A stockholder insurrection is brewing over ownership of automotive supplier Excel Industries Inc.
A private investment firm filed a preliminary proxy statement Nov. 30 asking that Excel promptly sell the underperforming company to a third party.
The firm, New York-based MMI Investments Inc., owns 404,600 common shares of Elkhart, Ind.-based Excel, or about 3.2 percent of the shares outstanding. MMI is asking other shareholders to join in demanding that Excel — a major injection molder of interior and exterior auto parts — be auctioned off to a high bidder.
The proxy's ``shareholder value proposal'' goes beyond mere rhetoric. MMI is run by Millbrook Capital Management Inc., a Millbrook, N.Y., company that specializes in leveraged buyouts of publicly traded companies. It either owns or has investments in about 21 firms.
MMI owns more shares of Excel than Excel's top executives own. Those company directors and officers hold 145,010 shares, or about 1.1 percent of Excel, the filing reported.
The timing of the Securities and Exchange Commission filing caught equity analysts off guard. On Nov. 18, the company had hired Morgan Stanley Dean Witter & Co. to evaluate ways to enhance shareholder value.
As reported last week, alternatives include a possible sale, as well as acquisitions, joint ventures and other financing options. The move followed a dip in Excel's stock price and poor performance for its seat-track-mechanism business.
``In light of the announcement by Excel, such action by shareholders is somewhat surprising,'' said Gregory Kagay, an analyst with McDonald & Co. in Birmingham, Mich. ``And in this case, there are better candidates than Excel that are poorly run across the board. Excel is a capable player that has found itself with overcapacity [problems].''
Millbrook officials said that, for legal reasons, they could not comment on the sharply worded filing until a definitive proxy is filed in a few weeks.
The filing itself contains several charges leveled against Excel. Among those is that the hiring of Morgan Stanley was a smoke screen for further inaction. The filing alleges that Excel worked with the investment banking firm for more than a year prior to the announcement.
``Why should Excel's shareholders believe that this old consulting arrangement will lead to fresh action now?'' the filing said.
Excel investor relations spokesman William Schall said the company had not worked with Morgan Stanley for several years and that other firms were considered.
The filing also alleges that no alternative besides a sale would be viable to maximize shareholder value. The company's acquisition of Atwood Industries Inc. — which included the faltering seat-track business — left investors with little confidence, the filing stated.
The company's balance sheet would make it difficult to arrange financing to borrow additional funds, while more debt would only continue to depress the stock price, according to the SEC filing.
Excel recently posted an operating loss of $2.8 million on sales of $280 million for the third quarter of 1998. The supplier's stock was trading at $17.81 at the close of business Dec. 2 after reaching a 52-week high of $22.62 on April 13.
MMI officials met with Excel executives Oct. 13 to inquire about the sale of the company. MMI then sent Excel a proposal stating that shareholders requested the firm's board of directors seek a prompt sale.
The filing indicates Excel rejected MMI's proposal. In a letter from Excel Chief Financial Officer Joseph Robinson, the company said it did not believe the proposal was proper, the SEC filing said.
MMI initially purchased about 75,000 shares of Excel 15 months ago, Schall said. Last summer, the firm bought more than 300,000 additional shares at about $13 a share, he said.
Excel's wide-sweeping operations include the molding of plastic air-suspension systems, door modules, steering components, exterior trim pieces, window encapsulation systems and taillight assemblies.
Last year, Excel had $85 million in North American injection molding sales, according to Plastics News' ranking