Gateway Avoids Proxy Fight

The company will add two directors to satisfy an investor group.
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Gateway (GTW) has agreed to add two new directors to satisfy an investor group that was agitating for change at the PC maker.

The investors, who are led by Firebrand Partners and own about 10.7% of Gateway's shares, will place Scott Galloway on the board. Galloway is an associate professor at New York University's Stern School of Business and a managing member of Firebrand.

Gateway will also appoint an additional independent director, mutually acceptable to the company and the investor group, to its board by Feb. 28. Both Galloway and the other director will be up for re-election by stockholders at the 2007 annual meeting.

Initially, the group had been seeking three seats on the board. Shares of Gateway tacked on 2 cents to $1.88.

The appointments, Gateway said, will enable management to focus on returning the company to profitability and at the same time avoid a potential proxy contest. With the addition of the new directors, Gateway will expand its board to 10 members, nine of whom will be independent.

As part of the arrangement with the investor group, Gateway's board will undertake a review of its stockholder rights plan, also known as a poison pill, and make recommendations before next year's annual meeting. The investors had told Gateway they wanted it to abolish its anti-takeover provisions.

Earlier this year, Lap Shun Hui, the founder of eMachines, said he was interested in purchasing Gateway's retail PC operations for $450 million, but the offer was turned down.

The company will also suggest that stockholders approve a proposal to declassify the board. If the measure is approved, Gateway directors will be up for election at every annual meeting.