Ex-Governor Teams With Investor Activist on Stillwater
Former Montana Governor and potential presidential candidate Brian Schweitzer has joined activist investor Clinton Group Inc. to shake up Stillwater Mining Co. (SWC), the largest public company in his home state.
“The only board of directors that is doing worse is the U.S. Congress,” Schweitzer, a 57-year-old Democrat, said in an interview. “Clinton Group is trying to protect shareholder value, and I am too. But I’m also trying to protect this unique asset that we have in Montana.”
Schweitzer, who left the governorship last month after eight years due to term limits, will be part of an eight-person slate nominated by shareholder Clinton for the board of Stillwater, a palladium and platinum producer based in Billings, Montana. In December, Clinton cited a declining stock price in calling for the retirement of Chairman and Chief Executive Officer Frank McAllister, cost-cutting and the sale of a mining project in Argentina.
“The stock has performed poorly in the last couple of years and is significantly undervalued today,” Greg Taxin, Clinton’s managing director, wrote in a letter to the Stillwater board in December. “We believe change is needed.”
Clinton notified Stillwater’s management of its plans today in an e-mailed letter, Taxin said.
Stillwater fell 1.1 percent to $12.85 at the close in New York. The shares had declined 12 percent in the 12 months through Feb. 22. That compares with an 18 percent gain for the Standard & Poor’s SmallCap Materials Index (S6MATR), of which Stillwater is a member. The company had a market value of $1.52 billion at the end of last week, down from $2.6 billion in March 2011.
Stillwater is scheduled to report fourth-quarter results on Feb. 27. In the third quarter, revenue fell 29 percent to $181 million and net income dropped 68 percent to $13 million.
Mike Beckstead, a Stillwater spokesman, and Chief Financial Officer Gregory Wing didn’t respond to telephone requests for comment.
Taxin said in an interview he and Charles Engles, a former Stillwater chairman and CEO, are among Clinton’s other nominees for the nine-person board. Engles led the company from 1994-97, which included its initial public offering.
Clinton owned more than 800,000 Stillwater shares, or 0.7 percent of the stock, at the end of 2012, according to data compiled by Bloomberg.
Schweitzer said he became skeptical of Stillwater management while still governor after it bought Vancouver-based Peregrine Metals Ltd. in 2011 for $262.9 million. The purchase gave Stillwater a copper and gold project in Argentina that might take as much as $2.5 billion to develop.
The stock fell 22 percent on the day the deal was announced. Schweitzer said that reminded him of what he described as a cautionary tale from Montana’s past. Anaconda Copper Mining Co. had a property in Chile confiscated by the government in 1971. That helped weaken the company and eventually led to the closing of a mine in Montana and job losses, Schweitzer said.
“We’ve had our belly-full in Montana of good Montana-based mining companies throwing the long ball in South America,” Schweitzer said.
Clinton and Schweitzer want Stillwater to focus on its palladium mining in Montana and reconsider a diversification strategy that has also included buying Marathon PGM Corp. for C$134.7 million ($131.3 million) in 2010 to gain a project in Ontario.
Schweitzer said his background as a business owner running ranches and farms, the holder of a master’s degree in soil science, and creating budget surpluses while governor make him a legitimate board nominee. He said he’s also a recent investor, buying 25,000 Stillwater shares since leaving office.
As governor, he met with management, including the CEO, and said he intervened on behalf of the company when he pushed General Motors Co. (GM) to reverse a decision to cancel a contract with Stillwater as part of its bankruptcy reorganization in 2009.
Stillwater’s annual meeting is scheduled to be held on May 2, according to the New York Stock Exchange’s website. The record date to be able to vote at the meeting is March 6.
Schweitzer reiterated Clinton’s critique that Stillwater raised capital by issuing what he described as costly convertible bonds last year instead of issuing high-yield debt.
He also agreed with Clinton’s criticism of the company spending more than $10 million a year funding Palladium Alliance International, a group that promotes use of the metal in fine jewelry. In 2011, the group ran an ad campaign featuring actress Pamela Anderson.
It’s an issue, Schweitzer said, because a small percentage of palladium is used for jewelry. The largest use is for the catalytic converters in cars.
“It will only take one or two more of these bad decisions to drive this company out of business,” he said.
Schweitzer, who lives in Montana, said that beyond trying to get on the Stillwater board, he isn’t sure about his future, including running for the White House in 2016.
“There are many people who say I am one of the top prospects to run for president,” Schweitzer said. “That might be a decision that I make sometime in the future, but I haven’t made one now.”
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