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Hedge fund manager Andrew Shapiro of Lawndale Capital Management LLC has escalated his activism campaign at electronic manufacturing services company Sparton Corp.--again.
On Tuesday, Shapiro, a 9.9% Sparton shareholder, made an SEC filing disclosing a letter to Sparton's board that formally recommended four independent turnaround professionals for Sparton's nominating committee to add to Sparton's staggered 10-person board. At the same time, Shaprio gave the board notice of his alternative intent to elect them directly through a proxy contest, if necessary.
In addition to his nominees, Shapiro pressed Sparton to hire experienced turnaround management from outside Sparton and consider strategic options, such as a sale. The annual meeting date has not been set but is expected to be held the week of Oct. 20. In March, Sparton announced that its CEO, David Hockenbrocht, was resigning from the firm, to be replaced by an interim executive, former Sparton CFO Richard Langley. This was good news for Shapiro who had been complaining about Hockenbrocht's management of the business for several years. "The truth is that fiscal 2007 was not an isolated event, it was just worse than usual," Shapiro wrote in an October filing with the Securities and Exchange Commission. "Clearly Mr. Hockenbrocht and this board are out of touch. Shareholders have suffered long enough." Shapiro also has argued that management had been mismanaging company capital in a self-serving manner. Shapiro said in a Jan. 11 SEC filing that the company was mishandling its defined benefit pension plan by maintaining an excessive amount of company stock in it and using those shares to entrench senior managers in the face of his insurgency. Additionally, in that filing, Shapiro argued that management had been misallocating the company's stock buyback plan, supporting insiders' option share sales inappropriately. To resolve these problems, Shapiro requested a series of governance changes including having the company conduct a full independent investigation of possible Erisa and fiduciary duty violations. - Ron Orol See Dealscape: Lawndale wins another Sparton battle See Dealscape: Shapiro winning Sparton battle See Dealscape: Shapiro escalates battle with Sparton Categories Deal Video
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