Over the past couple of years, ValueAct Capital Partners, an activist shareholder fund, has been targeting Acxiom (Nasdaq: ACXM) for a buyout. The hedge fund accumulated a 13.2% stake, waged a proxy fight, got two board seats, and even teamed up with Silver Lake Partners to buy the company for $2.25 billion. But Wall Street quickly turned sour on the deal, and as of last Friday, there was a significant spread between the stock price and the buyout offer. The stock fell an additional 19% yesterday, when ValueAct said it plans to ditch the transaction.
Acxiom develops technologies to help companies acquire customers. It focuses primarily on large companies, including Citigroup (NYSE: C), GE (NYSE: GE), and IBM (NYSE: IBM). But its performance has been mixed. For example, according to the proxy statement for the buyout, Acxiom's CEO, Charles Morgan, said in early May that the company needed "significant operating cost reductions" and was considering "significant investments." The upshot would be a negative impact on earnings for the next six to 18 months.
In fact, the deterioration was apparent in Acxiom's fiscal first-quarter results, which came out in late July and showed a net loss of $0.15 per share.
In light of all these troubling signs, I can understand why Morgan wanted a buyout. It would have saved shareholders a lot of pain. What's more, being a private company would have relieved management of dealing with the pressures of meeting quarterly expectations.
But with the credit crunch, it's now much tougher to get buyouts done. Just look at the troubles at Harman International (NYSE: HAR), where the buyers walked away from the $8 billion deal. As a result, the stock price collapsed.
So for the most part, Acxiom is in a bad spot. Morgan announced that he is going to retire, and even though he says he won't leave until a successor is chosen, the move is likely to be disruptive. More importantly, it looks as though the company will need some time just to get back on track. It's probably best for Foolish investors to stay away.
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