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Portfolio > Alternative Investments > Hedge Funds

Steel Partners Presses Buyouts

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NEW YORK (–The activist hedge fund Steel Partners II LP issued buyout offers this week to Bairnco Corp, and Stratos International Inc., which were met with mixed reactions.

Late Thursday [June 15] Steel Partners extended a bid to purchase Bairnco Corp. for $12 per share, an offer that values the company, which manufactures engineered materials and electronic components, at approximately $89 million. Steel Partners, which currently controls 15.5% of Bairnco’s equity, will begin a tender offer by the end of next week and the fund’s principals expressed their desire to meet with Bairnco’s board of directors as soon as possible.

“We have determined, after evaluating all our options, that commencing a tender offer would be in the best interest of all the shareholders,” said Warren Lichtenstein, managing member of the hedge fund, in a statement.

Bairnco management isn’t so sure. The Lake Mary, Fla.-based company responded Friday [June 16] with a statement cautioning shareholders against “taking premature action” in response to the announcement from Steel Partners.

The markets reacted more positively to the unsolicited bid. As of midday Friday, shares in Bainco (BZ) had risen to $11.49, a gain of $1.53 from its close at $9.96 the previous day.

Steel Partners found a warmer, if not quite open-armed, reception earlier in the week at Stratos International Inc., a Chicago-based developer and manufacturer of components and products used in telecom, video and other markets. The hedge fund, which owns approximately 15% of the company’s outstanding common shares, advanced an unsolicited offer June 9 to acquire Stratos for $7.50 per share.

In response, Stratos issued a statement acknowledging that it has been in discussions with Steel Partners “over a period of several months,” a span of time in which the company was careful to point out that its stock price had traded well over the $7.50 mark, as high as $8.11. The company didn’t discount the possibility of a sale to Steel Partners, but said that the hedge fund would need to fully spell out its intentions before any decision could be made–something Steel Partners apparently hasn’t yet done in the ongoing discussions.

“Similar to its prior proposals, Steel Partners, in its press release on Friday, did not articulate any strategy or plan for Stratos’s business,” said Phillip Harris, chief executive of Stratos, in a statement. “To the extent Steel Partners has developed a plan for the company that would add value, Stratos will carefully review and evaluate it.” Stratos stockholders were also urged not to take any action before the company’s board could make a recommendation.

In the week following the announcement of the upcoming Stratos offer, that company’s stock didn’t see the uptick that Bainco’s did. As of late-day trading today, it had slipped 33 cents from $7.14 one week ago, to $6.81, after the company’s June 15 announcement of fourth quarter results, showing a loss of 9 cents per share.

Last month, Steel Partners took issue with the management of another company in its portfolio, Angelica Corp., a hospital laundry contractor whose leadership, according to Mr. Lichtenstein, has taken “egregious action” to resist the changes in corporate governance recommended by the hedge fund.

Steel Partners, which owns 19.6 percent of Angelica’s outstanding shares, had requested a change in the company’s by-laws that would allow holders of 10% of the company’s equity to call a special meeting, instead of the current 50% required, and also expressed dissatisfaction with Angelica’s staggered board elections. Since receiving that letter, however, Angelica has removed the ability for any shareholders to call a special meeting, while rescheduling its annual meeting from May to the end of October.

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Contact Bob Keane with questions or comments at [email protected].


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