According to persons familiar with the situation, Donerail Group is close to negotiating an agreement with Turtle Beach Corp that will give the activist investment group representatives on the board of directors of the US gaming gear company.
Donerail, which owns 7.4 percent of Turtle Beach’s outstanding stock, has chastised the gaming headset and controller manufacturer for operational blunders and has been pressuring the business to sell itself. Turtle Beach claims it has done all possible to locate a buyer at a reasonable price.
According to the sources, Turtle Beach has agreed to add three Donerail nominees to its board of directors, bringing the total number of directors to nine. At the annual meeting next month, one director is anticipated to step down.
According to the sources, this comes after big Turtle Beach shareholders alerted the business that they expected to support Donerail’s board director nominees at the June meeting. Donerail said in March that it will replace the entire board of directors, including CEO Juergen Stark, with its own nominees. Turtle Beach will be spared this board challenge thanks to the deal.
According to the sources, Turtle Beach’s board has formed a strategic review committee to oversee the sale process. The committee will consist of four members, including two Donerail directors. According to the sources, Donerail’s managing partner Would Wyatt will serve on the committee as an adviser.
If Turtle Beach is not sold within 120 days, a Donerail principal and another director chosen with Donerail’s support will be appointed to the board.
The sources, who asked not to be identified because the topic is private, said a deal between the two parties may be announced as soon as Monday.
Turtle Beach, which has a $275 million market cap, declined to comment.
Its stock has dropped 42% in the last 52 weeks, compared to a 3.4 percent drop in the S&P 500 index.
Turtle Beach said earlier this month that in the last five years, it has communicated with possible purchasers three times.
Donerail made an offer to buy Turtle Beach for $36.50 per share last year. Donerail announced in March that it has withdrawn the offer.
According to the sources, Turtle Beach has received new takeover interest and is in talks with at least two strategic buyers. According to one of the individuals, the company expects to have contacted more than 50 partners as part of the sales process.