Ferro Corporation Urges Shareholders to Vote White Proxy Card
Highlights Strong First Quarter and Company’s Increased Full Year Guidance
Reiterates That the FrontFour Group’s Interests Are NOT Aligned With Those of
Provides Details Related to A. Schulman Proposal
CLEVELAND -- April 29, 2013
Ferro Corporation (NYSE: FOE, the “Company”) announced today that it mailed a
letter to shareholders in connection with the Company’s Annual Meeting of
Shareholders to be held on May 15, 2013.
The Ferro Board of Directors unanimously recommends that shareholders protect
their investment and vote “FOR” the Company’s experienced and highly qualified
directors – Richard C. Brown, Gregory E. Hyland and Ronald P. Vargo – by
telephone, by Internet or by signing, dating and returning the WHITE proxy
The full text of the letter to shareholders is below:
Dear Fellow Shareholder:
We have been pleased to speak with a number of Ferro shareholders over the
past few months and, as always, we have appreciated your insights and input.
During our discussions and in our recent letters to you, we have reviewed the
value creation strategy developed by your Board and management team and the
ways in which all of us at Ferro are collaborating to pursue that strategy and
drive value for all shareholders.
Now is the time to act to protect your investment. The Annual Meeting of
Shareholders of Ferro Corporation will be held on May 15, 2013 – just a couple
of weeks away.
We ask that you please take a moment TODAY to vote “FOR” the Ferro Board’s
nominees – Richard C. Brown, Gregory E. Hyland, and Ronald P. Vargo – using
the enclosed WHITE proxy card. You may vote by telephone, by Internet, or by
signing and dating the enclosed WHITE proxy card and returning it in the
postage-paid envelope provided. Your vote is very important!
FERRO’S STRATEGY AND EXECUTION ARE ALREADY GENERATING RESULTS (see graphic)
Since the Board’s decisive actions last fall, the value creation strategy has
already begun to generate substantially improved financial results. This is
evidenced by Ferro’s strong first quarter 2013 earnings report and increased
full year earnings guidance, as well as our recently announced additional cost
Adjusted Earnings Per Share
*In the first quarter of 2013, adjusted EPS from continuing operations was
$0.10, exceeding the guidance range of $0.05 to $0.07 and beating
analysts’ average expectations of $0.04
*Ferro recently increased full year 2013 adjusted EPS guidance to
$0.35-$0.40, a 40% and 33% increase from the initial guidance given on
February 6, 2013
*Over $30 million in cost savings expected for 2013
*$70 million in aggregate cost savings in 2014, with $85 million worth of
identified cost-reduction projects
*Selling, general, and administrative costs reduced by 15% in the first
quarter of 2013 compared to the first quarter of 2012
YOUR BOARD’S NOMINEES HAVE THE RIGHT EXPERIENCE TO LEAD FERRO AND DELIVER
VALUE TO SHAREHOLDERS
The Ferro Board and management team are intensely focused on enhancing
shareholder value by divesting non-core businesses, streamlining operations to
reduce costs and pursuing high-return growth investments.
As evidenced by Ferro’s recent first-quarter 2013 earnings, Ferro’s Board is
guiding the Company through meaningful, measurable execution of the value
creation strategy, which already is driving increased shareholder returns.
Moreover, your Board’s recognition of the importance of balancing historical
knowledge and experience with fresh, new perspectives is reflected in the
Board’s composition. Five of the nine current independent directors, along
with our newly appointed CEO and President, Peter Thomas, have joined the
Board within the past four years. These members bring new perspectives,
experience, and skills, complementing the historical knowledge and continuity
of leadership of the Board as a whole. Below is a tally sheet reflecting your
Director Independent CEO/CFO International & & M&A
Peter X X X X
Sandra X X X
Richard X X X X X
Richard X X X X X
Jennie X X X X X
Gregory X X X X X
Peter X X X X
William X X X X
Timothy X X X X X X
Ronald X X X X X X
THE FRONTFOUR GROUP HAS NO PLAN TO IMPROVE OPERATIONS AND IS PUSHING FOR
ACCEPTANCE OF A LOW-BALL PROPOSAL TO ACQUIRE YOUR COMPANY
Given the positive earnings achieved by Ferro in the first quarter of 2013, it
is unfortunate that a group of short-term shareholders – the FrontFour Capital
Group and Quinpario Partners (the “FrontFour Group”) – is seeking to elect a
slate of self-interested nominees with an agenda to undermine our value
creation strategy. The FrontFour Group’s stated agenda is to press for the
sale of your company, turning a quick profit for themselves without regard to
the impact on long-term Ferro investors. This agenda threatens to derail the
Board and management team’s successful execution against the value creation
strategy and the important progress Ferro has made in the past six months.
*The FrontFour Group has disclosed no specific plan to improve Ferro’s
financial and operational performance. Instead, it continues to claim
credit for actions that Ferro initiated months before the FrontFour Group
appeared on the scene.
Inexplicably, the FrontFour Group claims that initiatives undertaken as part
of Ferro’s value creation plan – including the divestitures of our solar
pastes and pharmaceuticals businesses – represent your Board’s reaction to a
letter from the FrontFour Group dated January 23, 2013. This is nonsense.
Our value creation strategy was announced in October 2012. We said then that
we would be cutting expenses and exploring strategic alternatives for our
solar pastes business. In fact, by November 2012, we were identifying
additional cost savings and had already entered into negotiations with the
buyer of the solar pastes assets. We also by then were already in negotiations
with the buyer of the pharmaceuticals business. Whatever self-serving version
of events the FrontFour Group might present, the fact is that those
initiatives were well underway BEFORE the FrontFour Group’s January 2013
letter. For the FrontFour Group now to claim credit for those initiatives is
Don’t let the FrontFour Group deceive you. It does not understand Ferro's
businesses and has no plans to generate value. That’s why the best that it can
do is try to claim credit for the strategy already produced by your Board and
*The FrontFour Group is focused on its own interests, not those of all
While none of the three FrontFour Group nominees has proposed a plan for or
demonstrated a commitment to adding value for all Ferro shareholders,
particular caution is warranted regarding Mr. Quinn, whose actions and
statements are inconsistent and self-serving.
Mr. Quinn was a candidate for Ferro’s CEO position in December 2012. He
interviewed with Ferro’s executive-search advisors on December 18, 2012. On
the same day, Mr. Quinn’s hedge fund, Quinpario Partners, executed its
first-ever trade in Ferro stock, buying 300,000 shares. We find the timing of
this purchase highly irregular, especially if the trade occurred after the
interview. Further, Quinpario sold those 300,000 shares on January 7, 2013,
taking what might be viewed as a short-swing profit while Mr. Quinn was still
a CEO candidate. Having one’s hedge fund make such trades while seeking the
top leadership position at the very same public company could create the
appearance of impropriety. These actions strike us as a triumph of
self-interest over prudent judgment.
Furthermore, although Mr. Quinn holds himself out as an advocate for good
governance, in fact, when he was a candidate for our CEO position, he sought
special treatment for himself, attempting to circumvent the thorough and fair
process established for vetting CEO candidates. He tried to have the process
pushed aside because (as he put it) he was “uniquely qualified” for the
position. And in an email to Ferro’s executive-search advisors on December 20,
2012, Mr. Quinn stated:
“I have several things in the hopper currently and...I do not have much of a
desire to be part of a typical search process...”
We find it noteworthy that the FrontFour Group launched its proxy contest the
day after Mr. Quinn learned that he was no longer under consideration for the
A leading proxy advisory firm also has expressed concern about Mr. Quinn’s
governance standards. In 2009, when Mr. Quinn served as a director of Tecumseh
Products Co., proxy advisory firm Glass-Lewis stated that:
“[We] believe that shareholders and the Company would benefit from the removal
of Mr. Quinn from the board . . . [Mr. Quinn’s removal] will send a firm
message to the remaining members of the board.”
Also contrary to the illusion he seeks to create, Mr. Quinn failed to achieve
even market-level performance as the leader of a public company. Mr. Quinn
holds himself out as having a record of value creation during his tenure as
CEO of Solutia, selectively using as a starting point the stock market lows of
2009. What Mr. Quinn fails to tell you is that the period was selected because
it provides the illusion of outperformance. The truth is, beginning with
Solutia’s public listing and exit from bankruptcy on February 28, 2008, until
January 26, 2012, the day prior to the announcement of the sale of Solutia to
Eastman, Solutia significantly underperformed its peers. For this period -
virtually the entirety of Solutia’s existence as a public company under Mr.
Quinn’s leadership - Solutia’s 14.1% share price performance was less than
half of the 33.9% return generated by its peers.^1
The FrontFour Group also has repeatedly criticized Ferro’s involvement in the
solar pastes business, a business that Ferro had been in for many years,
contending that Ferro should have taken “decisive action” to sell the business
unit in early 2011.
But just the year before, in March 2010, Mr. Quinn caused Solutia to spend
hundreds of millions of dollars to acquire a solar-energy business of its own,
Etimex Solar. At that time, Mr. Quinn was effusive about the potential of the
solar-energy sector, saying:
“Renewable energy is an acknowledged source of long-term growth…I am extremely
excited about Etimex Solar and the role it will play in Solutia’s future
Now that it suits his purposes to change his tune, Mr. Quinn and his
colleagues in the FrontFour Group contend that Ferro should have been exiting
the solar-energy sector at the very time that Mr. Quinn was paying a premium
to get into it.
*The FrontFour Group backs A. Schulman’s unsolicited and inadequate
proposal to acquire Ferro.
The FrontFour Group consists of hedge funds and their managers, a group whose
interests are not aligned with those of other Ferro shareholders. Indeed, the
FrontFour Group continues to push for a sale of your company to A. Schulman,
based on A. Schulman’s low-ball $6.50 proposal. Bear in mind that, under the
proposal, half of the $6.50 that Ferro shareholders would receive in the
transaction would be in the form of A. Schulman shares.
The divergence of interests between the FrontFour Group and Ferro’s other
shareholders is apparent from the FrontFour Group’s continued support of such
a transaction when Ferro’s earnings results, earnings expectations, and share
price have grown stronger while A. Schulman’s have weakened. Indeed, since
February 13, 2013, when A. Schulman made its proposal, A. Schulman’s share
price has declined by 22.9%.^2 Had your Board accepted the proposal, the value
of your investment would have eroded considerably along with the value of the
A. Schulman shares you would have received.
It is clear that, despite its supposed interest in the “future of Ferro,” what
the FrontFour Group is really considering is its short-term investment. Having
seen the value of its investment in Ferro shares rise by approximately 76% in
a few short months, we believe the FrontFour Group’s goal is to liquidate its
stake by forcing Ferro into a fire sale of your Company to A. Schulman. The
management team and Board should not be diverted from their focused execution
of our value creation strategy by negotiations on a low-ball proposal. The
better course is to support the value creation strategy, which already has
begun to generate enhanced value for all shareholders.
Consider who stands to gain the most from your vote: ALL Ferro shareholders or
a short-term-focused hedge fund out to sell your company on the cheap? PLEASE
VOTE THE WHITE CARD TODAY.
FERRO’S BOARD CONDUCTED A THOROUGH REVIEW OF A. SCHULMAN’S PROPOSAL AND
DETERMINED IT IS NOT IN YOUR BEST INTEREST
A great deal of misinformation has arisen regarding Ferro’s response to the A.
Schulman proposal, misinformation that the FrontFour Group has helped to
spread. We want to set the record straight. Here are the facts leading to the
Board’s determination that A. Schulman’s unsolicited proposal of $6.50 per
share is inadequate.
*Joseph Gingo, A. Schulman’s CEO, requested to meet with Peter Thomas, then
Ferro’s Interim CEO, on December 7, 2012. At the meeting, Mr. Gingo
expressed that A. Schulman had an interest in acquiring Ferro.
*Even though no specific proposal had been made, Ferro’s Board of
Directors, with assistance from the Company’s independent advisors,
analyzed on its own initiative a potential combination of the two
companies. The Board’s conclusion following that analysis was that Ferro’s
value creation strategy presented a better value proposition for Ferro
*Almost two months later, on January 28, 2013, Mr. Gingo called Mr.
Lawrence requesting an in-person meeting.
*Mr. Lawrence and Mr. Gingo met in person on February 13, 2013. At that
meeting, Mr. Gingo provided a letter outlining, at a high level, a
combination with Ferro at $6.50 per share, half in cash and half in A.
*At that meeting, Mr. Gingo also pressed Mr. Lawrence to arrange a quick
response to the proposal, but Mr. Lawrence informed Mr. Gingo that the
Ferro Board would need adequate time to properly consider the matter, in
consultation with its independent advisors.
*On February 26, 2013, following a second review with its independent
advisors of a potential combination with A. Schulman, this time
specifically reviewing the $6.50 per share proposal, Ferro notified A.
Schulman that it did not believe the proposal was in the best interest of
*On March 4, 2013, A. Schulman publicly announced the proposal that A.
Schulman had previously made and that Ferro had previously rejected.
As the facts show, your Board carefully considered the A. Schulman proposal.
Simply put, A. Schulman’s $6.50 proposal was not then and is not now in the
best interests of Ferro’s shareholders.
Your company is executing on a value creation strategy that we believe will
deliver greater value to Ferro shareholders. In fact, your company has been
strengthening its performance, reporting higher than expected first-quarter
earnings and raising its 2013 earnings guidance, while A. Schulman has
stumbled, missing analyst estimates and its own first-quarter guidance and
lowering its earnings forecast for 2013. Your Board carefully analyzed the A.
Schulman proposal and then stood firm, despite repeated criticism from the
FrontFour Group, and refused to negotiate a low-ball sale to a stumbling A.
SUPPORT THE BOARD THAT IS COMMITTED TO SERVING THE INTERESTS OF ALL FERRO
SHAREHOLDERS – PLEASE VOTE THE WHITE PROXY CARD TODAY
The value of your Ferro investment is at stake. We urge you to vote today by
telephone, by Internet, or by signing and dating the enclosed WHITE proxy card
and returning it in the postage-paid envelope provided.
We thank you for your continued support of Ferro.
The Ferro Board of Directors
Your Vote Is Important, No Matter How Many Shares You Own.
If you have questions about how to vote your shares on the WHITE proxy card,
or need additional assistance, please contact the firm assisting us in the
solicitation of proxies:
INNISFREE M&A INCORPORATED
Shareholders Call Toll-Free: (888) 750-5834
Banks and Brokers Call Collect: (212) 750-5833
We urge you NOT to sign any Green proxy card sent to you by the FrontFour
Group, even as a protest vote. If you have previously submitted a Green proxy
card, you can revoke that proxy by using the enclosed WHITE proxy card to vote
by telephone or by Internet, or by simply signing, dating and returning the
enclosed WHITE proxy card in the postage-paid envelope provided.
Ferro’s definitive proxy materials are available on the SEC's website at
^1 The Solutia peer group is comprised of mid-cap specialty chemicals
companies including: Albemarle, Ashland, Cabot, Chemtura, Cytec, FMC, HB
Fuller, Rockwood, RPM, and Valspar; Source: Bloomberg
^2 As of the market close on April 26, 2013, the last trading day prior to the
mailing of this letter.
About Ferro Corporation
Ferro Corporation (http://www.ferro.com) is a leading global supplier of
technology-based performance materials and chemicals for manufacturers. Ferro
products are sold into the building and construction, automotive, appliances,
electronics, household furnishings, and industrial products markets.
Headquartered in Mayfield Heights, Ohio, the Company has approximately 4,700
employees globally and reported 2012 sales of $1.8 billion.
Cautionary Note on Forward-Looking Statements
Certain statements in this press release may constitute "forward-looking
statements" within the meaning of Federal securities laws. These statements
are subject to a variety of uncertainties, unknown risks, and other factors
concerning the Company's operations and business environment. Important
factors that could cause actual results to differ materially from those
suggested by these forward-looking statements and that could adversely affect
the Company's future financial performance include the following:
-- demand in the industries into which Ferro sells its products may be
unpredictable, cyclical, or heavily influenced by consumer spending;
-- Ferro's ability to successfully implement its value creation strategy;
-- Ferro's ability to successfully implement and/or administer itscost-saving
initiatives, including its restructuring programs, and to produce the desired
results, including projected savings;
-- restrictive covenants in the Company's credit facilities could affect its
strategic initiatives and liquidity;
-- Ferro's ability to access capital markets, borrowings, or financial
-- the effectiveness of the Company's efforts to improve operating margins
through sales growth, price increases, productivity gains, and improved
-- the availability of reliable sources of energy and raw materials at a
-- currency conversion rates and economic, social, regulatory, and political
conditions around the world;
-- Ferro's presence in certain geographic regions, including Latin America and
Asia-Pacific, where it can be difficult to compete lawfully;
-- increasingly aggressive domestic and foreign governmental regulations on
hazardous materials and regulations affecting health, safety, and the
-- Ferro's ability to successfully introduce new products or enter into new
-- sale of products into highly regulated industries;
-- limited or no redundancy for certain of the Company's manufacturing
facilities and possible interruption of operations at those facilities;
-- Ferro's ability to complete future acquisitions or dispositions, or
successfully integrate future acquisitions;
-- competitive factors, including intense price competition;
-- Ferro's ability to protect its intellectual property or to successfully
resolve claims of infringement brought against the Company;
-- management of Ferro's general and administrative expenses;
-- Ferro's multi-jurisdictional tax structure;
-- the impact of the Company's performance on its ability to utilize
significant deferred tax assets;
-- the effectiveness of strategies to increase Ferro's return on capital;
-- the impact of operating hazards and investments made in order to meet
stringent environmental, health, and safety regulations;
-- stringent labor and employment laws and relationships with the Company's
-- the impact of requirements to fund employee benefit costs, especially
-- implementation of new business processes and information systems;
-- the impact of interruption, damage to, failure, or compromise of the
Company's information systems;
-- exposure to lawsuits in the normal course of business;
-- risks and uncertainties associated with intangible assets;
-- Ferro's borrowing costs could be affected adversely by interest rate
-- liens on the Company's assets by its lenders affect its ability to dispose
of property and businesses;
-- Ferro may not pay dividends on its common stock in the foreseeable future;
-- other factors affecting the Company's business that are beyond its control,
including disasters, accidents, and governmental actions.
The risks and uncertainties identified above are not the only risks the
Company faces. Additional risks and uncertainties not presently known to the
Company or that it currently believes to be immaterial also may adversely
affect the Company. Should any known or unknown risks and uncertainties
develop into actual events, these developments could have material adverse
effects on our business, financial condition, and results of operations.
This release contains time-sensitive information that reflects management's
best analysis only as of the date of this release. The Company does not
undertake any obligation to publicly update or revise any forward-looking
statements to reflect future events, information, or circumstances that arise
after the date of this release. Additional information regarding these risks
can be found in our Annual Report on Form 10-K for the period ended December
Reconciliation of Reported Income/Loss to Adjusted Income/Loss
(Dollars in thousands, except per share amounts)
For the Three Months Ended:
March 31, 2012 December 31, 2012 March 31, 2013
Net Income EPS Net Income EPS Net Income EPS
As Reported $ 3,846 $ 0.04 ($63,876 ) ($0.74 ) $ 883 $ 0.01
Restructuring $ 199 - $ 3,576 $ 0.04 $ 6,051 $ 0.07
Discontinued (707 ) (0.01 ) 371 - 8,421 0.10
Taxes ^1 623 0.01 20,205 0.23 (2,569 ) (0.03 )
Pension ^2 - - 17,432 0.20 - -
Noncontrolling - - - - (394 ) -
Other ^3 1,576 0.02 16,951 0.20 (4,057 ) (0.05 )
Total Special $ 1,691 $ 0.02 $ 58,535 $ 0.67 $ 7,452 $ 0.09
As Adjusted $ 5,537 $ 0.06 ($5,341 ) ($0.07 ) $ 8,335 $ 0.10
Net Income = Net income attributable to common shareholders
EPS = Diluted earnings per share
1 Adjustment of reported earning and of special items to a normalized 36%
2 Pension and other postretirement benefits mark-to-market adjustment of
related net liabilities.
Includes gain/loss on divestitures, certain severance costs, impairments,
3 ongoing costs at facilities that have been idled, and certain business
Reconciliation of Reported Income/Loss to Adjusted EBITDA
(Dollars in thousands)
For the Three Months Ended:
31-Mar-12 31-Dec-12 31-Mar-13
Net Income Attributable to Ferro $ 4 ($63 ) $ 1
Loss (Income) from Discontinued Operations (1 ) (1 ) 8
Interest Expense 6 7 7
Income Tax Expense 3 (4 ) 1
Depreciation & Amortization 13 16 12
Charges 3 59 3
Other (3 )
Adjusted EBITDA $ 28 $ 11 $ 32
Photos/Multimedia Gallery Available:
John Bingle, 216-875-5411
Treasurer and Director of Investor Relations
Mary Abood, 216-875-5401
Director, Corporate Communications
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