Griffon Investor Voss Capital Pushes for Board Seats, Possible Breakup

(Bloomberg) -- A top-10 investor in Griffon Corp. has nominated three directors to the company’s board and is calling on the manufacturer to explore all available alternatives to improve its performance, including a breakup. 

Voss Capital, which owns a 2.1% stake in Griffon, said in a letter to the company’s board Tuesday that it believes the company has very attractive assets but that they are being undervalued because of Griffon’s poor corporate governance, excessive executive compensation and outdated structure. 

Travis Cocke, Voss’ chief investment officer, said he agrees with the company’s own estimates that its shares could be valued at more than $50 apiece if it were to remove its conglomerate discount. 

“Now is the optimal time for a committee of truly independent directors to conduct a comprehensive strategic review of all potential paths for unlocking shareholder value and we are highly confident there are several suitors who would be interested in a transaction for each of the three segments,” Cocke said in the letter, a copy of which was reviewed by Bloomberg. Voss’ nominees include Gerry Bollman, H.C. Charles Diao, and Leviathan Winn. 

Cocke said the company’s chairman and chief executive officer, Ronald Kramer, has admitted in discussions with Voss that there has been inbound interest for Griffon’s businesses. But the investor was told “now is not the time to sell,” Cocke alleges.  

Shares in Griffon have gained about 34% year-to-date. They rose 4.1% to $27.20 at 1:35 p.m. in New York on Tuesday, giving the company a market value of about $1.5 billion.

Griffon said in a statement Tuesday it had reviewed Voss’s assessments and concluded they were “inaccurate.” It said it planned to push ahead with its strategy, including through mergers and acquisitions, that it said had allowed for optimal capital deployment and significant returns for shareholders.

“We have engaged in good faith with Voss to date. Independent members of the board have met with them and are currently assessing their nominees in accordance with our thorough process,” the company said. “While we are disappointed by Voss’ decision to create public disruption, and despite their misleading statements, we remain open to engaging with them.”

Three Businesses

Griffon operates three businesses, including a division that builds landscaping and gardening tools, one that produces garage and rolled steel doors, and a defense electronics division that provides intelligence, surveillance and communications products, according to its website. 

In September, Griffon launched a strategic review of its defense electronics business, which is known as Telephonics. It also said last week it plans to implement measures to improve its governance, including de-staggering its board over the next three years so that all of its directors stand for re-election annually instead of just a few at a time, among other measures. 

While Cocke said the review of Telephonics was a step in the right direction, the governance moves are too little and should have been immediately implemented rather than waiting years. He criticized the board for its lack of diversity, arguing it is stacked with Kramer’s allies, who lack the necessary independence and experience. He also called for the immediate removal of current directors Victor Renuart and Robert Harrison, whose military expertise he says will be irrelevant at the business once Telephonics is sold. 

Cocke took aim at the $60 million in compensation that Kramer has been awarded over the past five years, which he said is more than the CEOs of some of the world’s largest and most profitable businesses. 

“Paying a CEO many times what his peers make may be justified when the person delivers exceptional relative shareholder returns. Unfortunately, this is not the case with Mr. Kramer,” he said. 

Voss, which is based in Houston, has pushed for changes at several companies in which it has invested, including Rosetta Stone Inc., which was sold to Cambium Learning Group Inc. last year.   

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