BKF Capital boots Qualstar CEO in battle for control
The battle for control of Simi Valley-based Qualstar Corp., a data storage and power supply maker, appears to have ended in victory for Steve Bronson and Florida-based BKF Capital Group.
The investment firm started grappling with the Qualstar’s brass more than year ago, when it began a proxy contest to replace board members and executives. At the time, longtime-CEO and company co-founder Bill Gervais had recently retired and still owned more than a quarter of the company, whose tape-based data storage business was struggling in a competitive global market.
BKF, meanwhile, had amassed more than 18 percent and continued to strengthen its ownership position. In an acrimonious proxy contest last summer, the investment firm argued that Qualstar’s current leadership team was unfit to turn the money-losing firm around and that newly appointed CEO Larry Firestone’s pay was oversized given Qualstar’s precarious condition. The company’s leaders, on the other hand, argued that BKF was trying to shake loose cash from Qualstar’s balance sheet without regard for the Simi Valley firm’s future.
BKF narrowly lost at the firm’s 2012 annual meeting, and then put forth and withdrew a tender offer to buy the company earlier this year. Qualstar’s leaders balked, saying the offer didn’t give existing shareholders — many of whom were insiders — a sufficient premium for the change in control.
This summer, BKF again mounted a proxy battle, and the language was no kinder than the first round. Despite proxy advisory firms Glass Lewis and ISS recommending against the BKF slate, the Florida group emerged victorious on June 28. BKF’s board nominees were elected and promptly installed Bronson as interim CEO and sacked Firestone, filing a lawsuit against him on allegations of breaching fiduciary duties to the company.
Philip Varley, the company’s chief financial officer, said he could not comment on the lawsuit but that Qualstar’s new leaders are working swiftly to craft a turnaround plan.
“The strategy is going to be to expand significantly internationally and use Mr. Bronson’s extensive contacts in Asia to generate sales over there,” Varley told the Business Times, noting that the company only gets about half of its sales from international markets at present.
Qualstar also terminated several other executives that were brought aboard during Firestone’s tenure. It said it also expects to close an office in Denver that Firestone and his team used and will relocate all executive functions in Simi Valley, for an estimated savings of $1 million.
“I believe that it is vital for any successful turnaround that executive management works closely with the rest of their team and that expenses need to be controlled and reduced wherever possible,” Bronson said in a release.
It is not yet clear what the impact of the change in control will be for Qualstar’s employees. In its most recently filed annual report, the company said it had 68 employees, with 21 of them in operations and manufacturing.
However, Firestone implemented a outsourcing program for manufacturing, and the company has not filed updated employment figures.
Bronson, meanwhile, is currently the CEO of Camarillo-based Interlink Electronics, another struggling technology firm. He appears to have staunched the cash bleeding at that company. Between 2010 and 2012, Interlink’s revenues dropped from $8 million to $6.4 million, but its net loss narrowed from $1 million in 2010 to $136,000 for the end of 2012. The company has also turned modest quarterly profits this year.