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Business

Shareholder Groups Want Spots On Ferro, Calgon Carbon Boards

Finance: Investors seek management shake-up to improve shareholder value

by Marc S. Reisch
January 31, 2013 | A version of this story appeared in Volume 91, Issue 5

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Credit: Ferro
Ferro operator at a solar paste mill. Investors want an immediate sale of the business.
Photo of a Ferro operator at a solar paste mill.
Credit: Ferro
Ferro operator at a solar paste mill. Investors want an immediate sale of the business.

Two investment groups have separately set their sights on shaking up the boards of directors at ailing specialty chemical firms Ferro and Calgon Carbon. The groups say they want to improve the value of the two firms’ stock.

FrontFour Capital Group, a New York City-based hedge fund, is leading a group of investors that owns a 3.2% stake in Ferro and wants the firm to “immediately” sell its solar paste and pharmaceutical ingredients businesses. The group is proposing a slate of three directors for election at Ferro’s 2013 annual meeting.

Included in the proposed slate of directors is Jeffry N. Quinn, former CEO of Solutia, a specialty chemical maker that was recently purchased by Eastman Chemical.

At Calgon Carbon, investment firm Starboard Value hasn’t made any specific demands although it wants new directors. Starboard, which describes itself as a “deep- value-oriented firm” that invests in underperforming companies, says it is in talks with the firm’s management. The investors have accumulated a 7.7% stake in the activated-carbon maker since November and have proposed three directors for election.

Among the proposed directors is Louis S. Massimo, former chief financial officer of Arch Chemicals, which was recently bought by specialty chemical maker Lonza.

The last time investors undertook a similar challenge to a chemical firm’s management, recalls Dmitry Silversteyn, a research analyst with Longbow Research, was in 2007 and 2008. Then activist investor groups sought to place their own directors on the board of struggling plastics compounding firm A. Schulman. One, Ramius Capital Group, succeeded in getting two directors on Schulman’s board and shaking up management.

However, unlike in the Schulman case, both Ferro’s and Calgon Carbon’s management say they are open to input from shareholders who believe in the firms’ potentials.

The FrontFour group makes a point of its lack of confidence in Ferro’s management. In a letter to shareholders, FrontFour says Ferro’s management “is ill-equipped to make the appropriate decisions to restore shareholder value.”

Ferro CEO James F. Kirsch resigned in November after solar paste sales dipped and earnings tumbled. Silversteyn suggests that if FrontFour succeeds, it could help break up and sell the firm.

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