A San Jose tech company that had been fighting for its life in a proxy battle has surrendered to the hedge fund that had been seeking to oust the company's board.
Tessera Technologies had asked shareholders to reject a proposed slate of seven new directors proposed by New York-based Starboard Value. Tessera CEO Richard Hill had claimed Starboard -- which in recent years has launched proxy battles against a number of companies it believes are undervalued -- wanted to turn the maker of chip-packaging technology into a "patent troll" that would stop making new products and instead focus only on licensing and enforcing its existing patent portfolio.
But with a number of other large institutional investors saying they planned to back the new slate, Tessera on the eve of Thursday's shareholder vote agreed to seat all but one of Starboard's directors while jettisoning two tenured board members. Two other board members have agreed not to stand for re-election.
Hill -- who became interim CEO in March after Starboard, which owns more than 7 percent of the company's shares, forced the board to fire Tessera's previous chief executive -- also will turn over the helm to one of Starboard's board nominees, although just whom that will be was not announced.
Hill, in a statement, said the settlement with Starboard "is in the best interests of the company and its stockholders." Starboard managing member Peter Feld said the flurry of moves will "enhance value for the benefit of all stockholders."
A new shareholder meeting to vote on the compromise is scheduled for June 7.
Bryan Kohm, an intellectual property attorney with Fenwick & West in San Francisco, said an increasing number of Silicon Valley companies are at risk for such shareholder actions.
"For decades, you've had situations where investors come in and realize the assets of the company are worth more than the company as a going concern," he said. "What we're seeing now is the realization that a patent portfolio can be one of those assets. Companies that seem to have a difficult road ahead of them are very susceptible."