GenCorp Inc.
(NYSE:GY) is taking fire from several activist hedge funds bent on
unlocking value in the company’s shares. Pirate Capital, Carl Icahn,
Steel Partners, and Sandell Asset Management have all taken stakes in
the defense company and pushed for changes in order to unlock value for
shareholders. This “who’s who” list of activist investors has many
believing that changes may finally be implemented to help jump the
company’s lackluster share price. So, should you look at picking up
some shares of GenCorp?
Warren Lichtenstein’s Steel Partners has been a GenCorp shareholder
for several years and first agitated for change in December of 2002.
The activist hedge fund continued the assualt that culminated in a $700
million bid for the defense company in 2004. The company then issued
new stock that effectively raised the takeover price by $127 million
and Steel Partners withdrew its bid. Shortly after, Lichtenstein
announced his first proxy contest that was eventually dropped when the
company added a corporate governance expert to its board. Now, Steel
Partners is renewing its push to unlock value by nominating a new slate
of six directors that they believe can help unlock value.
Thomas Sandell’s Sandell Asset Management is another activist hedge
fund that began its push for changes in March of 2005. The firm
requested that the company make more changes to improve governance and
also sell a chemicals unit. More recently, the hedge fund demanded that
the company remove its anti-takeover measures and allow large
shareholders to call special shareholder meetings. Clearly this would
lend more credibility to the board, but would also open the door for
hedge funds like Steel Partners to step in the door.
Thomas Hudson’s Pirate Capital was yet another activist involved
with the company back in 2006 when it nominated its own directors to
the company’s board of directors. The move was mollified when the
company agreed to abandon its “poison pill” anti-takeover protection,
but Pirate succeeded in winning three seats. Pirate noted that the
company had substantial value tied up in its real estate that it
believed should be unlocked through a strategic transaction. In
particular, the hedge fund was interested in the company’s Sacremento
real estate holdings.
In the end, there are a lot of activists circling around this stock.
No doubt, Steel Partners is most interested in unlocking GenCorp’s real
estate value while Sandell is bent on making governance changes and
selling a chemical unit. Whether or not the hedge funds will succeed in
getting their wishes remains to be seen, but this is definitely a stock
that is worth watching over the next few months - with three activist
involved, the odds of change are much higher!
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