A fight over control of Pasadena pipe manufacturer Ameron International Inc. escalated last week when an investment fund set the stage for a proxy challenge for two board seats.

If successful, the challenge will take Ameron’s current chairman-chief executive off the board and give New York-based Barington Capital Group a voice in the boardroom.

Ameron makes concrete, fiberglass and steel pipes for construction and manufacturing. It also makes poles for street lights. The company has 2,400 employees, and operations in Houston, Honolulu, Rancho Cucamonga, Brea and Ventura.

Last week, Barington notified Ameron that the investment firm will nominate two directors for Ameron’s board. Results of the election will be announced at the annual shareholder meeting March 30.

One of the contested board seats is held by James Marlen, chairman and chief executive. If he loses, Marlen would be removed from the chairman’s position but could remain CEO at least until his contract expires in 2012.

The battle roared to a start Jan. 5 when Barington sent a public letter to Ameron’s independent board members calling for Marlen’s ouster as chairman-CEO. The letter complained about the company’s poor financial performance and said that Marlen’s compensation of $66 million over 16 years was excessive.

Also, Barington said Ameron stock should be trading at more than $100 per share. The stock closed Feb. 3 at $70.53.

In a press release issued Jan. 12, Ameron’s independent board members rebuffed Barington’s assertions, saying that the stock price had increased fivefold during Marlen’s tenure.

“The criticisms of the company are inaccurate and reflect a fundamental lack of understanding of Ameron’s history, businesses and markets,” the board members stated.

James McLaughlin, Ameron senior vice president and treasurer, told the Business Journal that the Jan. 12 letter summarizes the company position, and he declined further comment.

Barington also declined to comment. However, a source familiar with the company’s thinking who spoke on condition of anonymity said Ameron’s fiscal 2010 earnings, released Jan. 31, motivated the proxy battle.

Ameron reported 2010 net income of $46.3 million, or $5 per share, a 39 percent increase from the previous year. However, the company sold a steel mill for $48.4 million last year. Without that one-time gain, the company would have had to report a loss from its ongoing operations.

“That earnings release may have tipped the scale,” the source said. “Barington has publicly questioned Mr. Marlen’s management skills and his reliance on asset sales to help the company make its numbers.”

Barington’s case also got a boost from Brent Thielman, the only analyst to cover Ameron. In a report published by Portland, Ore.’s D.A. Davidson & Co. on Jan. 31, Thielman concluded the stock should trade at $109 per share, backing up Barington’s position that it should be more than $100.

“Ameron trades at a nearly 50 percent discount to the implied value for the shares,” Thielman wrote. “Given the still meaningful discount, we are maintaining our ‘buy’ rating.”

Michael Levin, founder of the Activist Investor, a shareholder consulting firm in Chicago, said that both Barington and the Ameron board will send to shareholders separate proxy mailers arguing for their respective candidates. Ameron’s board will pay for these materials from company revenue; Barington will pay out of pocket.

“Barington can challenge these incumbents, but the system is really slanted in favor of incumbents,” Levin noted.

But history gives some hope to Barington’s long-shot strategy. Last year, the firm proposed a shareholder resolution to split the chairman and chief executive job titles rather than having Marlen in both roles. The resolution gained approval from 56 percent of shareholders, yet fell short of the 80 percent threshold needed to make it binding on the board.

Even if Barington’s two nominees win the election, the fund won’t be able to dictate terms on Ameron’s seven-person board. But the message of shareholder unrest will grab the attention of management, said Levin.

“Right now it sounds like there are seven board members friendly to management,” he said. “If two members are not friendly and constantly challenge management, that is often enough to win the kinds of concessions Barington wants.”

Timeline Key

Dates in Barington’s campaign against Ameron’s management:

Jan. 5: Barington letter criticizes Ameron’s low stock price and seeks ouster of CEO James Marlen.

Jan. 12: Ameron independent directors refute Barington criticisms in a press release, calling them inaccurate and vindictive.

Jan. 31: Ameron releases 2010 earnings report that misses analyst expectations.

Feb. 1: Barington sends Ameron notice that it will nominate two candidates for board election.

March 30: Election results will be announced at annual shareholder meeting.