Barington Capital Group Sends Second Letter to the Chairman and CEO of Ameron International Corporation Believes Ameron's Board of Directors Should be Focusing on Measures to Improve Shareholder Value
NEW YORK, July 9 /PRNewswire/ -- Barington Capital Group, L.P. sent a letter today to James Marlen, the Chairman, President and Chief Executive Officer of Ameron International Corporation (NYSE: AMN). The letter was sent in response to the Company's recent announcement that its Board of Directors has amended the Company's Bylaws in order to put in place new advance notice provisions regarding stockholder action. Barington states in the letter that it believes that it is more crucial for the Board to be spending its time and the Company's resources improving Ameron's financial and share price performance, and recommends that the Board implement the measures Barington outlined in its March 29th letter to Mr. Marlen.
A copy of Barington's letter is attached to this press release.
About Barington Capital Group:
Barington Capital Group, L.P. is an investment firm that, through its affiliates, primarily invests in undervalued, small and mid-capitalization companies. Barington and its principals are experienced value-added investors who have taken active roles in assisting companies in creating or improving shareholder value. Barington represents a group of investors that currently owns over 3.5% of the outstanding shares of the Company.
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Barington Capital Group, L.P.
888 Seventh Avenue, 17th Floor
New York, New York 10019
July 9, 2010
Mr. James S. Marlen
Chairman, President and Chief Executive Officer
Ameron International Corporation
245 South Los Robles Avenue
Pasadena, CA 91101
As significant stockholders of Ameron International Corporation ("Ameron" or the "Company"), we wanted to share our thoughts with you regarding the Company's recent announcement that its Board of Directors has amended the Company's Bylaws without stockholder approval in order to put in place new advance notice provisions regarding stockholder action.(1)
We were disappointed to learn that in this challenging economic environment the Board has elected to spend its time and the Company's resources updating its defenses against stockholder initiatives. The Company already has a vast array of provisions in place which have the effect of isolating the Board from Ameron's stockholders. These include a classified board of directors, restrictions on the ability of stockholders to call a special meeting or act by written consent, the absence of a majority voting standard in director elections, the ability of the Board to amend the Company's Bylaws without stockholder approval, and an 80% supermajority voting requirement for stockholders to amend the Bylaws or approve certain types of business combinations. One would think that if a company was truly stockholder focused, it would be unnecessary for it to have such a range of defensive measures in place.
We believe that it is more crucial for the Board to be focusing its efforts at this time on improving the Company's financial and share price performance. We therefore strongly recommend that you implement the measures we outlined in our March 29th letter to you. These recommendations include reducing expenses, exiting non-core businesses, appointing an independent chairman of the board, aligning management interests with those of stockholders and improving Ameron's corporate communication efforts.
Expense Reduction; Exit Non-Core Businesses
In our opinion, it is of foremost importance for the Company to reduce its corporate and operating expenses and bring its selling, general and administrative (SG&A) expenses in line with its peers. While we have been told that the Company has already reduced expenses, we believe that further expense reductions are available and need to be taken promptly.
In addition, it is our belief that the Company should exit its non-core TAMCO joint venture and Hawaii Infrastructure business in order to better focus on its core Fiberglass-Composite and Water Transmission businesses. As the Company's results of operations for the second quarter ended May 30, 2010 indicate, Ameron's Fiberglass-Composite Pipe Group continues to be the Company's strongest performer, with sales increasing 16% year-over-year. In contrast, TAMCO reported another quarterly loss while the Hawaii Infrastructure Division's sales and segment income for the quarter were lower in 2010 as compared to 2009. We therefore recommend that Ameron conduct a thorough review of all strategic alternatives for TAMCO and the Hawaii Infrastructure Division, including the sale to a strategic buyer that may be willing to pay a premium for these businesses.
Appoint an Independent Chairman of the Board
We continue to believe that the Company needs to improve its corporate governance in a number of areas, including by appointing an independent chairman of the board. The stockholders of Ameron overwhelmingly support this recommendation, as indicated by the fact that over 67% of the shares voting at the 2010 annual meeting voted in favor of a stockholder-proposed Bylaw amendment that would have required the chairman of the board to be an independent director. Unfortunately, amending Ameron's Bylaws requires the affirmative vote of 80% of the outstanding shares of the Company. This is an extremely difficult threshold to achieve, especially considering that barely 80% of the outstanding shares voted on the proposal. We therefore add to our list of recommendations to improve the Company's corporate governance that Ameron remove the supermajority voting requirements for stockholders to amend its Bylaws and approve certain types of business combinations. We hope, however, that the Board will voluntarily appoint an independent chairman so that future stockholder votes on this issue are not necessary.
Alignment of Interests between Management and Stockholders
We were pleased to see that the Ameron Board took our advice and implemented a minimum stock ownership policy for its directors and executive officers. It's about time. While we have questions concerning some of the provisions of the policy, we support the decision of the Board to take action to "better align the interest of the CEO and directors of the Company with the interests of the Company's stockholders."
We hope that the Board will also implement our other suggestions to better align the interests of management and stockholders. Among other things, we are convinced that the Company needs to reduce its executive compensation expenditures quickly and judiciously and establish new executive compensation guidelines to address the pay-for-performance disconnect at the Company.(2) The Company's compensation practices have been widely criticized by a number of proxy advisory firms and in our view must be revised promptly.(3)
Improve Corporate Communication
We note that the Company has again elected not to hold an investor conference call in connection with its quarterly earnings release and has failed to announce any other steps it has implemented to augment stockholder communication. To the contrary, it appears to us that the Company has taken efforts to limit the ability of stockholders to speak with you, as when I last called you to discuss our recommendations, I was referred to other members of your management team.
Ameron is not a private company. It is owned by its public stockholders and should be operated in their best interests. It is our hope that the Company will communicate more openly with its stockholders and carefully consider their suggestions to improve shareholder value.
/s/ James A. Mitarotonda
James A. Mitarotonda
(1) The announcement was contained in the Company's latest Form 8-K filing dated June 25, 2010
(2) RiskMetrics Group stated in its March 15, 2010 proxy report that there is a "pay-for-performance disconnect at the company" and Ameron received a "D" grade in the area of pay-for-performance from Glass Lewis & Co. in its 2010 proxy report. Similarly, The Corporate Library, in its March 2, 2010 profile of the Company, gave the Company a "Very High Concern" rating with respect to its compensation practices and noted that there are a number of concerns at Ameron that call into question the alignment of executive interests with shareholder interests.
(3) See, for example, RiskMetrics Group's March 15, 2010 proxy report
SOURCE Barington Capital Group, L.P.