The source said Fairholme asked Wm. Britton Greene to remain as President and CEO. The mutual fund is proposing Greene and Thomas Fanning, CEO of Southern Company, remain on the board, and asked Durden and three other current directors, Michael Ainslie, Delores Kesler and John Lord to step down at the annual meeting on May 1st. Fairholme is nominating Rodney Barreto, Chairman of Florida's Fish and Wildlife Conservation Commission, and Howard Frank, Vice Chairman and Chief Operating Office of Carnival Cruise line be elected to the board.
If the current directors do not accept Fairholme's proposal, the mutual fund plans to call a special shareholder meeting. The mutual fund, which owns 27 million shares, is in a strong position to achieve its goal should it be able to persuade top institutional shareholders like T. Rowe Price and Janus its plan is the right one for St. Joe. Janus and T. Rowe own a combined 24% of the stock, add in Fairholme's 30% and you have a majority. CNBC's sources say Fairholme has yet to reach out to these institutional holders.
There has been much speculation about what Berkowitz might propose for St. Joe. He and Fernandez were appointed to the board on January 1, 2011. Fairholme, which has $20 billion dollars under management, has been accumulating stocks in the company since 2007. A standstill agreement with St. Joe, signed in April of 2009, prohibited Fairholme from buying more than 30% of the company, though the agreement was amended on January 12, 2011, basically removing those handcuffs from Fairholme and paving the way for the fund to buy more shares. Berkowitz, named Morningstar's U.S. Stock Manager of the Decade, is on the record as saying taking the company private would not be in the best interest of its shareholders, though with $5 billion in cash on hand, his fund could easily increase its holdings in the company.
St. Joe owns 577,000 acres in northwest Florida. has reported operating losses in 2008 and 2009, and for the first three quarters of 2010, hurt by the real estate downturn and more recently, by the BP oil spill in the Gulf of Mexico. Along with timberlands, the company operates properties with 12 million square feet of commercial space, 31,000 residential properties on acreage that allows for the development of 12,000 more.
In an interview on CNBC's Strategy Session on February 2, 2011 Berkowitz said, "We have some great ideas for the future of St. Joe which we still have to discuss with the board. There is a lot that can be done there. We're coming out of the worst real estate recession since the great depression. It's a question of vision. It's a question of timeframe."
It appears that timeframe has opened, and it may spell trouble for short sellers like Greenlight Capital's David Einhorn. Einhorn, a respected investor, has been a vocal critic of St. Joe's saying the stock and the company's properties are overvalued. Einhorn maintains the company needs to take writedowns on some of its holdings. His presentations led the SEC to open an investigation into St. Joe's accounting.
As of January 14th, 27 million shares of St. Joe were sold short, up from 25.67 million the month before. The firm's short interest ratio stood at a hefty of 16.3, meaning it would take a short seller 16.3 days to cover their short positions if the stock begins to rise. St. Joe closed Friday down $0.23 at $27.07 a share, below the midpoint of its 12 month range of $17.04 to $37.44.