Voce Capital Sends Letter to Obagi Medical Products Board of Directors; Criticizes Recent Adoption Of Poison Pill And Demands Immediate Action To Rectify Governance

Voce Capital Management LLC announced today that it has sent a letter to the Board of Directors of Obagi Medical Products, Inc. (Nasdaq: OMPI) criticizing the Board's recent adoption of a poison pill and demanding immediate action to address corporate governance deficiencies and to evaluate strategic alternatives.

Voce's letter states that it believes Obagi has spurned recent overtures to acquire the Company, and further cites pervasive corporate governance deficiencies that explain the Board's unwillingness to consider those proposals. Voce also expresses concern over the Board's recent decision to adopt a poison pill, citing it as further evidence of the Board's entrenchment.

In the letter to the Board, Voce's Managing Partner, J. Daniel Plants, said “We have grown increasingly concerned by the Company's lack of progress in broadening its product portfolio and expanding its reach. In our view Obagi would be much more valuable in the hands of a larger and more skilled operator, and indeed we believe that interested strategic parties have approached the Company only to be consistently rebuffed by a Board unwilling to even entertain discussion of an acquisition proposal.”

Mr. Plants went on to state in the letter:

“To date, we have enjoyed regular and candid dialog with Obagi and have refrained from publicly questioning or criticizing its leadership. However, we believe the Company's deficient corporate governance is a key contributor to its refusal to consider acquisition offers it has received and explains the actions the Board has taken to entrench itself. While we would have preferred to continue these discussions in private, the Board's decision to adopt a poison pill – two days before Christmas and in sight of the notice deadline for shareholder actions at the annual meeting – leads us to conclude that the Board's interests have become so misaligned with those of the Obagi shareholders that public disclosure of these matters is not only warranted but required.”

Voce's letter also questions the Obagi Board's independence, particularly the undue influence of Stonington Partners and the absence of meaningful stock ownership by directors. “The Board appears to be preeminently interested in its self-perpetuation and the maintenance of its insular and clubby nature.”

Specifically, Voce calls upon the Board of Obagi to immediately:

commence a review of the Company's strategic alternatives, including good faith consideration of the strong strategic interest in acquiring the Company; overhaul the Obagi Board, including the removal of Directors Fitzgibbons and Bartholdson and their replacement with proper independent shareholder representation; and commit that it will put the poison pill to a vote at the 2012 annual meeting, and that it will not adopt another poison pill or any other anti-takeover device should the shareholders not ratify the pill at that time.