Moreover, the fact that the Board is willing to take action only when under immediate pressure is highly concerning and calls into question the sincerity of the announcement on Friday. The events described above make it extremely clear that without our action to begin an election contest by nominating a slate of directors, the Company would not have announced its intention to explore a sale of its Technical Paper business. The fact that this announcement was made on a Friday at 5:00 pm, in a hastily drafted press release with minimal information, is by itself enough to indicate that this announcement would likely not have been made without the external pressure of a pending election contest.
While the Board may think that it can fool its shareholder base into believing that it is willing to take the appropriate actions to create shareholder value on its own, the facts paint a far different picture. History demonstrates that without substantial pressure, specifically an impending proxy contest, Wausau's Board has consistently shown that it is unwilling to make the difficult decisions necessary to improve shareholder value. Prior to Starboard's involvement, from 2005 through 2010, Wausau spent over $100 million of capex in machine upgrades and $150 million in restructuring charges attempting to "turn around" its failing paper businesses, not to mention substantial management time. In fact, even despite substantial losses in its paper businesses, going back as far as the year 2000, as well as years of criticism from shareholders and research analysts, Wausau continued to blindly follow its flawed strategy and showed a complete lack of urgency to make any substantive changes. This frustration was recently highlighted in a research report by one of the most respected sell-side analysts in the paper and packaging sector:
Sadly, the turnaround case in technical papers is looking like last decades' failed turnaround efforts in printing & writing papers. Even more disappointing, the new management teams' credibility has taken a big hit. For nearly a decade, we've argued that Wausau ought to exit all paper operations and focus on its tissue business. For this entire period, Wausau has continued to focus shareholder cash & managerial time on bailing out a sinking ship. In the meantime, the residual value of the paper businesses has continued to erode.
- Mark Wilde, Deutsche Bank, October 2, 2012Only after several public letters from Starboard, and while facing a proxy contest last year, did the Company finally begin to take shareholder friendly actions, which resulted in the Company selling its money-losing Print & Color business and non-core timberland assets. Similarly, despite continued dismal performance, Wausau did nothing to address the serious issues with its money-losing Technical Paper business until it faced the immediate threat of public action by us. In fact, as recently as October 30, 2012, on Wausau's Third Quarter 2012 earnings call, CEO Hank Newell stated that "There is no change to our strategic intent, financial objectives or timelines." The above statement is clearly in conflict with the statements made in last Friday's press release, shown below: Wausau Paper (NYSE:WPP) today announced that it commenced a process last year to identify strategic alternatives for its Paper Segment that will position the Company to focus its management efforts on continuing the growth of its highly successful tissue business. Clearly, it was not until faced with another proxy contest, having received a nomination letter that was about to become public, that the Board decided once again to be reactive and announce the bare minimum that it felt might allow it to avoid a proxy contest for one more year. Therefore, at this time we believe direct shareholder representation on the Board is critical to ensure that the Company does not return to its past practices of complacent oversight and reactionary measures.
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