Ambassadors investors want change

Two large investor groups have filed notices with Spokane-based Ambassadors Group saying they want the company to change directors and refocus operations to stem five years of steady stock decline.

The investors are Lane Five Capital Management, based in Towson, Md., and Bandera Partners, based in New York City.

Lane Five, which owns about 7 percent of the company’s public shares, sent a preliminary proxy statement saying it will submit three new directors to Ambassadors’ board to replace three who are leaving.

Ambassadors, which promotes cultural-immersion trips for students, has a nine-person board. Only three positions are due for replacement at the next annual meeting.

Lane Five Capital’s CEO Lisa O’Dell Rapuano said the effort reflects her belief that Ambassadors’ management and board are not aggressively changing to reverse the company’s slide.

“I want the company to get better,” Rapuano said. “The current path being taken is not sufficient to fix things.”

Rapuano said she believes management is pricing some travel programs too high, and marketing initiatives have to be smarter.

“I don’t think the brand is broken. But I also don’t see the management experimenting enough or creating new products to change,” she said.

On Monday, Bandera Partners – the largest stakeholder of Ambassadors stock, with 13 percent – filed a statement saying the company’s board should seek to find accord with Lane Five and avoid a lengthy, costly proxy fight.

Proxy statements are letters inviting shareholders to vote in favor of a nominee or a company resolution.

A fight that requires hiring lawyers, sending mail to shareholders and hiring contractors to handle public relations “is not in the best interests of Ambassadors Group and its shareholders,” said Bandera, adding that it intends to support Lane Five’s three nominees.

Rapuano said her firm invested in Ambassadors in January 2008 after the stock fell from around $40 to $17. She said she was convinced Ambassadors would reverse course and start producing solid gains.

Instead, the stock has continued dropping; its price Monday was $5.35.

Lane Five has invested in some companies in which Bandera has also invested, but the two are separate entities, she said.

Lane Five’s investment strategy, added Rapuano, is to hold stocks long-term and not run for cover in a down cycle.

“But when you face long periods of decline, you do have to be concerned,” she said.

Ambassadors in February said it lost $7.8 million in the last quarter of 2011, compared with a loss of $6.7 million in the previous fourth quarter. Net income for 2011 was $3 million, down from $8.1 million the year before.

Ambassadors reported net income of $31 million for 2007, the company’s 10-year high point.

In its conference call this February, Ambassadors officers said they’re focusing on a number of initiatives, including cutting costs and more effective marketing.

Also Monday, Ambassadors filed a document with the Securities and Exchange Commission that included a letter the company sent to its workers and a general “frequently asked questions” sheet addressing the possible proxy fight.

The letter noted that company managers have discussed Lane Five’s concerns. But “these discussions have not led to a mutually agreeable resolution thus far,” it said.

It also said, “Our board and management team are committed to acting in the best interests of shareowners and are focused on delivering value.”

A company spokesman said Ambassadors declined to comment beyond the employee letter and the FAQ.

Rapuano said she and company officials have discussed a number of solutions. Ambassadors CEO Jeff Thomas told her the company would offer Lane Five two board seats, she said.

Rapuano, however, contends just changing two board seats is inadequate.

“You can’t just do the same thing and hope it gets better,” she said.