0000902664-12-000042.txt : 20120111 0000902664-12-000042.hdr.sgml : 20120111 20120111090034 ACCESSION NUMBER: 0000902664-12-000042 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20120111 DATE AS OF CHANGE: 20120111 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: Information Services Group Inc. CENTRAL INDEX KEY: 0001371489 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 205261587 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-82508 FILM NUMBER: 12521193 BUSINESS ADDRESS: STREET 1: FOUR STAMFORD PLAZA, SUITE 512 STREET 2: 107 ELM STREET CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 203-517-3100 MAIL ADDRESS: STREET 1: FOUR STAMFORD PLAZA, SUITE 512 STREET 2: 107 ELM STREET CITY: STAMFORD STATE: CT ZIP: 06902 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CARLSON CAPITAL L P CENTRAL INDEX KEY: 0001056973 IRS NUMBER: 752494317 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 2100 MCKINNEY AVE STREET 2: STE 1800 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149329600 MAIL ADDRESS: STREET 1: 2100 MCKINNEY AVE STREET 2: STE 1800 CITY: DALLAS STATE: TX ZIP: 75201 SC 13D/A 1 p12-0052sc13da.htm INFORMATION SERVICES GROUP, INC. p12-0052sc13da.htm

SECURITIES AND EXCHANGE COMMISSION
  
   
Washington, D.C. 20549
  
_______________
  
   
SCHEDULE 13D/A
 
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
 
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
 
Information Services Group, Inc.
(Name of Issuer)
 
Common Stock, par value $0.001 per share
(Title of Class of Securities)
 
45675Y104
(CUSIP Number)
 
 
Steven J. Pully
Carlson Capital, L.P.
2100 McKinney Avenue
Dallas, TX 75201
(214) 932-9600
 
with a copy to:
David E. Rosewater
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
(212) 756-2000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
 
 
January 11, 2012
(Date of Event which Requires
Filing of this Schedule)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [ ]

 
 
 


--------------------------
* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

(Continued on following pages)
 
(Page 1 of 10 Pages)
 

 
 
 
CUSIP No.  45675Y104
SCHEDULE 13D/A
Page 2 of 10 Pages



1
NAME OF REPORTING PERSON
Double Black Diamond Offshore Ltd.
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) x
(b) ¨
3
SEC USE ONLY
4
SOURCE OF FUNDS*
WC
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
¨
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
7
SOLE VOTING POWER
0
8
SHARED VOTING POWER
3,075,371
9
SOLE DISPOSITIVE POWER
0
10
SHARED DISPOSITIVE POWER
3,075,371
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
3,075,371
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
8.5%
14
TYPE OF REPORTING PERSON*
CO



 
 
 
CUSIP No.  45675Y104
 
SCHEDULE 13D/A
Page 3 of 10 Pages



1
NAME OF REPORTING PERSON
Black Diamond Offshore Ltd.
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) x
(b) ¨
3
SEC USE ONLY
4
SOURCE OF FUNDS*
WC
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
¨
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
7
SOLE VOTING POWER
0
8
SHARED VOTING POWER
189,719
9
SOLE DISPOSITIVE POWER
0
10
SHARED DISPOSITIVE POWER
189,719
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
189,719
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
0.5%
14
TYPE OF REPORTING PERSON*
CO




 
 
 
CUSIP No.  45675Y104
 
SCHEDULE 13D/A
Page 4 of 10 Pages


1
NAME OF REPORTING PERSON
Carlson Capital, L.P.
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) x
(b) ¨
3
SEC USE ONLY
4
SOURCE OF FUNDS*
AF (See Item 3)
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
¨
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
7
SOLE VOTING POWER
0
8
SHARED VOTING POWER
3,265,090
9
SOLE DISPOSITIVE POWER
0
10
SHARED DISPOSITIVE POWER
3,265,090
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
3,265,090
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
9.0%
14
TYPE OF REPORTING PERSON*
PN



 
 
 
CUSIP No.  45675Y104
 
SCHEDULE 13D/A
Page 5 of 10 Pages


1
NAME OF REPORTING PERSON
Asgard Investment Corp. II
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) x
(b) ¨
3
SEC USE ONLY
4
SOURCE OF FUNDS*
AF (See Item 3)
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
¨
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
7
SOLE VOTING POWER
0
8
SHARED VOTING POWER
3,265,090
9
SOLE DISPOSITIVE POWER
0
10
SHARED DISPOSITIVE POWER
3,265,090
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
3,265,090
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
9.0%
14
TYPE OF REPORTING PERSON*
CO



 
 
 
CUSIP No.  45675Y104
 
SCHEDULE 13D/A
Page 6 of 10 Pages


1
NAME OF REPORTING PERSON
Asgard Investment Corp.
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) x
(b) ¨
3
SEC USE ONLY
4
SOURCE OF FUNDS*
AF (See Item 3)
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
¨
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
7
SOLE VOTING POWER
0
8
SHARED VOTING POWER
3,265,090
9
SOLE DISPOSITIVE POWER
0
10
SHARED DISPOSITIVE POWER
3,265,090
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
3,265,090
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
9.0%
14
TYPE OF REPORTING PERSON*
CO



 
 
 
CUSIP No.  45675Y104
 
SCHEDULE 13D/A
Page 7 of 10 Pages


1
NAME OF REPORTING PERSON
Clint D. Carlson
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) x
(b) ¨
3
SEC USE ONLY
4
SOURCE OF FUNDS*
AF (See Item 3)
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
¨
6
CITIZENSHIP OR PLACE OF ORGANIZATION
USA
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
7
SOLE VOTING POWER
0
8
SHARED VOTING POWER
3,265,090
9
SOLE DISPOSITIVE POWER
0
10
SHARED DISPOSITIVE POWER
3,265,090
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
3,265,090
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
9.0%
14
TYPE OF REPORTING PERSON*
IN



 
 
 
CUSIP No.  45675Y104
 
SCHEDULE 13D/A
Page 8 of 10 Pages


This Amendment No. 2 to Schedule 13D amends and supplements the statement on Schedule 13D filed with the Securities and Exchange Commission (the “SEC”) on November 19, 2010 (the “Original Schedule 13D”) and Amendment No. 1 filed with the SEC on July 21, 2011 ("Amendment No. 1, and together with the Original Schedule 13D and this Amendment No. 2, the “Schedule 13D”) with respect to shares of common stock (the “Shares”) of Information Services Group, Inc., a Delaware corporation (the “Issuer”).
 
Item 4.
Source and Amount of Funds or Other Consideration.

Item 4 of the Schedule 13D is amended and supplemented to add the following information for updating as of the date hereof:
 
On January 11, 2012, Carlson Capital, L.P., on behalf of the Reporting Persons, sent a letter to Mr. Michael P. Connors, Chairman of the Board of Directors (the "Board") and Chief Executive Officer of the Issuer ("Mr. Connors") and Mr. Robert E. Weissman, Lead Director of the Board ("Mr. Weissman"). The letter expressed the Reporting Persons' increasing concern about the strategic direction of the Issuer and recent actions undertaken by the Board. The letter highlights the severe underperformance of the Issuer's stock price since its initial public offering and conveys the Reporting Persons' view that the Board's actions need to better reflect the will of the Issuer's current stockholders and further maximize shareholder value.
 
The Reporting Persons urged the Issuer to immediately pursue a strategic review of its business and operations with the assistance of a reputable investment bank, while halting any further acquisition activity. In particular, the Reporting Persons noted the attractiveness of the Issuer's TPI business as a potential acquisition target. The Reporting Persons also commented on the lack of financial alignment between the Board's current members and the Issuer's performance, and asked that the Board replace two of its existing directors with new independent candidates willing to represent the perspective of a majority of the Issuer's shareholders and focus on enhancing shareholder value, who have the energy and time required to successfully implement any strategic action required. The Reporting Persons expressed further concern over the recent announcement by the Issuer of the new employment agreements entered into with Mr. Connors and Mr. David Whitmore, each of which provided for an increase in compensation despite the Issuer's increasingly poor performance.
 
The summary of the letter, dated January 11, 2012, from the Reporting Persons to Mr. Connors and Mr. Weissman is qualified in its entirety by reference to the full text of the letter, which is filed as Exhibit 1 to this Amendment No. 2 and is incorporated by reference herein.
 
Item 5.
INTEREST IN SECURITIES OF THE ISSUER.

Paragraph (a) of Item 5 of the Schedule 13D is hereby amended and restated in its entirety as follows:
 
(a)           As of the close of business on January 10, 2012, the Reporting Persons beneficially owned an aggregate of 3,265,090 Shares. Based upon a total of 36,163,423 Shares outstanding as of October 27, 2011, as reported in the Issuer's Quarterly Report on Form 10-Q filed with the SEC on November 7, 2011, the Reporting Persons' Shares represent approximately 9.0% of the total number of outstanding Shares.
 

 
 
 
CUSIP No.  45675Y104
 
SCHEDULE 13D/A
Page 9 of 10 Pages



Item 7.
MATERIAL TO BE FILED AS EXHIBITS

Exhibits
Description
   
1
Letter, dated January 11, 2012 from Carlson Capital, L.P. to Mr. Connors and
Mr. Weissman.


 
 
 
CUSIP No.  45675Y104
 
SCHEDULE 13D/A
Page 10 of 10 Pages



SIGNATURES
 
After reasonable inquiry and to the best of his or its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.
 
Dated:  January 11, 2012

 
DOUBLE BLACK DIAMOND OFFSHORE LTD.
  
       
 
By:
Carlson Capital, L.P.,
its investment manager
  
       
 
By
Asgard Investment Corp. II,
its general partner
  
       
 
 
By:
/s/ Clint D. Carlson
  
 
Name:
Clint D. Carlson
  
 
Title:
President
  

 
BLACK DIAMOND OFFSHORE LTD.
  
       
 
By:
Carlson Capital, L.P.,
its investment manager
  
       
 
By
Asgard Investment Corp. II,
its general partner
  
       
 
By:
/s/ Clint D. Carlson
  
 
Name:
Clint D. Carlson
  
 
Title:
President
  

 
ASGARD INVESTMENT CORP. II
  
       
 
By:
/s/ Clint D. Carlson
  
 
Name:
Clint D. Carlson
  
 
Title:
President
  

 
ASGARD INVESTMENT CORP.
  
       
       
 
By:
/s/ Clint D. Carlson
  
 
Name:
Clint D. Carlson
  
 
 
 
 
By:
/s/ Clint D. Carlson
  
 
Name:
Clint D. Carlson
  
EX-99 2 p12-0052exhibit.htm EXHIBIT 1 p12-0052exhibit.htm
                                              EXHIBIT 1
 
January 11, 2012


Mr. Michael P. Connors
Chairman and Chief Executive Officer
Robert E. Weissman
Lead Director
Information Services Group, Inc.
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut

Dear Mr. Connors and Mr. Weissman:

Carlson Capital, L.P. is the beneficial owner of  9% of the stock of  Information Services Group (the “Company” or “ISG”), which makes us one of the Company’s largest shareholders.  We made our first investment as part of your IPO almost five years ago.  Although we have been supportive shareholders, we now find ourselves with increasing concerns about the strategic direction of the Company as well as actions recently undertaken by the Board.
 
Since the Company’s IPO, the market value of our initial investment in the Company has dropped approximately 87%, severely underperforming both peers and broader indices.   Over ISG’s history as a public company, ISG has consistently disappointed the market, missing operating targets and losing much of its sell-side coverage.  The table below highlights the Company’s stock price performance.
 

Relative Performance (Total Return 1)
  
 
1 Year
Since IPO2
  
       
Russell 2000 Index
(4%)
(1%)
  
S&P 600 Small Cap Index
1%
8%
  
S&P 600 Info Tech Index
(4%)
16%
  
Information Services Group
(50%)
(87%)
  
 
 
------------------------------------------------
1  Total Return including price appreciation and dividends (reinvested in the index) through 12/30/2011.
2   Total Return as from January 31, 2007.  ISG return based on $8.00 initial investment in ISG “units” from the Initial Public Offering.  Units consisted of 1 share of common stock and 1 warrant (which expired worthless 4 years after the offering).
Source: Bloomberg, Russell, Standard & Poor's.

 
 
 

Strategic Review
 
In light of the Company’s poor operating and stock price performance, we believe the Company should immediately undertake a strategic review of its business and operations, while halting any further acquisition activity.  In paticular, the Company should engage a reputable investment banking firm to assist in the review, and should consider all strategic alternatives.
 
In particular, we note that your operating businesses – particularly TPI – are valuable businesses with strong brands and talented workforces.  However, we believe that the asset value of the operating businesses, regardless of recent announced changes, is being substantially undervalued as operating subsidiaries of a sub-micro-cap public holding company.  While attractive assets, the operating businesses are saddled with the overhead of the ISG holding company, further suppressing the public valuation of the entity.  Relative to the alternative of being a sub-scale stand-alone public company, it is likely that the value of the operating businesses would be enhanced as part of another enterprise or as a private operating company.  For example, two of TPI's peers, Equaterra and Diamond Technology Partners, have been acquired by strategic players in the last two years.  A similar transaction could be achieved without substantially impacting the operating businesses and their employees and customers, yet could still eliminate ISG's unnecessary public holding company structure.  Given the tremendous loss of shareholder value in recent years, the Company must take more decisive action than it has to date.
 
Board Composition
 
We strongly believe that the composition of the Board must change.  Three of your five independent Board members have been part of the Board since the Company went public and have therefore overseen the tremendous value destruction that the past several years have brought without taking any action to correct it.  Your newest director, Neil George Budnick, was not even elected by the shareholders, yet his term will not be up until 2014.  Independent Board members collectively own only about 1% of the Company’s stock, which appears to be limited to stock awarded as part of director compensation.  Accordingly, we are highly concerned that the members of the Board may not be engaged enough to be effective agents on behalf of ISG shareholders or prepared to make the tough decisions required to drive the change needed to enhance shareholder value for all shareholders.
 
As you know, we have had discussions with a representative of the Board about changes to the composition of the Board.  We are dismayed by the lack of progress in this regard, and question whether the Board is sincere in considering new qualified candidates to better represent the shareholders.  In light of the inherent lack of progress toward real change on the Board, we are now requesting that two existing directors be replaced with two new independent candidates.  The candidates should have the following attributes: i) the willingness to represent the perspective of the majority of shareholders and focus on enhancing shareholder value, ii) the energy and time required to successfully implement any strategic action required, and iii) no ties to senior management of the Company.  We also request that that the CEO and Chairman roles be separated.
 
New Compensation Arrangements
 
On December 21, 2011, the Company announced in a Form 8-K filing that new employment agreements had been entered into with Michael Connors and David Whitmore.  In light of the
Company’s poor operating and stock price performance, we believe that it was wholly inappropriate and unnecessary for the Company to enter into such agreements.
 
As the largest shareholder of the Company, we have been extremely patient.  As we have communicated to you over the last year, our patience is running out.  We are extremely concerned that delays in developing and executing a solution to ISG’s situation have already substantially detracted from shareholder value, and any further delays would irreparably harm the remaining value of ISG’s equity.  As part of the fiduciary duty you owe to your shareholders, you have a duty to act in a manner that is in the best interest of ISG and its shareholders.
 
In summary, we expect the Board to reflect the will of the majority of current shareholders - not just senior management.  If we do not see substantial progress on the items discussed above expeditiously, we reserve the right to take other actions to protect our investment.
 

Sincerely,

Vikas Lunia
Portfolio Manager

c.c.
Neil George Budnick (Board Member)
  
 
Gerald S. Hobbs (Board Member)
  
 
Kalpana Raina (Board Member)
  
 
Donald Cramer Waite III (Board Member)