Some Destination Maternity shareholders voting for new blood on board

Destination Maternity Corp.'s annual shareholder meeting, set for 9:15 a.m. Thursday at its headquarters in Moorestown, could result in fireworks as a major stockholder from France wages a proxy battle.

It's a battle that has ignited other shareholders as well, including investor activist Tim Stabosz, who holds a 3 percent stake in Destination Maternity.

"I'm a material shareholder, so I'm glad to see the company is exploring other options," including a sale of the company. "I'd like to see Destination Maternity sold at a price of at least $3 a share or higher," said Stabosz, who lives in LaPorte, Ind., and has been a longtime shareholder.

A private-equity fund or another retailer might buy Destination Maternity, he said Wednesday, calling the company a bargain at its current $33 million market cap, or about $2.30 a share.

Barry Erdos, Destination's non-executive chairman, said Monday that the company is "exploring strategic alternatives" with its consultants and advisers, including Guggenheim Securities.

"Separately, the board is evaluating its composition and is prepared to add individuals who possess additional skills and experience which will help further Destination's growth," Erdos added in the statement.

Destination Maternity bills itself as the world's largest designer and retailer of maternity apparel. As of Jan. 28, the company operated 1,220 locations, including 515 stores in the United States, Canada, and Puerto Rico under the Motherhood Maternity, A Pea in the Pod, and Destination Maternity brands, as well as 705 leased department-store locations.

French children's-clothing retailer Orchestra-Prémaman — which made an offer to acquire Destination in October 2015, then entered into a later-terminated merger agreement in December 2016 – "now seeks to compel the resignation of the company's four directors eligible for reelection at this year's annual meeting, Destination said in a statement earlier this month.

Orchestra owns 1,921,820 shares, or 13.8 percent, of Destination Maternity stock and informed shareholders it would wage a proxy fight to unseat the board, but it has not put forth any names to replace those it wants out. Currently, Erdos, Michael J. Blitzer, Melissa Payner-Gregor, and B. Allen Weinstein sit on the board. They are seeking a new CEO.

Orchestra, for its part, has filed a series of dramatically worded letters with U.S. regulators, saying in one filing with the Securities and Exchange Commission this week that "the Status Quo Directors utterly refuse to address their devastating tenure at the controls of the company. But now, they actually have the audacity to try to convince you that the Status Quo Directors — the fiduciaries who have repeatedly delivered you poor results in the past — are suddenly motivated and capable of delivering you a rosy future. We think the only thing rose-tinted is their eyeware."

In its SEC filings, Orchestra also accused the Destination Maternity board of neglecting to hold a meeting of the Nominating and Governance Committees and refusing to commit to adding a specific number of directors.

Stabosz acknowledged that "it's puzzling" that Orchestra hasn't put forth its own slate of director nominees. Still, he said, he'll be voting with Orchestra Thursday.

"There's no reason why they shouldn't at least let Orchestra have one seat on the board. Then the management should get together a committee of large shareholders, like myself, and say 'We hear you. where do we go from here?' " he said. "It's time for new blood."