushed by Motient also would include Robert Brumley, president and chief executive officer of TerresStar Networks Inc.
Motient holds 61 percent and 49 percent stakes in TerreStar Networks and Mobile Satellite Ventures L.P., respectively.
“Highland remains committed to ensuring Motient has a board and new management team that is working in the best interests of Motient stockholders,” said Denise DesChenes, a spokeswoman for Highland.
Kittner, chairman of Motient’s nominating committee, stated, “I am proud to have served Motient over the past several years, as are my colleagues on the board. Together, we have navigated the company forward despite the adversarial initiatives of Mr. Dondero and Highland Capital. Though meritless, Mr. Dondero’s attacks increased the complexity of many issues, yet the board was able to accomplish each one of its goals.”
Motient, which emerged from bankruptcy in 2002, lost $158.4 million on revenues of $13.8 million in 2005. Motient had revenues of $36.9 million and $54.5 million in 2004 and 2003, respectively.
The Lincolnshire, Ill., company is betting on new satellite architecture-approved by the Federal Communications Commission in 2003-allowing MSS operators to supplement networks with land-based cellular networks. Doing so would enable MSV, TerreStar and other MSS operators to deliver service to small handheld wireless phones, rather than large satellite phones used by government, but largely a dud in the consumer space. Motient’s MSS business model is also based on joining forces with a major telecom partner, such as one of the major satellite TV operators.
Motient said Highland’s president and founder, James Dondero, are using lawsuits to further a broader agenda.
Christopher Downie, chief operating officer of Motient, is quoted as saying, “Jim has been seeking to take control of Motient by selectively disclosing non-public, misleading information to manipulate the stock and by soliciting the replacement of Motient’s current board and management.”
Last Thursday, Motient filed a preliminary proxy statement with the SEC, but it did not include the date, time or location of its upcoming annual stockholders meeting. The preliminary proxy statement made explicit reference to Dondero’s challenge.
“You should also be aware that a group of funds controlled by Mr. James Dondero… a former director of your company, which own about 8.7 percent (percentage does not include preferred stock and warrants held by Dondero) of the company’s outstanding common stock, announced that it intends to nominate a slate of directors and solicit proxies in opposition to the board’s recommendations, or to seek consents to elect them, and seize control of Motient’s board of directors. If Dondero does begin such a solicitation, the board will communicate further with you in due course,” reads the preliminary proxy statement.
Highland said it owns approximately 14 percent of Motient’s common stock.
