GAMCO noted that company has approximately $76.5 million cash which is suitable for potential distribution to shareholders, and submitted a shareholder proposal for 2014 annual meeting that Superior Industries board of directors authorize a "Dutch Auction" tender offer to repurchase at least $40 million of the company's outstanding common stock. An interesting fact is that two other well-known value-oriented investment firms also own shares: Third Avenue Management, founded by veteran value investor Martin J. Whitman, owns a 3.8% stake and Heartland Advisors has a 6.1% stake. The company's chairman and CEO, Steven J. Borick and his family's trust and foundation collectively own 19.5% of the company's shares. Superior Industries recently announced that Steven J. Borick will retire as CEO and president in March 2014.
The company declared a regular quarterly cash dividend of $0.18 per share, which was restored in August 2013 following accelerated dividend payout in December 2012 due to uncertainties at the time regarding possible future dividend tax rate changes. Based on a recent share price of $20.06, the dividend provides a 3.6% annual yield. The proposed Dutch tender offer can have a positive effect on share price, especially in case insiders or three institutions mentioned above do not tender their shares. Using a recent market price, the company would be able to acquire 9% to 12.5% of free float shares or approximately 7% of total shares outstanding.
Conservative valuation, expected increase in manufacturing capacity and involvement of a well-known value investor offer an interesting risk/return profile. At the same time, attractive dividend yield and possible share buybacks can provide a near-term downside support.
By Alex Gavrish, Etalon Investment Research; author of "Wall Street Back To Basics"