Activist investor pushes Shutterfly to pursue a sale

Staff Writer
Columbus CEO

SAN FRANCISCO (AP) — Activist investor Ancora Advisors is stepping up the pressure on photo sharing service Shutterfly to negotiate a sale of the company or reshuffle its board of directors if a deal can't be quickly worked out.

Ancora outlined its demands in a letter sent Monday to Shutterfly's interim CEO, Philip Marineau.

The Cleveland investment fund wants Shutterfly Inc. to reach out to potential bidders following the company's disclosure last month that it had received an unsolicited offer from an unnamed private equity firm.

Ancora's letter identified the suitor as Thomas H. Lee Partners, a private equity firm in Boston.

Shutterfly declined to comment on Ancora's letter. Thomas Lee Partners also declined to comment.

When it revealed the overtures about a potential sale, Shutterfly said that its board wasn't negotiating a deal.

"We believe it would be extremely irresponsible of the board to dismiss this unsolicited bid and eschew a strategic review," Ancora CEO Fred DiSanto wrote in the letter.

Ancora sent its letter a week after another Shutterfly shareholder, Eastbay Asset Management, urged the company to explore a sale.

Eastbay Asset is among Shutterfly's largest shareholders with a 5.4 percent stake, according to FactSet. Ancora owns a 0.3 percent stake.

Shutterfly is currently looking for a new CEO after its longtime leader, Jeff Housenbold, stepped down last month.

Ancora contends the transition to a new CEO makes it an ideal time for Shutterfly's board to gauge how much the Redwood City, California, company might fetch in a sale. Shutterfly currently has a market value of about $1.6 billion.

If no deal emerges before Shutterfly's next annual meeting in June, Ancora wants the company to replace two directors, venture capitalists Eric Keller and Nancy Schoendorf, on its eight-member board. Keller has been on Shutterfly's board since 2006 and Schoendorf has held her seat since 2004.

Ancora believes Shutterfly needs more "shareholder-minded" directors on its board.

Shutterfly was forced to shake up its board last year after another activist investor, Marathon Partners, led an uprising. That revolt ushered in two new directors, Mario Cibelli of Marathon Partners and Thomas Hughes of Cedar Groves Investments.

Shareholders are frustrated because Shutterfly's stock stands about 30 below a high of $66.70 reached nearly five years ago. The Standard & Poor's 500 index has climbed by about 45 percent during the same stretch.

Shutterfly's shares gained 20 cents to $46.71 in Monday's afternoon trading.