Exclusive: Gaming equipment supplier Turtle Beach is set to strike a consultancy deal with Donerail


Donerail, which beneficially owns 7.4% of Turtle Beach’s outstanding shares, criticized the maker of headsets and game controllers for operational errors and pushed the company to sell itself. Turtle Beach maintains that it has done its best to find a buyer at an attractive price.

Turtle Beach has agreed to add three candidates from Donerail to its board of directors, increasing it from six to nine directors, the sources said. One director is expected to step down at next month’s annual meeting.

The move comes after Turtle Beach’s major shareholders informed the company that they plan to back Donerail’s board nominees at the June meeting, the sources added. In March, Donerail said it planned to replace the entire board, including CEO Juergen Stark, with its own nominees. The settlement will spare Turtle Beach this board challenge.

Turtle Beach’s board of directors has formed a strategic review committee to oversee the company’s sale process and it will have four members, including two directors from Donerail, the sources said. Donerail’s managing partner, Will Wyatt, will be an adviser to the committee, the sources said.

If Turtle Beach is not sold within 120 days, a Donerail director and another director Donerail would be allowed to help select would join the board, essentially handing over control to the hedge fund.

The sources said the agreement between the two parties could be announced as early as Monday and asked not to be identified as the matter is confidential.

Turtle Beach, which has a market value of $275 million, declined to comment.

Its stock price has fallen 42% in the past 52 weeks, compared to a 3.4% drop for the S&P 500 index.

Turtle Beach said earlier this month that it has engaged in discussions with potential buyers three times over the past five years. The company has recently received new interest in an acquisition, the sources say, and has been in talks with at least two strategic buyers. The company expects to contact more than 50 parties as part of the sale process, one of the sources said.



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