Griffon Corporation
(NYSE:GFF) rejected a proposal by the Clinton Group earlier this month
to lead a public recapitalization of the company and now the activist
hedge fund is fighting back. Shareholders are hoping that the hedge
fund will be able to successfully convince management to institute at
least some of their measures in order to unlock shareholder value.
The Clinton Group's initial
May 31st proposal
called for a $25/share public recapitalization in which half of the
company's outstanding shares would be repurchased through a tender
offer. The activist hedge fund noted that the debt financing to
accomplish this would be "easily obtainable" in today's market. Clinton
Group also suggested that the company make several governance changes,
declassify the board and address excessive executive compensation
issues.
Griffon Corporation
responded
several days letter by calling the Clinton Group's proposals
"completely without merit" and noting that it has made no decision to
pursue a recapitalization or any other specific course of action. The
company insisted that the hedge fund was trying to takeover the company
while focusing on the short-term at the expense of long-term
shareholders.
The Clinton Group
responded
yesterday to the unfavorable response saying they were "extremely
disappointed" with the company's response, which it said
mischaracterized their proposals and painted them in a bad light. The
hedge fund countered that they were not trying to takeover the company
with a mere $65 million investment but rather trying to return control
to shareholders. Moreover, they insisted that they are long-term
shareholders aimed at helping shareholders realize intrinsic value
through their recapitalization.
The Clinton Group was also quick
to note that even if the company disagreed with their recapitalization
proposal, they should still work to correct several other problems
facing the company. In particular, they believe the company should
eliminate their classified board structure and work to reign in
excessive executive compensation by instituting performance-based
compensation plans.
Finally, the hedge fund threatened to take
matters into their own hands if the company failed to take action.
Unfortunately, a proxy battle may be difficult with a classified board
but it is still possible to win shareholder support. Combined, these
factors make GFF a stock
worth watching!
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