Shamrock Messes With Texas

Call them the Carl Icahns of the west. Stanley Gold and Roy Disney have never been shrinking violets in pushing for management changes at companies where they've invested some of the $2 billion in funds in their Shamrock Holdings. Most famously, the two led the charge to oust Michael Eisner at Disney , a company formed by Roy's father, and his uncle, Walt.

They succeeded then, and it looks like they just succeeded again in a different corporate fight, far from the confines of Hollywood. The firm claims preliminary results show that its slate of three candidates was overwhelmingly voted onto the board of Texas Industries , a cement company based in Dallas. "We believe this stock is worth at least twice as much, if not more," says Shamrock's Dennis Johnson, who came to the firm last year by way of CalPERS, where he was in charge of corporate governance. Johnson was one of the candidates Shamrock put up to join the board of TXI in a proxy battle launched only after Johnson says management refused to work with shareholders like Shamrock to address concerns about the company.

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Texas Industries' stock performance has tripled since the March lows, but it is well off its high and trails rivals like Cemex . Shamrock started buying shares in the company last year as the housing bust hit the cement industry hard. Texas Industries was already being criticized by its largest shareholder, Egyptian Nassef Sawiris, who owns almost 15 percent of shares. Shamrock now owns more than 10 percent, and as it began clashing with management, Stanley Gold accused TXI's chairman Robert Rogeres of running the company "as his own personal fiefdom."

Shamrock's main operational concern is the way Texas Industries allocates capital. "This company has spent just under $800 million on capital projects in California and in Texas that have yielded zero profit for shareholders," says Dennis Johnson. He disputes public statements by TXI management that it has already given in to Shamrock on many issues. "Not much that I'm aware of," he replies.

Texas Industries turned down our requests for an interview, and we were not allowed to be at the annual meeting in Dallas Thursday. Official results are not out yet, but Johnson says preliminary totals show that he and his fellow candidates were elected to the board by a four to one margin. Passing by a wider margin were their shareholder proposals, which included raising the level of shares an individual can own before a "poison pill" kicks in, as well as forcing all directors to stand for re-election each year, instead of staggering them.

Is Shamrock in for the long haul or is it out to make a quick buck as operations improve and the housing market rebounds? "Shamrock is a patient long-term investor, and our limited partners are also patient long-term investors," Johnson says. "We believe that this company is significantly under-valued, and that value is not going to be realized in the short term." He says that, in the meantime, his Shamrock Activist Value Fund is now looking at investments in other companies. All he would say is that they may involve business services. But Johnson says much of his focus will now be on working with the remaining board members at Texas Industries, many of whom cordially introduced themselves to him after yesterday's meeting. He even had a nice chat with CEO Mel Brekhus. As for his when their first board meeting will happen? "I can just tell you that it will happen soon."

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