Minneapolis – Wednesday, June 6, 2018 — Groveland Capital, LLC today announced that it has sent a letter to the Board of Directors of Donnelley Financial Solutions (NYSE: DFIN) requesting a meeting and strongly recommending that Donnelley’s Board of Directors announce a plan to explore strategic alternatives. The body of the letter is as follows:
Dear Board of Directors:
Groveland Capital has a significant ownership stake in Donnelley Financial Solutions, Inc. (NYSE: DFIN) (“Donnelley” or “DFIN” or the “Company”) and has been a long-term holder of the stock. Needless to say, we’re very disappointed in the Company’s stock performance since it became an independent public company back in October 2016. The stock closed at $22.97 per share on October 3, 2016 and as of June 4, 2018 the stock closed at $15.47 per share, or a decline of approximately 33% compared to the S&P 500, which has risen about 31% (excluding dividends) during that same timeframe.
DFIN’s stock performance is unacceptable to shareholders and clearly indicates a failed spinoff as well as an uninspiring investor day. The stock has declined approximately 10% since management revealed its 5-year plan on May 22nd. With DFIN now trading at 5.0x projected Non-GAAP 2018 EV/EBITDA, it appears that the market has lost confidence in the management team. It is now up to the board of directors to instill confidence in an increasingly frustrated shareholder base. Groveland is strongly recommending that the board of directors announce a plan to explore strategic alternatives. It is our belief that DFIN’s stakeholders would be best served in pursuing the business plan/transition to SaaS currently underway as either a private company (outside of the public spotlight) or as a subsidiary of a larger complementary company, where top and bottom-line growth synergies could be achieved.
Recent financial services M&A transactions are being executed at significant premiums to DFIN’s current valuation. Intralinks sold for approximately 4.0x revenue to Siris Capital, Lionbridge Technologies sold for about 10.4x EV/EBITDA to H.I.G. Capital, and DST Systems was acquired for 13.8x EV/EBITDA by SS&C Technologies. Even Broadridge Financial Solutions, a competitor with print exposure, is trading at 17.0x projected 2018 EV/EBITDA. A conservative 7.0-8.0x multiple of projected Non-GAAP 2018 EV/EBITDA would value DFIN at $25-30 per share or a 62-94% premium over the current market price.
It is the fiduciary duty of DFIN’s board to safeguard the interests of shareholders. We request the opportunity to discuss this letter with the board in person where we will provide insight into other value-enhancing initiatives that we believe can be pursued to immediately increase shareholder value.
ABOUT GROVELAND CAPITAL, LLC
Groveland Capital is a nimble advisory focused on unearthing unique investment opportunities. Based in Minneapolis, Groveland’s insight and global network is complemented by our billion dollar+ fund experience and expertise. Groveland is led by a seasoned team of investment professionals who have continuity, vision and over a decade of experience executing key elements of our investment strategy. For more information, please visit www.grovelandcapital.com.