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Rush Enterprises: Activist Ancora Advisors Comes Calling

|Includes: Rush Enterprises, Inc. (RUSHA), RUSHB

Ancora Advisors is knocking on the truck dealer Rush Enterprises ($RUSHA). It wants it to get rid of its dual-class share structure to ensure better performance.

Ancora Advisors sent a letter earlier this month that said the company's "chronic valuation discount" was due to its dual class structure. The structure is common in family-owned companies like Rush, in which the company's founders and management retain higher voting power.

The activist wants to keep Rush Peterbilt and management in control, but it thinks a staggered board would work better.

"The Peterbilt agreement requires the Rush Family and management to hold a minimum of 22% of the votes," the letter stated, "We believe 22% is low to the point it is insignificant and pointless...The new arrangement would not eliminate a host of potential shareholders (institutional investors... that explicitly do not buy stakes in companies with dual-class shares)."

The activist has compared it to peers Lithia Motors (NYSE:LAD), Penske Automotive (NYSE:PAG), Asbury Automotive (NYSE:ABG), Group 1 Automotive (NYSE:GPI) and Sonic Automotive (NYSE:SAH). Compared to these peers, Rush returned just over 96% to shareholders over the past three years, while the median of the comparable group returned over 128% over that same period.

Ancora owns 4% of the voting power at Rush and is willing to give up some of its voting power in exchange for the increased liquidity and share price appreciation.

First published at on Dec. 28