TNS Inc. (NYSE:TNS) shares moved up $0.19, or 0.98%, to $19.65 today after Shamrock Activist Value Fund disclosed a 5.02% stake in the company and urged the Board of Directors to consider a $6/share special dividend. This news comes after the company recently disclosed that there were several buyers interested in acquiring the company, including the founder and former CEO who has already made a $20/share offer for the company. To this end, the Schedule 13D filed with the SEC also contained a letter with several other requests directed towards the company's board.

These requests included:

1. Disclosure of Key Financial Targets: We propose that the Board disclose EBITDA, FCF (free cash flow: operating cash flow less maintenance capital expenditures) and ROIC (return-on-invested capital) targets for FY 2007 and FY 2008. With this critical information, shareholders can judge for themselves the performance of management and the Board and whether or not an offer for the Company is adequate.
2. Long-Term Incentive Compensation: A Board’s design and implementation of an overall compensation plan, particularly the long-term incentive elements, represent a vivid lens to its governance. We were disappointed that the most recent issuance of restricted stock had no alignment to internal financial metrics that, we believe, correlate to long-term shareholder value creation. I will send to you under separate cover a summary compensation “white paper” outlining a conceptual framework consistent with emerging best practices that seek to provide a meaningful relationship between pay and performance.
3. Capital Management Strategy: We urge the Board to consider distributing to shareholders approximately $150mm of cash or $6.00 per share. Because the Company has a solid customer base, and steady and recurring revenues, it should not require the current level of financial flexibility. We believe an overly capitalized balance sheet often results in poor capital allocation decisions and presents the opportunity for a financial buyer to capture value at the expense of the existing owners. Capital can be returned to shareholders through a variety of mechanisms: dividends, special dividends, share repurchase, etc. Importantly, the Board should seek to articulate a comprehensive capital management policy given the Company’s current corporate strategy.
4. Board Composition: We encourage the Board to recruit immediately two new independent directors. The directors should be selected through a disciplined process that specifies key skills and attributes that compliment those of the existing Board members and match well the strategic challenges and opportunities of the Company over the next several years. We also strongly suggest that you actively seek input in good faith from your shareholders during this process. Fresh perspectives seem vital and appropriate given the recent history at the Company.
   

Shamrock has clearly identified several key issues that need to be addressed before any M&A transactions. First, they noted that the company has an excess amount of cash that could be utilized by potential buyers at the expense of existing shareholders. To solve this issue, they recommended that the company issue a special cash dividend of $6/share to relieve the company of approximate $150 million worth of capital. Secondly, the activist hedge fund made requests aimed at increasing transparency and streamlining the company's costs in order to make it easier for investors to come up with a fair value for the company in the event that a buyer surfaces. Finally, Shamrock requested that two independent directors be found to assist the company in evaluating any strategic alternatives and actively represent shareholder interests in the future. Combined, these recommendations should help the company avoid low-ball offers while encouraging a fair valuation of the company's stock price. This makes TNS a stock worth keeping on the radar over the next few months!

Related Companies
SAVVIS, Inc. (SVVS)
VeriSign, Inc. (VRSN)
AT&T Inc. (T)