A major shareholder of Simp-son Industries Inc. is calling for the possible sale of the supplier despite its record earnings last year.
MMI Investments II-A LP of New York takes issue with the slide in Simpson's stock price over the past six years and Simpson's lack of 'an effective acquisition program in recent years,' said Jerome Lande, an MMI associate involved in the proceedings.
MMI is protesting what it calls Simpson management's 'evasion of issues of shareholder value' and its refusal to explore the sale of the company.
In a March 10 letter, MMI encouraged Simpson shareholders to approve a recommendation that the Simpson board seek the sale of the company to a third party. The nonbinding proposal will be voted on April 18 at Simpson's annual meeting of shareholders.
MMI also proposes to seat three of its own directors on Simpson's board. MMI owns 4.7 percent of Simpson stock.
Simpson CEO Roy Parrott met with MMI to discuss its strategy last month. Simpson stated its goal of attaining $1 billion in annual sales by 2005 'primarily from organic growth from the record $532 million' in revenue it posted for 1999. Earnings rose 25 percent last year to $20.8 million.
'From what I've seen, suppliers who have become massive consolidators aren't faring any better in the stock market than we are,' Parrot said.
Simpson's stock closed at $10.13 on March 20. Since mid-1995, its stock price has averaged $10.59, reaching a high of $14.39 in April 1998 and a low of $8.23 in November 1995. The company, based in Plymouth, Mich., makes engine components, vibration-control products and wheel-end and suspension parts.
While acknowledging that Simpson's plan includes acquisition, MMI says that the automotive supplier doesn't have the financial power to make an acquisition, based on its limited-debt capacity and undervalued public stock. Said Lande: 'And they don't have a significant appetite to do so based on their plan of only growing to a billion dollars.'