Griffon Corporation (NYSE:GFF) may face more pressure from dissident shareholders after the Clinton Group (CGI) and its affiliates disclosed an 8.3% stake in the company and disclosed a letter to the board of directors. The activist hedge fund expressed disappointment over the extent of the company's decline in earnings and its inability to responsively adjust cost structures, which total more than $20 million annually.

CGI believes that the company's "mini-conglomerate" corporate structure where management ostensibly oversees three unrelated businesses for huge renumeration is simply unacceptable. While the company did retain Goldman Sachs to explore strategic alternatives, the hedge fund suggested that it be mandated to narrow these to either a sale of the company in whole or in parts or a public recapitalization aided by a qualified financial sponsor. The hedge fund believes this is the best way to unlock value for shareholder amid a string of un-kept promises and out-of-control costs.

Finally, CGI also noted that the company failed to respond to any of the management issues that were brought up in its previous letters to the company - particularly, the devices in place to entrench management and the board. The hedge fund threatened to conduct a proxy fight to replace board members if the company failed to address these issues soon. Combined, these factors make GFF a stock worth watching!

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