Jana Partners has nominated four directors to the board of Zendesk, arguing the company must be rehabilitated after an unpopular attempt to buy Momentive Global, parent of web-survey company SurveyMonkey, according to a regulatory filing.

Jana Partners launched the proxy contest a week before Zendesk shareholders are scheduled to vote on the company's proposed acquisition of Momentive Global on Feb. 25.

It also comes only a few days after Zendesk said it had rebuffed an approximately $17 billion bid from a consortium of private equity firms looking to acquire the customer service software company.

Even with the Momentive deal facing a likely rejection by shareholders, Jana said in the letter that lasting damage had been done.

"We believe the board must either be replaced with capable fiduciaries, or reverse course and engage with interested strategic and financial buyers to sell the company," Jana Partners Managing Director Barry Rosenstein wrote to the Zendesk board on Wednesday.

The activist nominated Quincy Allen, Felicia Alvaro and Jeffrey Fox, executives with expertise in the software and technology industries, as well as experience in mergers and acquisitions and finance.

It also nominated Scott Ostfeld, a partner and a co-portfolio manager at Jana Partners.

Zendesk said it welcomes input from all shareholders and will "review and evaluate" Jana Partners' nominees "carefully." The company also said it will stick by its commitment to independence, diversity and shareholder perspective, noting the board "has been built by balancing the benefits of tenure and experience with the need for fresh ideas and perspectives."

The four candidates would run against Zendesk's four directors who are slated for election this year, including two of the three Zendesk directors who served on a transaction committee that spearheaded the Momentive transaction.

PERSISTENT DISCOUNT

The company's 10-member board has eight independent directors but only a portion stand for reelection each year.

"We believe the board has all but assured that Zendesk will suffer a persistent discount to its intrinsic value," the letter said.

In October, Zendesk agreed to buy Momentive in an all-stock deal worth roughly $4 billion. Zendesk's stock price fell after the acquisition announcement and remained more than 20% below its pre-deal price until Nov. 30, when Jana wrote a letter publicly opposing the plans and urged the company to abandon the acquisition.

Other Zendesk investors, including Janus Henderson, Neuberger Berman and Florida's pension system Florida State Board of Administration, also said they would vote against the acquisition, citing procedural, strategic and financial concerns.

Proxy advisory firms Institutional Shareholder Services and Glass Lewis last week advised Zendesk investors to vote the deal down.

It is unusual for Jana to run a proxy contest as the firm has spent more than two decades cementing a reputation for working collaboratively and behind the scenes with target companies.

The prospect of a potential proxy fight is already resonating with some investors.

A portfolio manager at a prominent mutual fund company, who is not authorized to speak about the matter publicly, has told Reuters he would support replacing board members and would also like to see management replaced.