Quipp, Inc. (NDAQ:QUIP) may soon find itself in hot water as hedge funds Henry Partners and Matthew Partners (9.4% owners) demanded that the company immediately put itself up for sale or institute other measures designed to help unlock shareholder value. The hedge funds made seven comments/demands, highlighted in a letter attached to a
13D filing made today:
"1. We believe the best strategic alternative is for Quipp to agree to be sold now to the highest bidder in an arms-length transaction. We believe that Quipp's shareholders should then have the opportunity to decide at a special meeting whether or not the agreed upon consideration is acceptable to them. For the record, we have no intention of being a bidder for Quipp.
2. We are strongly opposed to, and would not support, Quipp making any additional acquisitions. Our opposition to such a step is based on the consideration paid in the Newstec acquisition, and the subsequent poor results of that unit as disclosed in Quipp's quarterly filings.
3. We are also strongly opposed to Quipp parting with any more of its cash reserves, unless such cash is distributed, or otherwise returned, solely to Quipp's shareholders.
4. We are strongly opposed to, and would not support, any effort by Quipp to pursue a "going dark" process. We believe that any cost savings purportedly offered by such a step are far outweighed by the potential further loss of both public market value and transparency that "going dark" actions typically result in.
5. If, for whatever reason, Quipp is not sold to a third party in the near term, we believe that Quipp should continue for the time being as a publicly-traded entity, with management focused solely on managing the now-existing business for maximum profitability, rather than seeking further acquisitions.
6. In conjunction with Quipp continuing as a publicly-traded entity, we would expect a further reshaping of the membership of the Board of Directors such that more representatives of Quipp's major shareholders are offered the opportunity to serve on Quipp's Board in place of its current members, some of whom may wish to retire from the Board. As one of Quipp's largest shareholders, we would expect to participate in that process.
7. As a further part of Quipp continuing its public company status, we strongly believe the shareholder rights plan should be repealed and not reinstated without the prior approval of Quipp's shareholders, and that all Quipp directors be required to purchase in the open market, with their own funds, a realistic, yet meaningful quantity of Quipp shares so as to align more closely their thinking with that of the actual owners of the business." (Read More)
Investors have struggled with the company for several years, as it moved down from $16 in 2004 to its current range between $7 and $8 per share. If these hedge funds can succeed in putting the company up for sale, it could result in quick short-term gains. However, even if the company cannot be sold, if the funds are successful in instituting their own Board members, it could spell a turnaround for the company in the medium to long term. Board members are typically (essentially) chosen by the company's management, and therefore rarely enforce measures designed to help shareholders at the expense of management. With large investors holding seats on the Board, more measures could be instituted to unlock shareholder value and curb spending.
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