Wednesday, September 23, 2009

Pressing for change at Texas Industries (TXI)



AlphaNinja - Activist investor Shamrock, in a 13d filing, is trying to get other shareholders of cement maker Texas Industries (TXI) to vote for its 3 proposed additions to the company's board. Shamrock cites various ways in which TXI has
-underperformed its peers
-overpaid executives
-been un-receptive to change

Whatever ones feeling are regarding "activist" investors (also called "corporate raiders" in the 80's), these guys/gals make a good point if this is true:

At each of the past two annual meetings, Texas Industries shareholders have sent a resounding message of concern and dissatisfaction. Yet the Texas Industries board has not meaningfully responded to the shareholders’ demand for change and, in our view, has become even more reluctant to consider views other than their own. Chairman Rogers even suggested during a recent meeting with us that if our nominees were elected to the Texas Industries board, the holdover incumbent directors would not work cooperatively with our duly elected nominees but instead would seek to isolate and marginalize them.

That's certainly not helpful. Shamrock's three suggested resolutions are very practical, and there's hardly a reasonable argument to say that they wouldn't improve shareholders' prospects:

the Shamrock Activist Value Fund, L.P. has proposed three shareholder resolutions, which request that the Texas Industries board of directors take the necessary actions to:

–declassify the board and require all directors to stand for election every year;

–institute majority voting in uncontested director elections and require that any incumbent who does not receive a majority of the votes cast resign from the board, effective immediately; and

–require shareholder approval of all “poison pill” rights plans.

In addition to large investor Southeastern Asset Management, Shamrock has the support of the company's largest shareholder, Nassef Sawiris:

In a letter to the Texas Industries board, Mr. Sawiris wrote: “I believe the [Shamrock Activist Value Fund, L.P.’s] director nominees and their three resolutions will be a catalyst for improving performance and governance at TXI and most importantly for increasing shareholder value.”

In management's defense, this is a DREADFUL time to be a cement maker. Even if they were able to get back to 2007 profitability of $4.00 per share - a truly herculean effort - the stock will not see $80 or a PE of 20 like it did...



...but that doesn't mean shareholders don't deserve a right to elect new directors if they desire a change at the top. Yay, capitalism!


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