Activist investor Barington Capital Group LP is taking aim at plastic materials and products maker Omnova Solutions Inc.
On Dec. 3, officials with New York-based Barington sent a letter to Omnova Chairman and CEO Kevin McMullen criticizing Omnova's financial performance during the 14 years that McMullen has led the Beachwood, Ohio-based firm. Barington lists several challenges facing Omnova, including lack of strategic focus, poor returns on invested capital, disappointing organic growth and consistent earnings shortfalls.
Barington — which describes itself as “a significant shareholder” in Omnova — then calls for several changes at the firm, including rationalizing its portfolio of businesses, investing in its sales force and making effective use of its excess liquidity.
In a response issued Dec. 3, McMullen said that Omnova officials “are taking aggressive actions to strengthen the company.”
According to McMullen, these actions include investment in higher-growth and higher-margin specialty businesses, improving profitability of traditional core businesses and optimizing the structure and use of capital. He added that Omnova has had two recent meetings with Barington officials to discuss their concerns and ideas.
Omnova's plastic products include polymer emulsions and plastic laminates for kitchen, bath, window and home furnishing applications.
For the nine months ended Aug. 31, Omnova's sales were down 5 percent to $744 million, while profit fell 45 percent to $6.4 million.
On Wall Street, Omnova's per-share stock price has fallen 26 percent since Jan. 1 to close at $6.73 on Dec. 2. The price had been near $10 as recently as early June.
Barington is no stranger to plastics stock battles. In the mid-2000s, the firm challenged materials firm A. Schulman Inc. in much the same way it's now challenging Omnova. That challenge eventually led to a management change at Schulman and to Barington chief James Mitarotonda and two other Barington appointees joining Schulman's board of directors.