Andrew Shapiro's  Instablog

Andrew Shapiro
Send Message
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 23 years, one of the longest periods of experience deploying an activist/relational investment... More
My blog:
Andrew Shapiro's Twitter Feed
  • Lawndale Capital Mgmt To Conditionally Vote For Equal Energy Sale 2 comments
    Jun 30, 2014 9:29 PM | about stocks: EQU

    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.

    Contact:

    Andrew Shapiro,

    415-389-8258 or

    aeshapiro@lawndalecap.com

    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.

    Stocks: EQU
Back To Andrew Shapiro's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (2)
Track new comments
  • jaginger
    , contributor
    Comments (803) | Send Message
     
    Thanks, Andrew. Looks like $5.43 (+ div) it is.
    30 Jun 2014, 11:24 PM Reply Like
  • Andrew Shapiro
    , contributor
    Comments (2152) | Send Message
     
    Author’s reply » The likelihood of a credible higher alternative bid diminishes every day but we are prepared to reverse our vote it there remains time to do so.
    1 Jul 2014, 01:09 AM Reply Like
Full index of posts »
Latest Followers

StockTalks

  • $CKEC holdout manager dropped his asking price down to $32/share. Will $AMC blink? AMC's extra share issuance impact for both acquistions?
    Jul 15, 2016
  • Russian sub activity returns to Cold War levels = Huge for Navy consumption of Sparton Corp $SPA sonobuoys http://wapo.st/1PIBOM0
    Feb 18, 2016
  • China "has more submarines than America has" The Chinese Submarine Threat | The Diplomat $SPA sonobuoys http://tinyurl.com/jocwkkm
    Jan 31, 2016
More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.