Activist hedge fund manager Andrew Shapiro has taken his
insurgency at electronic manufacturing services company Sparton Corp. up a
notch in anticipation of a pending annual meeting, according to a government
filing on Wednesday.
Shapiro, director of Lawndale Capital Management LLC in Mill
Valley, Calif., reported plans to launch a “just vote no” campaign focussed on three directors as part of his effort to send a message to the board, at the company’s Oct. 24 annual meeting. Shapiro, who
also hiked his stake in the Jackson, Mich.-based company to 9.8%,
said
in a Securities and Exchange Commission filing that the company has
repeatedly misallocated capital.
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“To date the series of ventures has culminated in the
destruction of shareholder value best illustrated by Sparton’s stock
depreciating 61% over the past decade through September 2007,” Shapiro wrote
in a letter to Sparton’s board on Tuesday.
Shapiro also lashed out at Sparton chief executive David W.
Hockenbrocht. “The truth is that fiscal 2007 was not an isolated event, it was
just worse than usual. Clearly Mr. Hockenbrocht and this Board are out of
touch. Shareholders have suffered long enough.”
The activist investor also accused the company of maintaining an imprudent and large allocation of Sparton employee pension plan’s assets in Sparton’s own stock.
“The allocation at June 30, 2007 of
44% of the pension plan’s equity holdings to Sparton’s own stock, so as to
entrench insiders who are simultaneously liquidating their personal holdings,
has eviscerated the employees’ retirement plan and we believe is a direct
violation of Mr. Hockenbrocht’s fiduciary duties to the Pension Plan’s
beneficiaries as well as to the company’s other constituencies,” Shapiro
wrote. Sparton has a $57.39 million stock market capitalization. — Ron
Orol
Ron Orol is a Washington-based reporter for The Deal and author of
Extreme
Value Hedging: How Activist Hedge Fund Managers Are Taking on the
World.
