Investor Demands That RIM Either Changes Governance or Sells Company

RIM shareholder Jaguar Financial has renewed its urge for the Waterloo company to change its corporate governance and also to sell RIM in whole or in parts.

Jaguar notes that in 2007, chairman and CEO roles were supposed to have been separated, but the process was never completed. Citing an article published by H. Garfield Emerson, a governance advisor who currently sits on the Boards of Canadian Tire, Jaguar points out the following quote: “Consistent with current best practices in corporate governance, the roles of Chairman and CEO are being separated. Mr. Balsillie has voluntarily stepped down from the role of Chairman to allow future consideration of a non-executive Chairman by the Nominating Committee.”

This was in March of that year. In May, RIM issued an announcement that included a disclosure stating “the roles of Chairman and CEO have been separated.” And the company announced that Jim Balsillie was resigning as Chairman “to allow future consideration of a non-executive Chairman by the Nominating Committee.”

Today, it’s easy to observe that this never happened.

Jaguar is pleading for RIM board members, most notably Barbara Stymiest and Roger Martin, to trigger change. Barbara, who self-describes herself an expert in corporate governance, and Dean Martin, a management school dean, are being urged to influence dramatic change of RIM’s executive team.

But in addition to shedding the dead skin of RIM’s corporate governance, Jaguar also wants to see money flood in through a whole or parts sale of the struggling company. Highlighting the fact that the aforementioned sea change is unlikely, Jaguar suggests focusing on selling.

“At this point we believe investors have lost faith in the ability of the RIM management team to carry out a proper game plan to restore value,” Vic Alboini, Chairman and CEO of Jaguar said. “Unless the independent directors push to replace management or change RIM’s strategic focus, Jaguar believes that the road map to value restoration lies in a sale of RIM whether as a whole or in separate parts.”

Given its poor operational and financial performance, RIM is trading at a significant discount to its peer group valuation.

Jaguar believes that RIM should sell its handset business and monetize its patent portfolio, while retaining its service business under new leadership. Jaguar believes RIM has lost its ability to compete in the consumer hardware business and a sale or spinout to its shareholders of the handset business is recommended as an approach to restoring value.

Jaguar believes the service business is RIM’s most valuable business given its recurring revenue and estimated high margins.   If the hardware business were sold, RIM can focus on managing and delivering mobility solutions in the enterprise sector for all smartphones and tablets.  With its secure messaging platform, Jaguar believes RIM could create considerable value as a software and service provider.

Jaguar is a Canadian merchant bank which “invests in underperforming, undervalued or unappreciated companies and acts as a catalyst to create value.”