Hawaiian Telcom’s largest shareholder, which owns nearly a quarter of the company, is seeking to increase its stake to 31.5 percent and occupy a seat on the board of directors.
The state’s largest telecommunications company said Thursday it has reached an agreement with Connecticut-based investment firm Black Diamond Capital Management LLC to nominate Senior Managing Director John Fontana or another Black Diamond representative to the Hawaiian Telcom board during the next three annual meetings of shareholders.
Black Diamond has been been investing in the company since 2012 and holds a 23.1 percent stake. Shares in Hawaiian Telcom, which closed Thursday at $22.57, are down 9.2 percent this year but up 46.6 percent since the start of 2012.
Hawaiian Telcom, which has a nine-member board, will have its next shareholders meeting in April.
“The investment Hawaiian Telcom has made in the state’s broadband infrastructure uniquely positions the company to increase both its margins and its market share in the growing broadband and cloud-services industry,” Fontana said in a statement. “I’m confident in the direction and leadership of the management team and look forward to working with the board to execute the company’s strategic plan, ultimately unlocking additional value at Hawaiian Telcom.”
When asked whether Black Diamond plans to buy a controlling interest in Hawaiian Telcom, Fontana said, “We’re an investor. We’re not a big electric utility and not a big telco. Our statement really stands on its own.” Fontana added that the statement “doesn’t say anything about taking over the company, taking control, doesn’t say ‘dissatisfied’ and doesn’t say ‘hostile.’”
Black Diamond and Hawaiian Telcom signed a three-year “standstill agreement,” a contract between the parties to refrain from taking further action. It can stall or stop the process of a hostile takeover or limit the number of shares purchased by a buyer.
Fontana didn’t want to discuss any changes he’d like to see at Hawaiian Telcom.
“I’m not trying to stonewall you or duck you, but it’s really a three-year standstill agreement,” he added. “Should the board adopt my nomination and vote on it and put me on the board of directors, I may have more to say.”
Hawaiian Telcom President and CEO Scott Barber said the company is looking forward to having Fontana on the board.
“We are confident that Black Diamond’s expertise and John’s advice as a board member will enhance our shared objective to increase shareholder value,” Barber said in a statement. “This agreement provides a means for Black Diamond to be actively engaged with us. We look forward to wide ranging and open discussions with John Fontana.”
Fontana oversees a number of Black Diamond’s key investments and has direct corporate operational experience as well as experience managing companies on behalf of well-established investment firms. Prior to joining Black Diamond, Fontana was president of Yankee Candle International, and his prior positions included serving as a partner with Deloitte &Touche in its leveraged-transactions group.
Hawaiian Telcom said that as part of the agreement, it will submit a letter to the state Public Utilities Commission in support of Black Diamond’s petition to increase its ownership stake in the company to 31.5 percent.
“The upshot is that this is good news because we have a company that wants to purchase more of our shares,” said Hawaiian Telcom spokeswoman Su Shin.
