LESCO, Inc. (NDAQ:LSCO) shares edged up $0.08, or 0.56%, to $14.33 in early trading today after Hawkshaw Capital Management voiced its opposition to the Deere & Co. $14.50/share buyout offer in a Schedule 13D filing with the SEC. The hedge fund argued in an attached letter that while the current offer makes sense for Deere & Co., it fails to adequately compensate LESCO shareholders for a return to normal operating earnings (before their recent downturn) and the value creation from continued expansion of the company's profitable retail service center business. Hawkshaw also expressed concern that the company decided to sell at an inopportune time - that is, immediately following one of the worst years in the company's history. LESCO shares dropped around 50% in 2006 due to temporary, fixable issues. In fact, management has already articulated plans to rebuild their sales force, avoid the hedging losses seen in 2006, and build more capital service centers. Finally, Hawkshaw questioned whether or not the board had sufficiently executed its fudiciary duty to shareholders to maximize shareholder value. The current offer was accepted without any kind of open auction process in which other parties would have been given an opportunity to bid.

Hawkshaw currently holds a 13% stake in the company and said it would withhold its votes in opposition if the company failed to meet it demands. The hedge fund believes that other parties should be given the opportunity to place bids, and if none materialize, the company should remain independent. It will be interesting to see if other shareholders support this notion that the $14.50 bid is too low to justify, which could lead to an increased bid or termination of the merger agreement. While this is not all to likely at this point, LSCO is definitely a stock worth keeping on the radar!

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