Building Materials Holding Company (NYSE:BLG) shares moved up
$1.92, or 13.38%, to $16.27 today after Chapman Capital disclosed a 7.4% stake
and expressed their concerns over the company's performance. Specificially, the
activist hedge fund suggested that the stock's value could best be unlocked
through a sale of part or all of the company.
Chapman first noted that
while management cannot be blamed for the steep correction in the U.S.
homebuilding market, the board's generous reward distribution to management
during this downturn should not be overlooked. Equally troubling is the fact
that management and the board have very little stake in the company while much
of what they do own was granted to them free of charge. This lack of a stake in
the future of the company is certainly a cause for concern.
Chapman then
argued that the company is undervalued. To unlock this value the hedge
fund recommended that the company immediately hire financial advisors to explore
selling all or part of the company. After all, the building materials sector is
clearly amid a consolidation wave. Chapman has also recently made personal
contact with BLG’s peers and leveraged consolidators of the building supply
industry, and they can convey an extremely high level of interest from both
private equity and strategic building supply players in the acquisition of the
company.
Chapman Capital recognizes the unique value of BMHC’s assets,
the years and efforts required to assemble and integrate them. As a result, they
are not encouraging an inopportune, undervalued sale, but instead a methodical
auction timed to consummate into the inevitable cyclical recovery. And this
would be great news for the company's shareholders who have suffered since the
downturn in 2006!
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