Hedge Fund Urges Griffon Corp. (GFF) to Consider Spinoff or Sale

Dec.20.06 | About: Griffon Corporation (GFF)

In a 13D filing on Griffon Corp. (NYSE:GFF) Clinton Group disclosed a 5.2% stake (1.54 million shares) in the company. The firm also delivered a letter to the company stating its belief that the market price of the shares fails to reflect the stand-alone value of the company's operating subsidiaries. The letter also indicated the firm's desire to work constructively with Griffon management to continue to evaluate multiple strategic alternatives for the Issuer, including, but not limited to, a tax-free spin-off or sale to strategic acquirers of one or more of the company's subsidiaries, or a going-private transaction for the company.

In the letter Clinton Group said, "Our analysis ultimately suggests that fair value for Griffon's stock approximates $31-$35, prior to certain adjustments..."

A Copy of the Letter:

Dear Mr. Blau:

We greatly appreciate you and Mr. Edelstein taking the time to discuss with us Griffon Corporation ("Griffon" or the "Company") and its prospects, and we are pleased with management's willingness to listen to shareholder ideas and opinions. Currently, funds and accounts managed by Clinton Group Inc.("Clinton") beneficially own in excess of 5% of the outstanding shares of the Company.

We have been impressed with the franchise that management has built, and continue to appreciate management's eye towards returning shareholder value through steady share repurchases. We have invested in Griffon because we believe the market price of Griffon shares fails to reflect the true value of the Company's operating subsidiaries, if they were to be valued on a stand-alone basis.

Given the apparent disconnect between each segment's intrinsic value and the Company's current stock price, we were pleased to hear on last quarter's conference call that management was proactively reviewing strategic alternatives with respect to the defense segment. We hope to work constructively with management to continue to evaluate multiple strategic alternatives, including, but not limited to, a tax-free spin-off or sale to strategic acquirers of one or more of Griffon's subsidiaries, or a going-private transaction for the Company. Given the market leading positions of Clopay Corporation's garage door division and specialty films division, as well as Telephonics Corporation's well positioned and growing defense segment, we believe any of these initiatives, or a combination thereof, would unlock significant value for existing shareholders.

Based on our due diligence, we firmly believe that competitors in each respective segment both hold the Company's subsidiaries in high regard and have tremendous strategic interest. Additionally, a publicly traded comparable company analysis as well as our due diligence supports the notion that ample demand would exist for Telephonics Corporation in the public market as a stand-alone company.

Our analysis ultimately suggests that fair value for Griffon's stock approximates $31-$35...

Conrad Bringsjord

Managing Director

Portfolio Manager Event Driven and Activist Investments

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