USA Technologies Folds in Proxy Fight; Bergeron Named New Chairman

The proxy fight between vending machine payments provider USA Technologies Inc.’s board of directors and top management on one side and the company’s largest shareholder, Hudson Executive Capital, on the other ended Monday with Hudson Executive the victor.

Malvern, Pa.-based USAT announced an agreement with the New York City-based investment firm that includes the immediate appointment of Hudson Executive’s slate of eight nominees to its board of directors. Shortly afterward, USAT reported that one of the nominees, Douglas G. Bergeron, an HEC managing partner and the former chief executive of point-of-sale terminal maker Verifone Systems Inc., had been appointed its new board chairman.

Five current USAT directors resigned. Donald W. Layden Jr., USAT’s president and CEO and a director, remains on the board, but the company said it had retained an executive search firm to find a replacement by the end of May.

HEC, which owns about 16% of the company, since last year has accused USAT’s top brass and the board of mismanagement in the wake of missteps that went beyond the accounting problems that resulted in delays and restatements of publicly traded USAT’s financial reports. After failing to reach an accord with Layden and the board on its proposed changes, HEC assembled a slate of nominees for a vote at the company’s annual stockholder meeting set for Thursday.

USAT did counter with some changes, including the replacement of many of its directors. It even put three of HEC’s nominees on its own director slate for a vote at the April 30 annual meeting.

Hudson Executive this winter said it already had enough shareholder support to win. The tide turned even more in HEC’s favor last week when two proxy advisory firms, Institutional Shareholder Services Inc. and Glass, Lewis & Co., issued recommendations in favor of the HEC slate.

“We are pleased that we have been able to reach an agreement with the company that installs a reconstituted board and reflects the wishes of the shareholders,” Douglas Braunstein, founder and a managing partner of Hudson Executive, said in a statement.

All of the HEC-backed directors as well as Layden and another incumbent USAT director, Patricia A. Oelrich, will stand for election at the annual meeting, which will be held virtually because of the Covid-19 pandemic. HEC has agreed to vote all of its shares in favor of the new 10-person slate.

USAT said little about why it agreed to accept HEC’s nominees. “The company believes the agreement with Hudson Executive is in the best interests of the company and its shareholders,” Layden, who took over when long-time CEO Stephen P. Herbert resigned last October, said in a statement. He went on to thank the outgoing directors and said, “Patricia and I look forward to working with our new board members on moving the company forward.”

Besides Bergeron, HEC’s slate has others with extensive payments-industry experience, including Ellen Richey, former vice chairwoman and chief risk officer at Visa Inc., and Michael Passilla, former CEO of merchant acquirers Chase Merchant Services and Elavon.

In a statement, Bergeron said the newly constituted board’s actions “demonstrate the commitment of these directors to putting the company on the right path to restoring strong corporate governance and building long-term, sustainable shareholder value. We look forward to rolling up our sleeves and working together to fundamentally transform USAT into an industry leader.”

USAT’s shares have been delisted from the Nasdaq stock market, but the company has applied for relisting. The shares currently trade over the counter.