CSK Auto Corporation's
(NYSE:CAO) turnaround plan isn't good enough to please one of its
largest shareholders who still insists that the company explore a
possible sale to unlock shareholder value, according to a
Schedule 13D/A filing with the SEC.
Karsch
Capital, who controls 9.32% of the company, said they are encouraged by
the company's strategic review aimed at improving profitability and
restoring topline growth, but still believe that the board should
demonstrate a genuine commitment to enhancing shareholder value by
concurrently conducting a thorough review of strategic alternatives
that could include a sale.
"We continue to believe that a
turnaround at CSK Auto should be very achievable because of the
tremendous opportunity to improve the Company's severely depressed
operating margins," said fund manager Michael Karsch. "[However] given
the Board's poor track record overseeing CSK Auto, we remain skeptical
about the Company's ability to achieve a successful turnaround."
CSK's
current turnaround plans call for a $34 million reduction in pre-tax
costs in fiscal 2008, which should improve EBITDA by over 20%. If
successful, this would greatly enhance shareholder value. However, the
company's plans remain vague amid poor board oversight. As a result,
Karsch called for more detailed information on the turnaround plans as
well as an evaluation of strategic alternatives.
The activist
hedge fund added, "We will continue to monitor the activities of the
Company and the Board very closely and will continue to carefully
consider all options that could maximize the value of our significant
investment in CSK Auto, including engaging in a proxy contest to
replace some or all members of the Board of Directors."
In the
end, shareholders are hoping to receive more information on the
proposed turnaround that will help them evaluate the viability of such
a plan. Meanwhile, Karsch is keeping careful watch over the company to
make sure that shareholder are protected in case the turnaround falls
through. Combined, these factors make CAO a stock
worth watching!
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