Mark Penn

Mark Penn warns MDC stockholders not to "be misled by crafty hedge funds" that oppose the merger of their company with Stagwell Media.

"Stagwell and MDC Partners are better together," said Penn in a letter that he posted on BusinessWire and on LinkedIn on May 27.

Indaba Capital Management, which is the largest independent shareholder of MDC, calls the merger an unfair deal that benefits Penn, who helms both MDC and Stagwell.

In its May 26 letter to MDC's special committee of the board—which already has blessed the transaction—ICM expressed disappointment that the independent directors "are still comfortable trying to push through this conflict-riddled and poorly structured merger."

While praising management for guiding MDC through the pandemic, ICM sees no justification for the special committee "to essentially rubber-stamp the unfair terms desired by Stagwell and Mr. Penn."

It also knocked MDC for the 2020 sale of "attractive asset," Sloane & Co., to Stagwell's SKDKnickerbocker unit.

The San Francisco-based hedge fund, which says it owns about 15 percent of MDC shares, will vote against the merger at the June 22 special meeting of shareholders.

Penn responded that Stagwell "brings some unique, high-value contributions to this partnership."

He noted that after years of shrinkage at MDC: "The combined entity has the prospect of strong growth and that growth can extend into the foreseeable future, fundamentally revaluing the company."

He's confident the Stagwell/MDC mash-up will be "the first platform in 50 years ready to take on the 'big four' that dominate the industry and who hold over $60B of marketing service work because of their size and reach."