St. Joe Co., northern Florida’s largest private landowner, said it “adamantly opposes” a plan by executives of shareholder Fairholme Capital Management LLC to elect a new board.
Fairholme founder Bruce Berkowitz and President Charles Fernandez said today that they hired executive search firm Spencer Stuart and began soliciting investor approval to replace the developer’s board, which currently has seven members. Fairholme, based in Miami, owns about 29 percent of the company.
“St. Joe adamantly opposes Fairholme’s efforts to obtain control of the company without paying a control premium to all other shareholders,” the developer said in a statement today. If the executives “want to take control of St. Joe, they should make an offer to all shareholders to buy it,” the company said.
St. Joe gained 88 cents to $27.37 at 4:15 p.m. in New York Stock Exchange composite trading.
The shares have fallen 6 percent in the past year, compared with a 33 percent gain for the Bloomberg Americas Real Estate Index. The Watersound, Florida-based company has lost money for 10 consecutive quarters during the state’s real estate slump.
Berkowitz has proposed a slate of board nominees including himself, Fernandez, Carnival Corp. Chief Operating Officer Howard Frank, and former Florida Governor Charlie Crist. Berkowitz and Fernandez resigned from the board Feb. 14, six weeks after they joined as outside directors, citing disagreements over its nominating and governance process.
“St. Joe management plans must reflect business reality,” Berkowitz wrote in a letter to shareholders today. “St. Joe management must stop selling cheap to fund wasteful spending.”
Chief Executive Officer William Britton Greene had total compensation of $2.8 million in 2009, when St. Joe reported a loss of $130 million on revenue of $138.3 million, according to the company and data compiled by Bloomberg.
St. Joe has been criticized by hedge-fund manager David Einhorn, who has said the company needs to take “substantial” asset-impairment charges. Based on the value of St. Joe’s timberland, the stock has a “single-digit” valuation, Einhorn’s Greenlight Capital Inc. said in a statement today.
“The land values don’t justify the stock price,” Greenlight said in the statement. “We do not believe cutting some executive compensation expenses or installing a new management team would bridge that gap.”
Berkowitz and Fernandez resigned less than a week after St. Joe said it hired Morgan Stanley to explore options to boost shareholder value, including a merger or sale.
The Fairholme executives said they would only be part of a board “where the majority of the directors are committed to shareholder value, pay for performance and effective corporate governance,” according to an e-mail to the board. “We have concluded that the current board is not in a position to propose such a slate of directors.”
The St. Joe board approved a shareholder rights plan that will “reduce the likelihood that any person or group would gain control of the company by open market accumulation or other coercive takeover tactics,” the company said in a statement late yesterday.
St. Joe has “smart, sophisticated shareholders,” who already hold the majority of its shares and can determine the outcome of a proxy fight, Berkowitz said today in an interview with Bloomberg Television.
“This should all be done in 45 days,” he said.
T. Rowe Price Associates Inc. is St. Joe’s biggest shareholder after Fairholme, with 11.25 percent, followed by Janus Capital Management LLC at 10.95 percent, according to data compiled by Bloomberg.
T. Rowe Price declined to comment, said Robert Benjamin, a spokesman for the Baltimore-based company. James Aber, a spokesman for Denver-based Janus, also declined to comment.
Berkowitz and Fernandez plan to create a website, takebackjoe.com, to receive shareholder suggestions for new directors, which Spencer Stuart will review. Berkowitz said he and Fernandez, Fairholme’s president, would serve on the board without pay.
“We are not looking to spend a dime of the company’s money,” Berkowitz, who was named the stock-fund manager of the decade last year by Morningstar Inc., wrote in the letter. “This is a matter of principle for us, and our return will be reflected in a more valuable St. Joe.”
Berkowitz said he and Fernandez expect to fill the remaining spots on a seven- or nine-member board with names proposed by shareholders and Spencer Stuart. Under Florida law, a majority can act by written consent to remove the existing board and elect a new one without a shareholder meeting, according to the letter.
The resignations of Berkowitz and Fernandez “are not in the best interest of all St. Joe shareholders,” the company said in a Feb. 14 statement. Berkowitz and Fernandez “substantially agreed” with the business plan and approved the exploration of alternatives, according to the statement.
“The St. Joe board has always been committed to strong corporate governance, protecting shareholders’ interests and creating superior results for the long term -- and that remains unchanged,” Greene wrote to employees in a letter contained in a Securities and Exchange Commission filing yesterday.
“I still believe St. Joe has tremendous value to unlock, but you have to have the right people to unlock it,” Berkowitz said earlier this week.
St. Joe’s annual meeting is scheduled for May 17 in Santa Rosa Beach, Florida.