DEFA14A: Matthews International Responds to Barington Capital's Board Nomination, Affirms Long-Term Value Focus

Matthews International Corporation issued a statement in response to Barington Capital's nomination of three director candidates, reaffirming its commitment to long-term value creation and highlighting recent business performance.

Summary

• Matthews International Corporation has responded to Barington Capital's nomination of three director candidates for the 2025 Annual Meeting.
• The company's press release emphasizes the strong performance of its core businesses and the resilience of its team.
• Matthews highlights the benefits of pricing actions and strategic acquisitions in its Memorialization segment, along with cost control measures that have improved operating margins.
• SGK has reported three consecutive quarters of higher sequential sales and solid margins, driven by investments in e-commerce.
• The Industrial Technologies segment anticipates a demand recovery that should lead to meaningful revenue results in late fiscal 2025 and into 2026.
• Matthews is also focused on its Energy Solutions business, positioning itself to lead the transition to electric vehicles.
• The company has retained J.P. Morgan to evaluate potential strategic alternatives, reflecting its commitment to long-term value creation.
• Matthews has increased its annual dividend for the 31st consecutive year.
• CEO Joseph Bartolacci has overseen the company's growth from approximately $700 million in revenues in fiscal 2006 to approximately $1.8 billion today.
• The company's board has added two new independent directors over the past two years and three over the past five years.
• Matthews had a consulting agreement with Barington that expired, and the company attempted to continue consulting with them in October 2024, but Barington refused.
• The company is urging shareholders to wait for the definitive proxy statement before taking any action.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While the company highlights positive performance and strategic initiatives, the proxy contest initiated by Barington Capital introduces uncertainty and potential disruption. The company's response is defensive, aiming to reassure shareholders of its commitment to long-term value creation.

Positives

• The Memorialization segment has shown resilience through pricing actions and strategic acquisitions.
• SGK's consistent sales growth and solid margins indicate strong performance.
• The company's investment in e-commerce is driving revenue growth and organic business opportunities.
• The Industrial Technologies segment is poised for a demand recovery.
• Matthews is well-positioned in the Energy Solutions sector to capitalize on the transition to electric vehicles.
• The company's long-term commitment to value creation is evident through the strategic alternatives process.
• The 31st consecutive annual dividend increase demonstrates financial stability and shareholder commitment.
• The board's refreshment with new independent directors enhances governance and decision-making.

Negatives

• Barington Capital's decision to launch a proxy contest suggests a disagreement with the company's current direction.
• The company's previous consulting agreement with Barington has ended, and attempts to continue discussions were unsuccessful.
• The proxy contest could be costly and disruptive to the company's operations.

Risks

• Uncertainties regarding future actions by Barington could impact the company.
• Potential operational disruptions from Barington's actions could affect relationships with customers, employees, or partners.
• Changes in economic conditions, currency exchange rates, and interest rates could impact financial performance.
• Fluctuations in the cost of materials could affect manufacturing costs.
• Environmental liabilities and regulations could limit operations.
• Disruptions to third-party services could impact operations.
• Changes in mortality and cremation rates could affect the Memorialization segment.
• Competitive pressures could impact product demand and pricing.
• Supply chain disruptions, labor shortages, and cost increases could affect operations.
• Cybersecurity threats could lead to costs and disruptions.
• The outcome of the company's dispute with Tesla could have financial implications.
• Global conflicts could impact the company's operations and supply chains.

Future Outlook

Matthews expects a demand recovery in its Industrial Technologies segment to positively impact revenue in late fiscal 2025 and into 2026. The company is also focused on leading the transition to electric vehicles through its Energy Solutions business. The company is evaluating strategic alternatives to drive long-term value creation.

Management Comments

• Our recent operating results reflect solid performance by our core businesses and demonstrate the resilience of our team in the face of a challenging market environment.
• The fundamentals of our businesses and their long-term outlook are strong.
• The Board is dedicated to driving long-term value creation, and the strategic alternatives process is a reflection of that commitment.
• Under Mr. Bartolaccis leadership, Matthews remains dedicated to driving improved performance and sustainable growth for all of the Companys stakeholders.
• The Board will continue its regular refreshment and believes a variety of perspectives facilitates effective decision-making, helps drive long-term value, and encourages different views on risk, business strategy and innovation.
• The Matthews Board and management team are committed to serving in the best interests of all our shareholders, and as the evaluation of strategic alternatives underscores, we will continue to take actions that are in the best interests of driving long-term value creation for all our shareholders.

Industry Context

This announcement comes amid a proxy contest initiated by Barington Capital, highlighting potential disagreements on the company's strategic direction. The company's focus on e-commerce and electric vehicle solutions reflects broader industry trends towards digitalization and sustainability. The company's diversified business model across memorialization, industrial technologies, and brand solutions positions it to navigate various market conditions.

Comparison to Industry Standards

• Matthews' Memorialization segment competes with companies like Hillenbrand and Service Corporation International, and its focus on cremation and mausoleum products aligns with industry trends.
• SGK's move to e-commerce is similar to other brand solutions providers adapting to digital marketing platforms, such as those offered by companies like RRD and Quad.
• In Industrial Technologies, Matthews' focus on energy storage solutions and automation technologies places it in competition with companies like ABB and Siemens, who are also investing in these areas.
• The company's 31st consecutive annual dividend increase is a positive sign of financial stability and shareholder commitment, which is comparable to other established industrial companies with consistent dividend policies.

Stakeholder Impact

• Shareholders are impacted by the proxy contest and the potential changes to the board.
• Employees may be affected by the uncertainty and potential operational disruptions.
• Customers may be impacted by any changes in the company's strategy or operations.
• Suppliers and creditors may be affected by the company's financial performance and strategic decisions.

Next Steps

• The company will file a definitive proxy statement with the SEC.
• The company will mail the proxy statement and WHITE proxy card to shareholders.
• Shareholders will vote on the election of directors at the 2025 Annual Meeting.
• The company will continue to evaluate strategic alternatives with the support of J.P. Morgan.

Key Dates

Keywords

Matthews International, Barington Capital, proxy contest, board of directors, strategic alternatives, memorialization, industrial technologies, brand solutions, e-commerce, electric vehicles, dividend, shareholders