For a public company, it's not a good thing for a stockholder-to-stockholder letter to begin with the words, ``Do not be fooled!''
Yet that's the situation that leading compounder A. Schulman Inc. finds itself in after Ramius Capital Group LLC sent out a blistering four-page letter Dec. 6, accusing Fairlawn, Ohio-based Schulman of not living up to promises made to shareholders after challenges in 2005 and 2006.
New York-based Ramius owns more than 7 percent of Schulman. In the letter, Ramius partner Mark Mitchell states Schulman ``is no stranger to entering into unproductive settlement agreements.'' He then reviews agreements made by Schulman in those years with Barington Capital Group LP - another major Schulman investor - after Barington challenged Schulman management for alleged financial underperformance.
In each case, Schulman agreed to review the firm's long-term future and make strategic changes if needed. Three Barington nominees - including Barington boss James Mitarotonda - joined Schulman's board.
Most recently, things came to a head Nov. 16, when Terry Haines, Schulman president, chairman and chief executive officer, announced he will retire March 1, and officials said the 79-year-old firm was considering an acquisition, merger or sale.
But Ramius - which had nominated four directors of its own - was not satisfied.
``As shareholders, we shouldn't be left to wonder whether the board will fully perform its contractual obligations under the new settlement agreement or ... whether the board is attempting to buy itself yet another year to implement its strategy under the false pretenses of a strategic review process,'' Mitchell wrote in the Dec. 6 letter.
The letter also quotes a Nov. 2 reply from Schulman to Ramius in which Schulman officials said that ``restructuring and cost-cutting initiatives, as well as effectively launching Invision [plastic sheet production], are the correct courses of action for the company's future.''
Schulman officials added, according to Ramius, that they ``[didn't] think that investigating the potential sale or merger of the North American business segment or the company would be in the best interest of the company or its shareholders at this time.''
Schulman officials could not be reached for comment or to confirm the contents of their response to Ramius.
Mitchell describes Schulman's Nov. 16 response, two weeks after the Nov. 2 statements, as a ``flip-flop.''
``In light of this `flip-flop,' ask yourself whether the Schulman board is truly and fully committed to a full strategic review process to maximize stockholder value,'' he wrote. Mitchell then concludes the letter by urging stockholders to vote for its four candidates. Schulman's annual meeting is set for Jan. 10 in Akron, Ohio.
For fiscal 2007, ended Aug. 31, Schulman's sales were up nearly 11 percent to almost $1.8 billion. But profit plunged almost 31 percent to $22.6 million. Operations outside North America - mostly in Europe - accounted for almost 75 percent of Schulman's sales. The North American unit has struggled in recent years, partly because of a soft automotive market, which is its largest end segment.
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Read a copy of the Ramius letter at www.plasticsnews.com/pictures/ramius.pdf