JLM Industries Inc. is navigating some choppy waters, facing a potential takeover bid by a major shareholder and a possible delisting from the Nasdaq stock index.
Tampa, Fla.-based JLM's poor financial results have led shareholder Philip Sassolder to resign from JLM's board and file a notice with the Securities and Exchange Commission outlining several actions he may try to take, including the acquisition of controlling interest in the firm.
Sassolder - along with Phoenix Enterprises LLC, his New York-based investment firm - controls about 5 percent of JLM stock.
Although JLM's performance improved in the first quarter - with sales climbing 66 percent to $73 million compared with the year-ago period - the firm still posted a loss of more than $1.1 million. JLM lost a total of almost $15 million from 2000-02, as sales dropped from $434 million in 2000 to $340 million in 2001 and to $241 million last year.
JLM officials have cited economic softness and changes in selling prices of acetone and phenol as reasons for the downturn. The company distributes engineering resins and specialty chemicals, along with producing plastic feedstocks phenol and acetone.
``We believe JLM is dramatically undervalued,'' Sassolder said in a June 4 telephone interview. ``Small or micro-cap companies like JLM have very little sponsorship in the financial community. There's no incentive for analysts to follow these types of companies.''
Although he was not required to resign from JLM's board, Sassolder said he did so to avoid the appearance of a conflict of interest, based on the proposals he is considering.
Taking JLM private is ``one of the alternatives'' Sassolder is looking at. In addition to his 5 percent stake, Sassolder said he believes the owners of another 20-30 percent would vote with him when he makes a recommendation.
JLM founder and Chief Executive Officer John McDonald is the firm's largest shareholder, controlling at least 43 percent of outstanding shares.
``We're no different than any other chemical company,'' McDonald said by phone June 4. ``The economy's had an impact of 20-25 percent on demand, we've had to deal with overcapacity and we've been slammed by rising energy and raw material costs.''
In Sassolder's assessment, JLM's chemical manufacturing business has hurt its distribution work, which has remained profitable. Overcapacity and what he called ``arcane'' pricing practices have damaged profitability in phenol and acetone, Sassolder said.
Regardless of his action, which should come in the next six to 12 months, Sassolder said he is not looking to shake up management at JLM.
``We have no intention of going forward [with a change in strategy] without being supportive of this management,'' he said.
McDonald said he has not discussed the company's future with Sassolder, but added that he would be willing to consider ``anything that would make the company better.''
Shortly before Sassolder's late May resignation, Nasdaq officials told JLM that the firm fell below listing standards. Nasdaq requires the value of a firm's outstanding shares to be at least $5 million. JLM, with its per-share stock price dropping close to 80 cents at one point, had been below that benchmark for more than 30 consecutive business days.
Although no date has been set for a hearing with Nasdaq, JLM lawyer Ford Pearson said he does not expect the firm to be delisted, since its per-share stock price had risen to $1.04 as of June 3. At that price, the value of JLM's outstanding shares would surpass the Nasdaq requirement.
``If the stock stays at its current price, that would be our strongest argument to avoid delisting,'' Pearson said. He added that he expects JLM to meet with Nasdaq by the end of summer to address the matter. JLM will continue to be listed on Nasdaq in the meantime.
JLM went through a similar scenario in 2001, facing delisting before meeting Nasdaq requirements. On Nasdaq, JLM's per-share price had been above $3 as recently as mid-2001, but has stayed at or near the $1 mark since late 2002.
``Our stock is definitely undervalued,'' McDonald said. ``Our assets alone are worth $4 or $5 per share.''
McDonald, who founded JLM in 1986 and took it public in 1997, is keeping his chin up as his firm toughs it out.
``I look at all of these events as positive,'' McDonald said. ``Our first quarter was up, and our second quarter will be better than the first. We could end up being the comeback kid.''
