MagnaChip Settles With Activist in Deal That Could Lead to a Sale

Activist investor Glenn Welling of Engaged Capital on Friday settled with MagnaChip Semiconductor  (MX) in a deal that ends a two-week old proxy fight and brings two dissident directors onto the company's board, a move that could help drive an eventual sale of the chipmaker.

As part of the agreement, Engaged Capital canceled his effort to elect four dissident directors to the company's board. The chipmaker agreed to install two of his board candidates, Melvin Keating and Camillo Martino on or around the company's yet-to-be-scheduled 2016 annual meeting. However, the agreement also specifies that Martino and Keating will immediately join the company as observers of the board. As part of the deal, MagnaChip will nominate Martino for the 2016 annual meeting while Keating will join "immediately" afterwards.

A source familiar with the situation, said that MagnaChip is in the late stages of a sales process. The move to have Engaged's candidates act as observers in advance of being installed as directors is part of that late-stage review process.

Engaged launched a campaign at MagnaChip in July, disclosing a 7.3% stake in the chipmaker and asserting that its core business could be attractive to potential strategic acquirers or partners. The activist, according to people familiar with the situation, gave the chipmaker roughly a year to sell itself or face a proxy contest. MagnaChip formed a strategic review committee and in March said it was continuing to evaluate alternatives. The company's stock price has been shifting up and down, mostly on a downward trajectory over the past year, trading up slightly on the news Friday at $5.18 a share.

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