One of MDC Partners' biggest shareholders is against the company's proposed merger with Stagwell Media, citing terms that favor Stagwell investors unfairly.
In a letter to the Special Committee of the Board of Directors, the committee convened to evaluate the merger proposal, Indaba Capital Management said the proposed deal is "conflict riddled and poorly structured," adding that it undervalues MDC.
Indaba also claims in the letter that the proposal to provide MDC shareholders with 26% ownership of the combined company is too low and that MDC shareholders should instead own 37.5% to 40%.
Both MDC and Stagwell are led by Mark Penn, who is the founder and managing partner of Stagwell and has been CEO of MDC since 2019. Penn will get 75% of profits on Stagwell's fund.
The committee responded to Indaba's letter with a statement expressing disappointment that Indaba made its concerns public and disagreement about the company's suggestions.
"MDC has been in the midst of a transformation, but has not yet returned to organic growth and remains constrained by the high leverage on its balance sheet as well as a portfolio of agencies that are heavily weighted to creative and traditional advertising," the committee's statement read.
Indaba, which owns about 12% of MDC stock, plans to vote against it next month.
MDC global agencies include 72andSunny, Forsman and bodenfors, Anomaly, and Allison + Partners.