OM Group Investor FrontFour Demands ChangesSimon Casey and Tim Loh
OM Group Inc., a chemical maker that lowered earnings guidance twice last year, has pursued a mergers and acquisitions strategy that “destroyed significant value,” hedge fund FrontFour Capital Group LLC said.
The Greenwich, Connecticut-based fund has taken a stake of more than 5 percent in the company and is prepared to nominate three board members at the next annual meeting if it can’t reach an agreement with OM on “necessary changes,” according to a letter to Chairman and Chief Executive Officer Joseph Scaminace today.
FrontFour said OM has a “bloated cost structure” and is overcapitalized. It said the company can cut at least $50 million in costs, release $30 million in working capital and buy back $250 million of stock.
OM is on a “sound strategic course” to increase shareholder value and welcomes the views of all investors, the Cleveland-based company said in a statement.
OM makes materials used in the manufacturing of magnets, batteries and circuit boards. The shares rose 8 percent to $29.58 in New York, the biggest gain since May 2013.