Quinpario: More Chemical Companies Need `Reinvigoration'
Stock Chart for Eastman Chemical Co (EMN)
Quinpario Partners LLC, a private- equity fund seeking changes at Ferro Corp. (FOE) and Zoltek Companies Inc., expects to take active stakes in more chemical and materials companies needing “reinvigoration,” Chairman and Chief Executive Officer Jeffry Quinn said.
Quinpario, founded in July by former executives of chemical maker Solutia Corp., is seeking opportunities with strategic partners to invest “several hundred million” dollars, Quinn said in a phone interview yesterday. The St. Louis-based investor has bought equity and debt in fewer than a dozen companies, mostly passive stakes, he said.
Quinpario emerged as an activist on Jan. 24 when it announced plans with FrontFour Capital Group LLC to challenge three incumbent Ferro directors for their seats. In March, Quinpario revealed a 10 percent stake in Zoltek and an effort to oust the board. Quinn, 54, said he expects to invest in more “underperforming” chemical and materials companies.
“There are a number of companies in the small and midcap areas that need reinvigoration, that need an injection of perspective and talent,” Quinn said. “There is a pretty rich menu of opportunities out there that we will be considering.”
Quinn declined to say how much Quinpario manages. The fund currently invests its partners’ money and its investment focus is on composite materials, films and packaging, ceramics, plastics, resins, electronic chemicals and specialty fluids. It’s also interested in alternative energy and storage.
“The idea in Quinpario is to assemble a group of actively managed portfolio companies,” Quinn said. “My partners and I, we are operators. We are guys that ran Solutia for a decade.”
Quinn was CEO of Solutia, the former chemical business of Monsanto Co. (MON), from 2004 until he sold it last year to Eastman Chemical Co. (EMN) for $4.65 billion including debt. He led the company through Chapter 11 bankruptcy protection in 2008.
The five other partners in Quinpario are Paul J. Berra III, who was Solutia’s general counsel; Nadim Z. Qureshi, former head of strategy; D. John Srivisal, who led mergers and acquisitions; Richard N. Altice, former president of technical specialties; and A. Craig Ivey, former president of performance films.
“We are investing our own capital and seeking long term returns above what we can get otherwise in the marketplace,” Quinn said. “I’m looking for companies that are not doing the job in terms of creating value for shareholders.”
Quinpario offered to acquire Zoltek, which makes carbon fiber for windmill blades, for a share price in the “mid- teens,” the company disclosed on March 4. The offer was rebuffed, prompting it to request a special meeting of shareholders to replace Zoltek’s board with its own nominees.
Zoltek said on April 2 it had hired JPMorgan Chase & Co. to explore “strategic alternatives.” Quinpario has agreed to not move forward while private discussions continue. Zoltek rose 3.2 percent to $13.08 at the close in New York. The shares have gained 41 percent since Quinpario disclosed its offer.
At Ferro, managers of the Mayfield Heights, Ohio-based company agreed this year to sell units that make solar paste and pharmaceutical units after Quinpario recommended the moves in January. The deals were “too little, too late,” Quinn said. Quinpario and its partners own about 4.3 percent of Ferro, based on a March 28 filing.
Quinn said Ferro made a “regrettable and egregious” decision to reject takeover talks with A. Schulman Inc. Schulman on March 4 offered to buy the maker of chemicals used in electronics and coatings for $6.50 a share, a 25 percent premium to the March 1 closing price. Ferro fell 1.2 percent to $6.69 today.
Ferro has said streamlining operations and focusing on the most profitable units will provide better shareholder returns than Schulman’s proposal. The company yesterday raised its 2013 earnings forecast and boosted its target for cost savings to as much as $70 million next year.
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