Business

Boardroom brawl: Activist investors face off over ModusLink seats

(
)

Activist investor Warren Lichtenstein, who’s notorious for his bare-knuckle tactics in corporate brawls, is about to get hit from behind.

Lichtenstein’s Steel Partners Holdings is poised to launch a proxy fight for three seats on the board of troubled supply-chain company ModusLink after amassing a 15 percent stake.

What he didn’t know is that a fellow ModusLink shareholder is set to wage a rival contest for board seats as well, The Post has learned.

Peerless Systems Corp., which owns 2.4 percent of ModusLink, wants to block Lichtenstein and plans to nominate its own slate of directors, sources said.

The competing moves set the stage for a three-way tug of war involving the company.

In one corner, there’s Lichtenstein, who is widely seen as an aggressive corporate brawler. He famously drew fire from fellow activist Carl Icahn over his controversial plan to curtail redemptions from his hedge fund, Steel Partners, which he eventually converted into a holding company.

In the other corner, there’s Peerless, a publicly traded technology licensing company run by another former hedge fund manager and activist investor, Tim Brog. He won one seat on the ModusLink board in a proxy contest last year and is gearing up to take another run at the company.

ModusLink has what’s known as a staggered board. That means only three directors will be up for election at the upcoming shareholder meeting, which could be scheduled in December based on past years.

In June, ModusLink took a major dive after the company announced “serious accounting deficiencies” requiring it to restate its audited financial statements as far back as 2007.

CEO Joseph Lawler and the head of global operations were forced to step down. The stock, which had been trading at close to $5 a share, plummeted to $2.60 on the news. Yesterday, the shares fell 3 percent to $3.35.

Meanwhile, the company has hired Goldman Sachs to explore strategic alternatives, including a sale.

Brog is worried Lichtenstein is seeking to buy ModusLink at the expense of other investors, according to a person familiar with his thinking.

At issue are some $2 billion in net operating losses on ModusLink’s books. The so-called NOLs could prove valuable to Lichtenstein by allowing him to offset earnings from other holding companies, thereby reducing his tax bill.

“He has a different agenda than other shareholders,” said the person.

Neither Brog nor Lichtenstein would comment.

It won’t be the first time Lichtenstein has butted heads with a fellow investor. In 2008, Ichan sued Lichtenstein over his hedge-fund conversion plan, calling it a “classic bait and switch” because investors would be paid partly in shares of the new company, Steel Partners Holding. A court sided with Lichtenstein by approving his conversion plan.