Marathon Partners Delivers Letter to e.l.f. Board

NEW YORK, Dec. 3, 2019 /PRNewswire/ -- Marathon Partners Equity Management, LLC, a New York-based investment firm, and its affiliated investment funds (collectively "Marathon Partners"), which beneficially own approximately 7.8% of the common stock of e.l.f. Beauty, Inc. ("e.l.f." or the "Company") (NYSE: ELF), announced today that it has delivered a letter to the Company's Board of Directors (the "Board") recommending that the Board seek a sale of the Company through a strategic alternatives process.

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In its letter to the Board, Marathon Partners outlines its belief that there is ultimately one solution to the Company's languishing share price - e.l.f. needs to sell itself through a competitive auction process. Marathon Partners shared its view that an announced strategic alternative process will inject needed discipline into the Board's deliberations and provide benchmark values to critically evaluate against management's current standalone plan.

Mario Cibelli commented, "After multiple years of share price under-performance and no operating progress since the IPO, it is time for the Board to act in the best interests of shareholders and initiate a strategic alternatives process to sell the Company. e.l.f.'s CEO has been richly rewarded over the past three years despite not delivering for shareholders, and it is time to seek out alternative strategies for enhancing shareholder wealth."

Mr. Cibelli continued, "We believe e.l.f. shares are currently worth approximately $22 to $27 per share to strategic buyers and that it will be highly challenging for an independently run e.l.f. to exceed the midpoint of this range over any reasonable period of time, especially on a risk-adjusted basis. To justify continued independence, the Board would need to support an operating plan that could drive value well in excess of this range over a relatively short period of time to compensate shareholders for execution risk and the time value of money.  Senior management has shown little discipline in matching revenue and expense growth in the past, and it is unlikely that plans to grow shareholder value as an independent entity will suddenly start bearing fruit. We do not believe there is a realistic plan from management that can deliver as much value at this time as a sales process."

Mr. Cibelli added, "We believe there is only one way to determine whether now is the right time to sell the Company, and that is by going through a bona fide strategic alternatives process with a properly motivated advisor. An announced strategic alternatives process will provide directors with competing benchmark values that can be evaluated against management's internal plans to add shareholder value.  Of course, astute Board members need to keep in mind that senior management's lucrative compensation will create a strong bias favoring plans of independence so that they may continue reaping excessive rewards."

Mr. Cibelli concluded, "There is little question in our minds that TPG and its former employee, Bill McGlashan, left a corporate governance mess at e.l.f. that the Board has left unaddressed. As TPG exits its investment, it is leaving the Company with an unsupportive shareholder base and a Board that received the worst possible corporate governance score by Institutional Shareholder Services Inc. We encourage Board members to engage with public shareholders to better understand their concerns, particularly since approximately two-thirds of public shareholders did not support the election of Chairman and CEO Tarang Amin and Lead Independent Director Beth Pritchard in their uncontested election at the Company's last annual meeting.  Kirk Perry, Sabrina Simmons and Maureen Watson are the current directors up for re-election in 2020, and we implore them to critically self-reflect on their tenure and remedy the areas in which they have fallen short as fiduciaries to win public shareholder support."

The full text of Marathon Partners' letter to the Board follows:

https://mma.prnewswire.com/media/1038440/elf_letter.pdf

About Marathon Partners:

Marathon Partners Equity Management, LLC is a fundamental, research intensive investment firm that deploys capital with a long-term investment horizon.

Investor Contact:

Mario Cibelli or Eric Hidy
(212) 490-0399
http://www.marathonpartners.com

SOURCE Marathon Partners Equity Management, LLC

Related Links

http://www.marathonpartners.com