On January 8, I penned an article that detailed the efforts of Roumell Asset Management to shake things up at Tecumseh (TECUA). In that article I explained that Roumell, which owns about 20% of Tecumseh, had hired a consulting firm with a 50-year history in analyzing manufacturing businesses, to conduct a deep review of the company's assets, operations and competitive position in the industry. That analysis concluded that the company had a liquidation value of between $237 and $334 million. Tecumseh's market cap is ~$98 million.
Roumell thinks even more value can be realized by only selling off part of the company. You can read about his plan here.
On January 14, Roumell filed another 13D, which reveals recent events that Tecumseh's BOD cannot ignore.
According to the filing, Roumell was approached in late 2012 by a representative of a "large Brazilian company" who expressed a strong desire of this firm to purchase Tecumseh's Brazilian assets and suggested a potential market value between $50 million and $125 million. Roumell says it referred the individual to the company's outside counsel. During the week of January 6, Roumell was again contacted by the same individual who indicated that he did in fact meet with the company on two occasions but feels his proposal is being "effectively ignored."
Additionally, Roumell was approached by an investor who is interested in investing in Tecumseh on a preferred stock basis with a dividend below the company's current cost of capital.
Quoting from the 13D:
In a separate instance, we were approached by a highly-regarded private investor interested in investing in Tecumseh on a preferred stock basis, with a proposed dividend rate below the company's current cost of debt capital and with interest payments potentially being deferred and at a strike price significantly above the company's current share price, so long as he could have a significant voice on, but not control of, the Board. We referred this investor to the company and were not a party to any negotiations between this investor and the company. This investor expressed a view similar to ours in that he believed the company possessed a strong set of assets, a legacy brand and on a restructured basis could shelter its earnings given its $400 million loss carry forwards. This investor, and his partner, have blue chip investment backgrounds and have a recognizable and identifiable track record of successfully turning around companies. We referred this investor to the company's outside counsel because we believe this individual's long-term capital commitment, background and vision would all increase the likelihood of a successful Tecumseh turnaround.
These, and previous revelations, which I detailed in my article of Jan. 8, are enough to convince me of the enormous hidden value at Tecumseh. I believe the time has come for the BOD to act on behalf of shareholders or someone may attempt to replace the board.