Proxy Battle Nears an End for Pasadena Pipe Maker

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Does Ameron International Inc. need a boardroom shake-up or is the company doing just fine?

Shareholders of the Pasadena pipe maker will decide that question Wednesday, when the final vote in a proxy battle will be announced at the annual stockholders’ meeting.

James Mitarotonda, a dissident shareholder, is running for a board seat as the challenger against two incumbents, Ameron Chief Executive James Marlen and independent director David Davenport. The top two vote-getters will sit in the Ameron boardroom.

Mitarotonda, chief executive of hedge fund Barington Capital in New York, has argued in proxy statements and press releases that Ameron has underperformed financially while overpaying its CEO.

In recent weeks, Mitarotonda has picked up key recommendations from two proxy advisory firms, Institutional Shareholder Services and Glass Lewis & Co. Meanwhile, the incumbents got a recommendation from advisory firm Egan-Jones Proxy Services.

Both Barington and Ameron declined requests for interviews but provided filings and documents to bolster their cases.

The challenger believes Ameron stock should trade above $100, rather the $70-$75 range, where it has hovered. That assertion was backed by a report in January from D.A. Davidson & Co., which calculated a fair market value of $109 a share.

Barington’s proxy statement noted that Ameron’s stock price has declined 25 percent since 2008, while the NYSE Composite Index has fallen only 6.5 percent and a peer group of construction-related stocks has increased 26 percent.

In addition, the fund has criticized Marlen’s compensation – adding up to more than $70 million since he took over as chief executive in 1993.

The Ameron proxy counters that for the duration of Marlen’s 17-year tenure, the company has outperformed market indexes. Moreover, Mitarotonda doesn’t have any experience in the pipe industry and the company maintains he hasn’t explained how he would improve the company’s performance as a director. Egan-Jones, the proxy advisory firm, agreed.

“There is a lack of sufficient specificity in the plans so far announced by the dissidents that would purportedly lead to improvements in shareholder value,” the Egan-Jones report stated.

As for the charge of excessive pay, the directors’ compensation committee believes executive paychecks “have been effective at incentivizing the achievement of outstanding financial performance and superior returns to stockholders,” the proxy filing states.

Damien Park, managing partner at consulting firm Hedge Fund Solutions in Philadelphia, is not involved in the proxy battle but wrote an investment report on Ameron in January. He thinks the recommendations from the advisory firms could tip the vote in Mitarotonda’s favor.

“A large proportion of institutional investors subscribe to ISS, and many will just follow the ISS recommendation with their votes,” Park said. “There’s a high concentration of institutional shareholders at Ameron, so it looks like Barington has a good shot at getting representation on the board.”

The shareholder meeting will begin at 10 a.m. Wednesday at the Pasadena Hilton Hotel.

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