Trico
Marine Services Inc. (NDAQ: TRMA) directors may be forced to fight for their job
after an activist shareholder opposition to the company’s current plans. Kistefos
AS, which owns a 22% stake, wrote a letter to the board expressing its disappointment
about the extraordinary loss in value since the company emerged from bankruptcy in
2005.
“I write today to express our deep concern about the extraordinary loss in value of
the company’s shares and about the current operations, direction, management and governance
of the company,” said the hedge fund in a letter. “Nevertheless, we believe that there
is significant inherent value in the company and we wish to work with management and
the Board of Directors to help restore it.”
Kistefos believes that the first step in unlocking this value is to replace the board
of directors with its own slate of directors. The hedge fund noted that it is an experienced
long-term investor with a strong track record of value creation through successful
investment in turnaround companies. The nominees to the board promise to bring significant
and relevant operating experience, a track record of generating attractive returns
and delivering value to shareholders.
Kistefos outlined several ways in which it could act to improve the company:
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The company failed to capitalize on high spot rates for shipping because of its bias
towards long-term charters. The board would terminate this line of thinking and act
in any way that generates the highest returns for shareholders.
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Management has failed to oversee construction of new vessels and contracts, which
has resulted in substantial unnecessary losses. The board would act to make sure that
the company does not make any more mistakes of this nature.
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The company took on substantial debt to make an acquisition in the subsea segment,
which has consistently lost money so far. The board would reduce the amount of debt
on the books and instead invest in the company’s own stock through share buybacks.
According to the fund, “in summary, while we remain confident that, over the very
long-term, the industry will offer the Company opportunities for organic and external
growth and increased profitability, the Company faces significant challenges in the
near future, including: completing the integration of its two recent major acquisitions
and reduction of related indebtedness; initiating the internationalization of the
subsea operations; enhancing the quality and reach of its supply vessels operations;
and returning to satisfactory profitability, all within the context of a global recession.”
