Agilysys Appoints New Board Member, Selects Special Committee to Weigh Options

July 14, 2008 Timothy Prickett Morgan

In mid-June, server reseller and application software provider Agilysys, which has a substantial presence in the i ecosystem and is a significant driver of Power Systems and Modular Systems sales for IBM, said that it had hired JPMorgan Chase to explore the possible future strategies of the company, including the possibility of selling some or all of the company. Those plans are moving ahead.

The Boca Raton, Florida, company that they are all focused on has shifted away from IT distribution and toward supplying IT solutions to end users, hoping to go where the profits are higher. What has happened instead is that Agilysys has radically shrunk its revenue base and still not been able to wring profits from its business. The company lost money from fiscal 2005 through fiscal 2007, and squeaked out a small $4.2 million profit after boosting revenues by 65 percent to $781 million in fiscal 2008–a lot of that growth came through acquisitions. Even though this is a big improvement, the weakening IT market has undoubtedly put a lot of heat on the managers of the company–particularly Arthur Rhein, who is president, chief executive officer, and chairman of Agilysys.

On June 24, after we were off press for the July 4th holiday here in America, Agilysys said that it had formed a special committee to analyze whatever options JPMorgan Chase comes up with. The company also said that Curtis Crawford, who did not plan to run for re-election to the Agilysys board at its impending 2008 annual shareholder meeting, decided to step down from the board now rather than wait for that meeting, which was postponed because of the JPMorgan Chase efforts. In his place, Andrew Cueva, has been tapped to fill a vacancy on the board. Cueva has been a managing director of MAK Capital, a New York hedge fund, since January 2005, and it just so turns out that this hedge fund owns 18 percent of Agilysys. So it is very little surprise that Cueva has a seat on the board. Ramius, another investor in Agilysys that has about 9 percent of the company, has proposed three people from its ranks– John Mutch, Steve Tepedino, and James Zierick–for election to the board, which will happen in August when the shareholder meeting is finally held. That meeting was delayed in June when JPMorgan Chase was engaged to do its analysis.

Cueva is also serving on the special committee that is analyzing the options Agilysys has to maximize shareholder value, and so are board directors Thomas Commes and Howard Knicely (who will co-chair the committee), with Keith Kolerus and Robert McCreary rounding out this committee.

“The independent members of the special committee are highly qualified to analyze all of the strategic alternatives available to our company,” explained Rhein in a statement. “They possess a broad range of business experience and have gained substantial knowledge about Agilysys either as members of the board or as a long-term major shareholder. We are confident of their ability to present prudent recommendations for the full board to consider on behalf of all of Agilysys’ stakeholders.”

That statement went on to say that the options presented by JPMorgan Chase and deliberations of the board would not be made public, and that only the plan that the board decides upon (if it decides to take any of the advice it gets from the bank) will be revealed. Agilysys is a public company, so there may be some way to find out what the possible plans are. And tongues will probably wag, even if there isn’t a way to find out through proper channels.

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