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Andrew Shapiro is Founder, President and Portfolio Manager of Lawndale Capital Management, an investment advisor that has managed activist hedge funds focused on small- and micro-cap companies for over 22 years, one of the longest periods of experience deploying an activist/relational investment... More
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  • Lawndale Capital Mgmt To Conditionally Vote For Equal Energy Sale

    Lawndale Capital Mgmt To Conditionally Vote For Equal Energy Sale

    • Would Change Vote For Credible Higher-Valued Alternative
    • Voting Against Management "Golden Parachute" Plan

    Mill Valley, CA (June 27, 2014) - Lawndale Capital Management, LLC and its affiliate funds ("Lawndale") own more than 1.769 million, or more than 4.9%, of the shares of Equal Energy, Ltd. (N-EQU) ("Equal" or the "Company,") entitled to vote on matters relating to Equal's proposed acquisition by Petroflow Energy Corp for $5.43/share (plus an additional $0.05/share dividend) at the Company's upcoming July 8, 2014 Special Meeting.

    Over the course of the past year, Lawndale, as one of Equal's largest shareholders, has disclosed its opposition to unsolicited takeover bids by Montclair Energy ("Montclair") of $4, $4.75 and $4.85 per share. Lawndale has also expressed concern with Equal's agreement to be completely acquired by Petroflow for only $5.43/share vs. higher value alternatives Lawndale considers possible.

    One of the higher value alternatives Lawndale suggested Equal's board pursue was a $6/share dutch tender and leveraged recapitalization that would allow Equal shareholders continued participation in what Lawndale views as favorable prospects for Equal's vast energy resources. Montclair subsequently published an analysis that a leveraged $6/share repurchase plan would provide $7.01-$9.97/share of aggregate value to Equal shareholders. Equal's Board has rejected such a plan for undisclosed reasons.

    Based on Lawndale's review of the proxy for Equal's Special Meeting, it is disappointed a fairly robust auction process resulted in a low sales price. However, Lawndale believes that the sales agreement's low break-up fee did not preclude higher alternative bids. In the absence of a credible higher-valued alternative proposal, Lawndale will reluctantly vote its shares "FOR" the proposed acquisition (Proposal #1). If a desirable alternative proposal emerges in time, Lawndale will change its vote to oppose the current transaction.

    Andrew Shapiro, President of Lawndale, stated, "We believe Lawndale's active involvement in this process contributed to the increased bids and minimal deal protection hurdles."

    Shapiro added, "While we fail to understand why Equal's Board didn't have the company pursue a much higher-valued leveraged buyback alternative, Montclair and other potential bidders have had ample opportunity to put forth higher, firm fully-financed offers."

    Lawndale will also vote "AGAINST" the proposal to approve senior management's severance "Golden Parachute" compensation (Proposal #2) for the following reasons: 1) In Lawndale's opinion, Equal CEO Don Klapko has already been overcompensated; 2) Mr. Klapko's severance plan is tied to this very same overcompensation, and 3) the excessive severance plan creates a misaligned bias toward a complete sale of the Company vs. alternatives that allow shareholders to continue participating in Equal's future growth.

    Shapiro added, "The 'Golden Parachute' proposal garners our NO vote for more compelling reasons than what caused Equal's 'Say-On-Pay' vote to go down in flaming defeat at last year's Annual Meeting. We hope the Board heeds shareholder's wishes this time around."

    About Lawndale Capital Management, LLC
    Lawndale Capital Management, a San Francisco Bay Area-based investment advisor, has managed activist hedge funds focused on creating and unlocking shareholder value in small- and micro-cap companies for over 21 years. Lawndale applies a private equity approach through active and relational ownership of public company securities. In most investments, Lawndale plays a constructive relational role by actively working with boards and management teams to help them achieve their strategic and operating goals. In other instances, Lawndale is a direct value-unlocking catalyst, utilizing a range of tools that include aggressively promoting improvements in a company's governance and operational structures, proxy actions, asserting shareowner's legal rights and taking active roles in restructuring and buyout proposal negotiations.


    Andrew Shapiro,

    415-389-8258 or

    Disclosure: The author is long EQU.

    Additional disclosure: At time of writing, author and/or funds author manages hold a long position in this issuer. Author and the funds may buy or sell securities of this issuer at any time.

    Jun 30 9:29 PM | Link | 2 Comments
  • Activist Investor Lawndale votes against P&F Industries bonus plan; sends letter to Board
    Lawndale Capital Mgmt files amended 13D in P&F Industries (O-PFIN) increasing position to 9.95%;
    Votes AGAINST executive bonus plan and director; Letter calls for reduced CEO compensation and increased Board independence;

    In a filing with the SEC on May 25, 2011, Mill Valley, CA-based Lawndale Capital Management, LLC and its affiliates (“Lawndale”) filed SEC form 13D/A #3 in P&F Industries ("PFIN") triggered by a May 24, 2011 letter to PFIN’s Board and Lawndale’s announced vote at PFIN’s 2011 Annual Meeting AGAINST the proposed executive bonus plan and director Mitch Solomon. Lawndale’s position also increased its ownership from its last filing to just shy of 10% of P&F.  

    (See Lawndale's May 24, 2011 letter to the P&F Board here.) 

    The Item 4 language of Lawndale’s filing is set forth, below, and the actual P&F 13D filing and May 24, 2011 letter exhibit can be found in SEC EDGAR filings for PFIN here

    Lawndale's earlier letters from September 17, 2010 and May 25, 2010 (the “2010 Letters) referred to in the May 24, 2011 letter filed with this amended 13D showing analysis of PFIN CEO compensation excess can be found here.

    P&F Industries, Inc., through its two wholly-owned subsidiaries, Continental Tool Group Inc., which manufactures and/or imports air-powered tools sold principally to the industrial, retail and automotive markets, and Countrywide Hardware, Inc, which manufactures and/or imports various residential hardware such as kitchen and bath hardware, fencing hardware and door and window hardware, primarily to the housing industry. P&F’s products are sold under their own trademarks, as well as under the private labels of major manufacturers and retailers. Further information on P&F can be found at P&F's corporate website

    Lawndale Capital Management, LLC is Mill Valley, CA-based investment advisor that manages activist hedge funds focusing on creating and unlocking shareholder value in small- and micro-cap companies for more than 18 years.  

    Item 4.            Purpose of Transaction

    As disclosed in prior filings, the Filers ("Lawndale") have been in contact with P&F Industries ("PFIN") management and members of PFIN’s Board of Directors (the “Board”) regarding certain operational and corporate governance concerns that include, but are not limited to, what Lawndale believes to be excessive compensation paid to PFIN’s senior management, particularly its Chairman and CEO, Richard Horowitz.  This leads to additional serious concerns Lawndale has regarding the Board’s composition and independence.

    On May 25, 2010 and September 17, 2010 Lawndale sent PFIN’s Board members letters (the “2010 Letters”), (copies of which are attached as Exhibit 1 to Exhibit B hereto, and incorporated by reference to this filing) informing them of the rationale for Lawndale concerns leading it to vote “Withhold” on the re-election of PFIN’s slate of directors at last year’s 2010 Annual Meeting. Voting results from the June 3, 2010, Annual Meeting disclosed roughly 30% of the votes cast for each of PFIN’s nominees were voted Withhold.

    Subsequent to the 2010 Annual Meeting, PFIN has taken some rudimentary steps towards improving its corporate governance, including, on July 29, 2010, expanding its Board to nine directors by adding to its Board one of five individuals recommended by Lawndale.  

    The September 17, 2010 letter sent by Lawndale to PFIN’s Board expressed Lawndale’s view that PFIN’s governance “reforms”, to date, were merely cosmetic.  In summary, the 2010 Letters, detailed ways in which Lawndale thought the Board could both:
    • Eliminate Mr. Horowitz’ egregious compensation through P&F’s sale or a greatly reduced contract. 
    • Improve the independent composition of P&F’s Board by removing or replacing conflicted directors. 
    On May 24, 2011, Lawndale sent a letter regarding the 2011 Annual Meeting (the “May 24th Letter”) to PFIN’s Board, (a copy of which is attached at Exhibit B hereto, and incorporated by reference to this filing) informing them of Lawndale's increased ownership in PFIN and Lawndale’s vote of 359,710 shares (equal to almost 10% of eligible shares) “AGAINST” approval of Proposal 3, the Executive 162(m) Bonus Plan and to “WITHHOLD” authority on NOMINEE 02, MITCHELL A. SOLOMON, on Proposal 1, Election of Directors.

    The May 24th letter explained Lawndale’s rationale for its vote and detailed certain changes Lawndale would like to see in PFIN’s executive compensation, currently or when Mr. Horowitz’ employment agreement expires at the end of 2011.  This letter also informed the PFIN Board that should it address what Lawndale views as compensation abuses, Lawndale would support a new bonus plan with lower annual grant caps on next year’s proxy.

    The May 24th letter expressed Lawndale’s view that if Mr. Horowitz chooses to leave the company because he does not receive his desired compensation, the Board should show him the door.

    In the May 24th Letter, Lawndale also requested that PFIN’s Board:
    • Consider strategic alternatives, including the sale of the company for a control premium to a synergistic buyer, prior to renewing Mr. Horowitz’ contract 
    • Reduce or eliminate the egregious compensation terms such that any new contract with Mr. Horowitz contains lower “guaranteed” base compensation, greatly reduced supplemental profit sharing payments, and no “Golden Parachute” severance terms
    • Restructure COO/CFO Joe Molino’s compensation package
    • Improve PFIN Board’s independent composition and reduce its size by removing or replacing conflicted directors, particularly Director Dennis Kalick, one of Mr. Horowitz’ personal tax advisors
    Lawndale has offered to source additional director candidates to PFIN’s Board as needed, and requested a meeting or conference call with PFIN’s independent Board members to discuss constructive actions to further improve corporate governance and maximize value for all P&F shareowners.

    Lawndale believes the public market value of PFIN is undervalued by not adequately reflecting the value of PFIN’s business segments and other assets, including certain long-held real estate.

    While Lawndale acquired the Stock solely for investment purposes, Lawndale has been and may continue to be in contact with PFIN management, members of PFIN’s Board, other significant shareholders and others regarding alternatives that PFIN could employ to maximize shareholder value. Lawndale may from time to time take such actions, as it deems necessary or appropriate to maximize its investment in the Company's shares. Such action(s) may include, but is not limited to, buying or selling the Company's Stock at its discretion, communicating with the Company's shareholders and/or others about actions which may be taken to improve the Company's financial situation or governance policies or practices, as well as such other actions as Lawndale, in its sole discretion, may find appropriate.

    Disclosure: At time of writing, funds author manages hold a long position in this issuer and is a 13D filer. The funds or its affiliates may buy or sell securities of this issuer at any time.

    Disclosure: I am long PFIN.

    Additional disclosure: At time of writing, funds author manages hold a long position in this issuer and is a 13D filer. The funds or its affiliates may buy or sell securities of this issuer at any time.
    May 25 12:05 PM | Link | 1 Comment
  • recent Reading International "Just One Stock" Interview - LINK
    Since this was an article not initiated from my blog but directly from the editors of Seeking Alpha the Just One Stock Interview on Reading International (NASDAQ:RDI) is found only on my profile's "Articles" link until now.

    The "Just One Stock" interview and the extensive comment dialogue can be found at : 

    Just One Stock: Come for the Real Estate; Stick Around for Popcorn and Flicks

    Disclosure: At time of writing, funds the author manages hold a long position in RDI. The funds or its affiliates may buy or sell securities of this issuer at any time.
    Oct 04 9:32 AM | Link | Comment!
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