(Bloomberg) — American Vanguard Corp. has rejected a slate of four directors put forth by activist investor Cruiser Capital Advisors, arguing the nominees wouldn’t add value to the board and lacked enthusiasm for joining.
Cruiser, run by Keith Rosenbloom, told American Vanguard last month when it nominated the directors that it held a roughly 0.2% stake in the agricultural chemical producer, the company said in a regulatory filing Tuesday, confirming an earlier report by Bloomberg News. Cruiser now claims to own about 3% of the company, it said.
American Vanguard believes that Cruiser, which said it was nominating the directors to help improve the company’s operations, didn’t offer enough details on how that would be achieved.
Rosenbloom said in an emailed statement that he believed American Vanguard has the potential to be a highly-profitable platform but is undermanaged. He said it’s failed to generate meaningful returns over the past decade, and a more focused management team could improve the company’s earnings before interest, tax, depreciation and amortization margin to “well north” of 15%, from 10% today.
“We think the opportunity is substantial, but the company’s board has demonstrated poor capital allocation decisions over the past 10 years and we are deeply concerned about how free cash flow will be allocated,” Rosenbloom said.
In addition to Rosenbloom, Cruiser nominated its director of research, Charles Rose; former Union Carbide Corp. chairman and chief executive officer Patrick Gottschalk; and former Hemlock Semiconductor chairman and CEO Mark Bassett. All four were interviewed by the American Vanguard board, which decided to reject them because the nominees either wouldn’t add value to the board or expressed reservations about joining, the company said in the filing.
The board considered, among other factors, the lack of relevant experience in agricultural chemicals, sustainable agriculture, precision applications, agribusiness, regulatory, or other relevant expertise, as well as the lack of diversity of any kind among the Cruiser nominees, it said in the filing.
Rosenbloom said he didn’t believe the vetting of its nominees was made in good faith.
“As for their review process of our board nominees, it was perfunctory at best — but it’s exactly what one would expect from a board who has been paid millions of dollars while its shareholders have seen virtually no historical return,” Rosenbloom said Tuesday.
Shares of Newport Beach, California-based American Vanguard have climbed 39% this year through Monday’s close. They rose 2.6% to $23.45 at 10:39 a.m. in New York trading Tuesday, giving the company a market value of about $726 million.
American Vanguard is benefiting from the fundamental strength in its sector that has been amplified by the war in Ukraine, which has created a fertilizer shortage and increased the value of North American crops.
Cruiser previously agitated for changes in the sector in 2018, when it nominated four directors to Ashland Global Holdings Inc.’s board to help oversee its transition to a pure-play chemical company. Cruiser reached a settlement at the company the following year that saw one of its nominees appointed to the board.
It also was also given two seats on the board of A. Schulman Inc. in a settlement in 2017. A. Schulman was later sold to LyondellBasell Industries N.V.
(Updates trading in tenth paragraph.)
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