Management at Florida land company St. Joe rejected a plan for a board coup that was floated earlier Wednesday by shareholder Bruce Berkowitz of Fairholme Capital.
“St. Joe adamantly opposes Fairholme’s efforts to obtain control of the Company without paying a control premium to all other shareholders,” the company said in a statement. “If Fairholme and its President, Bruce Berkowitz, want to take control of St. Joe, they should make an offer to all shareholders to buy it.”
The statement goes on to say that Fairholme should offer some kind of strategic plan for the company. If it doesn’t have one, then Fairholme should be supporting management in its efforts to “explore financial and strategic alternatives.”
A source close to Berkowitz reiterated Berkowitz's statement that he does not want control of the company, but rather a board chosen by all the shareholders.
Push to Remove Directors
Two days after resigning from the board ofSt. Joe , Berkowitz is seeking to replace the firm's current directors.
In a letter to shareholders, Berkowitz nominates himself, Fairholme president Charles Fernandez, former Florida governor Charlie Crist and Howard Frank, vice chairman and chief operating officer of Carnival Cruise Lines, to the board.
He is also asking other St. Joe investors to submit their nominees for three additional directors, and has hired the executive search firm Spencer Stuart to review these nominees and handle the search process. Investors will be able to submit their nominees via a website Berkowitz plans to set up called takejoeback.com. St. Joe declined to comment on Berkowitz’s plan.
“The shareholders of St. Joe—let them vote, let them decide,” Berkowitz said Wednesday morning in an interview on CNBC. “It’s their company. This isn’t about strategic initiatives. This is about who’s running the company.” His plan is an effort to align management and board pay with shareholder interests, Berkowitz said.
This comes hours after St. Joe's board adopted a shareholder rights plan prohibiting any investor with a more than 10 percent stake in the firm from increasing that stake without board approval.
Berkowitz had a scathing reaction to the plan on CNBC. “It looks like now we’re not going to be able to object,” he said. “If we do, we won’t be able to vote them out. We won’t be able to buy more stock. We won’t be able to protect our capital. We won’t be able to stop the waste. It’s mind-boggling. Is this a New York Stock Exchange company? Is this a democratic process?”
In his letter, Berkowitz, whose $20 billion mutual fund owns close to 30 percent of St. Joe shares, noted that under Florida law a majority can act by written consent to remove the existing board and elect a new one without a shareholder meeting.
This is the latest development in a now more than week-long drama. Over the weekend of February 5th, Berkowitz and Fernandez sent a letter to the board, seeking that it be restructured with Berkowitz replacing chairman Hugh Durden. They also said they wanted the company to hire a financial advisor and laid out a plan to cut expenses and return the company to breakeven.
Fairholme's executives won a partial victory later that week when St. Joe hired Morgan Stanley to help it explore strategic alternatives, including the possible sale of the company. Still, the board resisted other changes sought by Berkowitz and Fernandez, prompting both to resign on February 14th.
Berkowitz and Fernandez said they resigned because they could no longer serve on a board where directors are not "committed to shareholder value, pay for performance and effective corporate governance." St. Joe said their resignation was "not in the best interest of all St. Joe shareholders."
The largest landowner in northwest Florida, St. Joe lost money in the last three years. It's a target of famed short seller David Einhorn of Greenlight Capital. Einhorn maintains the stock is overvalued and the company has not taken the proper writedowns on some of its holdings.
Einhorn's view puts him at odds with Berkowitz, who has been accumulating his positions since late 2007. Berkowitz's view is that the company's 577,000 acres which include timber, commerical and residential real estate holdings, are a good value given the population trends in Florida and the recovering economy.