Activist investor Starboard Value LP has said it may take its activist campaign at RealD Inc. to the next level. The hedge fund said late Wednesday it was reserving its rights to take "any action" necessary to propel its unsolicited offer to buy all the shares it doesn't own in the 3D cinema technology provider for $12 each, a deal that values the company's outstanding shares at almost $600 million. "While we believe it would be in everyone's best interest to engage privately and constructively to explore a potential transaction, we must, however, reserve all of our rights to take any action we deem necessary in furtherance of our proposal," Starboard managing member Peter Feld said in a letter to RealD. Starboard's offer to buy the company was made Oct. 1. Starboard owns a 9.9% stake in the Beverly Hills, Calif., company. Feld's letter suggested that activist managers at the New York fund are frustrated that they haven't yet received a response to their request for a meeting to discuss the bid. Next moves could include launching a proxy contest to elect dissident directors or preparing a tender offer to gauge investor sentiment, people familiar with Starboard noted. The activist fund has launched proxy contests frequently in the past to effect change at businesses, most recently at Darden Restaurants Inc. where, earlier this month, Starboard was successful in getting its 12-person board slate elected as part of an effort to press a three-way company split. However, electing a control slate to the board would be difficult since the board is classified. Also, RealD prohibits activists from calling special shareholder meetings, according to an Institutional Shareholder Services Oct. 30 report, which was obtained by The Deal, pushing any proxy contest to the company's annual 2015 meeting which will likely take place next August. RealD has a potential blockbuster slate of movies in the works for 2015 that includes "Fifty Shades of Grey," "Jurassic World," "Star Wars: Episode VII" and updates to the "Terminator" and "Mad Max" franchises. Starboard's Peter Feld said in the letter that managers at the fund have talked to a number of shareholders, adding that "not a single" investor believes maintaining the status quo is acceptable. Though the letter didn't detail the names or number of investors contacted, Feld said he believes RealD should explore strategic alternatives, including a potential sale of some sort to "maximize" shareholder value. He added that Starboard is willing to participate in a competitive process. Analysts have suggested that Dolby Laboratories Inc. or Imax Corp. IMAX could look be interested in acquiring RealD. Officials from RealD did not respond to requests for comment. Some observers argued that Starboard, which for the most part doesn't make acquisitions itself, would likely prefer to have their bid push RealD to find a strategic acquirer that will pay a premium acceptable to the fund. But Starboard is also said to be serious about acquiring RealD, according to a person familiar with the firm's thinking. For example, in 2010, Starboard's predecessor firm Ramius LLC (now part of Cowen Group) acquired Cypress Bioscience Inc. along with drug licensing company Royalty Pharma for $255 million, a 63% premium over the fund's initial offer to buy the biotech, according to a statement. Starboard may have some large shareholder supporters in its RealD campaign. In February, Altai Capital Management LP, a 9.8% RealD holder, shifted its filing status from passive to active and announced it was holding discussions with management. In a statement earlier this month, RealD said that the company's board and advisers would review the unsolicited bid and is always open to "constructive dialogue" with investors about opportunities to increase stockholder value. However, Feld said in his most recent letter that the company's lack of response to a request for a meeting was "surprising and disappointing" given RealD's claim it was open to constructive dialogue with investors. RealD is scheduled to report second-quarter financial results on Nov. 3. Wachtell, Lipton, Rosen & Katz is providing counsel to RealD on the offer from Starboard. Steven Wolosky of Olshan Frome Wolosky LLP, is advising the activist fund. RealD shares closed Wednesday at $11.19 a share. The shares had been slumping before the unsolicited bid was made.
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