Sherborne Pursues Nautilus Holders' Vote

NEW YORK ¡ª Sherborne Investors LP said Monday it sent a letter to Nautilus Inc. shareholders urging them to vote for all of its nominees to the fitness-equipment maker's board at an upcoming special meeting.

With Nautilus' share price falling 62 percent in the past two years, Sherborne said it feels strongly that immediate action is required to enhance shareholder value.

"On its current course, we believe the company is facing a prolonged period of underperformance and a material risk of failure," the letter said. "There is a better way to unlock the value hidden in Nautilus, and we ask for your support to enable us to implement a fresh approach that can create value for all shareholders."

Sherborne wants to see the roles of chairman and chief executive separated, and said Nautilus' previous offer of two board seats is insufficient.

"We would have been locked into an ineffective position with only two directors out of 10 and would have been subject to an onerous company-drafted "standstill" agreement, which could have effectively precluded us from taking any matters directly to shareholders and from voting our shares in what we believe to be the best way," Sherborne said.

Sherborne, which owns about 7.9 million shares, or a 25 percent stake in Nautilus, has been in talks with the Vancouver, Wash.-based company since August about its turnaround plans.

In September, Sherborne called for the removal of board members and the election of replacements at a special meeting of shareholders.

On Friday, Nautilus said three independent voting advisory services have issued recommendations saying Sherborne's bid for control of the board is not in the interest of all shareholders. The recommendations said Nautilus' strategy offers superior opportunities for growth and profitability and that Sherborne's nominees lack fitness and fitness equipment industry experience.

The special meeting is scheduled for Dec. 18.

Nautilus shares fell 30 cents, or 4.3 percent, to $6.70 in morning trading. Shares have traded between $4.31 and $18.63 in the past 12 months.

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