Discloses Letter to the Board Highlighting
Continued Missteps and Lapses in Oversight
Announces Formal Nominations of Four
Independent, Highly-Qualified Director Candidates for Election at
Rentech’s Upcoming Annual Meeting
Concerned Rentech Shareholders (“Concerned Rentech
Shareholders”), a group led by Engaged Capital, LLC and Lone Star
Value Management, LLC, together one of the largest stockholders of
Rentech, Inc. (“RTK” or the “Company”) (NASDAQ:RTK) with aggregate
ownership of approximately 4.6% of the outstanding shares of RTK,
today announced it has submitted formal nominations of four
independent, highly-qualified candidates for election to the Board
of Directors of RTK (the “Board”) at the upcoming 2014 annual
meeting of RTK’s stockholders (the “2014 Annual Meeting”).
In a letter accompanying the nomination notice, Concerned
Rentech Shareholders highlighted its frustration at the continued
destruction of shareholder value at RTK and the persistent missteps
and lapses in oversight that have caused the group to lose
confidence in the current Board’s ability to effectively oversee
RTK. Concerned Rentech Shareholders concluded that immediate Board
reconstitution, including through direct shareholder
representation, is needed to ensure that all decisions place the
best interests of RTK’s shareholders first and foremost.
On December 27, 2013, Concerned Rentech Shareholders submitted
to the Board a formal request for exemption under the Company’s Tax
Benefit Preservation Plan (the “Rights Plan”) to allow the group to
acquire beneficial ownership in the aggregate of up to 7% of the
outstanding shares of RTK’s stock. To date, the Board has not
responded to this request. The Rights Plan prohibits any RTK
shareholder or group of shareholders from acquiring in excess of 5%
of the Company’s outstanding stock except in certain limited
circumstances.
Glenn Welling of Engaged Capital and Jeff Eberwein of Lone Star
Value commented: “Our decision to nominate four candidates for
election at the 2014 Annual Meeting follows over a year of failed
discussions with the Company in which our constructive suggestions
were ignored and value destruction persisted. We believe it is
imperative to inject an independent, fresh perspective in the
boardroom in order to foster management accountability, instill
capital discipline, and protect the interests’ of RTK’s
shareholders.”
The full text of the letter Concerned Rentech Shareholders
delivered to the Board follows:
December 27, 2013
Board of DirectorsRentech, Inc.10877 Wilshire BoulevardSuite
600Los Angeles, CA 90024
Gentlemen:
Engaged Capital, LLC (“Engaged Capital”), together with its
affiliates and Lone Star Value Management, LLC, together with its
affiliates (“Lone Star Value”), collectively, the Concerned Rentech
Shareholders (“Concerned Rentech Shareholders”), currently own
approximately 4.6% of the outstanding shares of common stock of
Rentech, Inc. (“RTK” or the “Company”), making us one of the
Company’s largest shareholders. As we recently discussed with the
Company’s Chairman Hal Washburn and his fellow director Michael
Burke, we believe the Company’s track record of poor capital
allocation, spendthrift expense management, and imprudent risk
taking has led to a significant destruction of shareholder value.
As a result, Concerned Rentech Shareholders have lost confidence in
the ability of the current Board of Directors (the “Board”) to
effectively oversee the Company. We believe immediate
reconstitution of the Board, including through direct shareholder
representation, is needed to ensure all future decisions place the
interests of shareholders first and foremost.
We believe RTK’s valuation has been and is continuing to be
significantly compromised by poor investment and operating
decisions which have served to benefit management at the expense of
shareholders. In our view, the only reasonable conclusion
shareholders can draw from the Company’s continued missteps is that
there is a lack of proper oversight by the current Board. The most
egregious of these missteps include:
- Failed Alternative Energy
Business – Nearly half a billion dollars of shareholder capital
was spent over the past seven years on a venture which failed to
generate any revenue, much less profits.
- Agrifos: Overpaid and
Under-delivered – After spending $158 million on a fertilizer
plant with no real operating history, the Company wrote down the
value of the asset by $30 million within a year of completing the
transaction. It seems clear to us this failure was the result of
insufficient due diligence and a lack of operating expertise at the
senior management level.
- Wood Pellet Projects: High Risk,
Capital Intensive Investments – The Board has now approved
expenditures with a total value of around $100 million in a
business where RTK has no institutional expertise. Furthermore, we
believe the original returns outlined and publicly communicated by
management last May were knowingly overstated as they were
calculated without the business development overhead management
knew would be required to grow the business.
- Wood Pellet Financing: Encumbering
Our Most Valuable Asset on a High Risk Venture – After failing
to secure support from our experienced joint venture partner,
Graanul Invest AS (“Graanul”), the Board approved using RTK’s most
valuable asset, RNF shares, as collateral in order to finance RTK’s
significantly increased capital investment. We fail to see how
mortgaging our most profitable asset to invest in an unproven, high
risk venture where RTK has no institutional expertise is a wise use
of shareholder capital.
- Corporate Overhead Structure Built
For a Business Seven Times RTK’s Size – The Company maintains a
corporate structure that costs shareholders over $25 million a year
for 65 people, or stated otherwise, around $400,000 per employee.
This structure supports a revenue base of approximately $95 million
today. This unjustifiably high cost structure has persisted for
years and represents an egregious waste of shareholder capital and
a clear sign of significant lack of Board oversight.
In order to improve the fiduciary oversight at RTK and ensure
that the shareholders’ best interests are protected, Concerned
Rentech Shareholders are delivering today formal nominations of
four highly qualified candidates for election to the Board at the
2014 annual meeting of RTK’s shareholders (the “2014 Annual
Meeting”). We firmly believe our nominees will bring a much needed
independent perspective into the boardroom and a wealth of
experience in working cooperatively with public company directors
and management teams to develop strategies aimed at maximizing
shareholder value.
Concerned Rentech Shareholders’ nominees include:
Jeffrey J. Brown, age 52, is the Chief Executive Officer
and founding member of Brown Equity Partners, LLC (“BEP”), which
provides capital to management teams and companies needing equity.
Prior to founding BEP in January 2007, Mr. Brown served as a
founding partner and primary deal originator of the venture capital
and private equity firm Forrest Binkley & Brown (“FBB”) from
1993 to January 2007. Prior to founding FBB, Mr. Brown served as a
Senior Vice President of Bank America Venture Capital Group from
1990 to 1993 and as a Senior Vice President of Security Pacific
Capital Corporation from 1987 to 1990. Mr. Brown also worked at the
preferred stock desk of Morgan Stanley & Co. (NYSE: MS) in 1986
and as a software engineer at Hughes Aircraft Company from 1983 to
1985. Since 2012, Mr. Brown has served on the board of directors of
Nordion Inc. (NYSE:NDZ) where he is a member of each of the
EHS/Governance and Finance/Audit Committees. From September 2009
until resigning in October 2011, Mr. Brown served as a director of
Steadfast Income REIT, Inc. Mr. Brown received a Bachelor of
Science in Mathematics, Summa Cum Laude, from Willamette University
and a Master of Business Administration from the Stanford
University Graduate School of Business. In his 27 years of venture
capital and private equity experience, Mr. Brown has served on the
board of directors of approximately 40 public and private
companies, including as the chairman of 10 such boards, and has
served as the chair of audit, compensation, finance and other
special board committees of such boards. Mr. Brown’s extensive
public and private company board experience and investment and
transaction experience will make him a valuable addition to the
Board.
Jeffrey E. Eberwein, age 43, is the founder and Chief
Executive Officer of Lone Star Value Management, an investment
firm. Prior to founding Lone Star Value Management in January 2013,
Mr. Eberwein was a private investor from December 2011 to December
2012. He was a portfolio manager at Soros Fund Management, from
January 2009 to December 2011, and Viking Global Investors, from
March 2005 to September 2008. Mr. Eberwein has been a director of
Aetrium Incorporated (NASDAQ:ATRM) since January 2013 and is
currently the Chairman of the Board and a member of its Audit and
Compensation Committees. Mr. Eberwein is also the Chairman of the
Board of each of Digirad Corporation (NASDAQ:DRAD) (“Digirad”) and
Crossroads Systems, Inc. (NASDAQ:CRDS) (“Crossroad Systems”), and
also is a member of the Compensation, Corporate Governance and
Strategic Advisory Committees of Digirad. He has also been a
director of NTS, Inc. (NYSE:NTS) (“NTS”) since December 20, 2012
and On Track Innovations Ltd. (NADAQ: OTIV) (“On Track
Innovations”) since December 30, 2012. Mr. Eberwein serves on the
Corporate Governance / Nominating, Compensation and Special
Committees of NTS, the Audit and Compensation Committees of On
Track Innovations, and is the Chairman of the Audit Committee and a
member of the Compensation and Corporate Governance Committee of
Crossroads Systems. Mr. Eberwein served as a director of Goldfield
Corporation from May 2012 to May 2013. Mr. Eberwein is also the
treasurer and serves on the Executive Committee of the Board of
Hope for New York, a 501(c)(3) organization dedicated to serving
the poor in New York City. Mr. Eberwein earned an MBA from The
Wharton School, University of Pennsylvania and a BBA with high
honors from The University of Texas at Austin. Mr. Eberwein’s over
twenty years of Wall Street experience and valuable public company
and financial expertise, gained from both his employment history
and directorships, will enable him to provide effective oversight
of the Company as a member of the Board.
Larry Holley, age 65, is currently the President and
Chief Operating Officer of The CBM Group, LLC (“CBM”). Mr. Holley
formed CBM in February 2006 primarily as a consulting vehicle to
engage with private equity in company valuations in the fertilizer
sector. Mr. Holley was most recently the President and General
Manager of Noranda Alumina LLC where he managed an alumina refinery
in Louisiana and a bauxite mining operation in Jamaica, from May
2008 to December 2009. Prior to that, Mr. Holley was Senior Vice
President and Chief Operating Officer of Mississippi Chemical
Corporation (“MCC”) where he was employed from November 1974 until
January 2005. While at MCC, Mr. Holley served in many management
capacities across the corporation including engineering, energy
acquisition, procurement and production. While at MCC, Mr. Holley
served as President of Nitrogen Production from July 1997 until
December 2003, excluding a two year period from November 1998 to
November 2000 when he was seconded to MCC’s joint venture
operations in Trinidad, West Indies as President of
FarmlandMissChem Ltd. In December 2003, Mr. Holley was promoted to
Senior Vice President and Chief Operating Officer of MCC to take
full charge of company operating activities. MCC successfully
emerged from bankruptcy in December 2004 and was purchased by Terra
Industries Inc. Mr. Holley is a past member of the board and
executive committee of The Fertilizer Institute. Mr. Holley
received his Bachelor of Science in Electrical Engineering from
Mississippi State University. Mr. Holley’s over 35 years of
experience in the fertilizer, chemical and mining industries will
make him a valuable addition to the Board.
Glenn W. Welling, age 43, is the Founder and Chief
Investment Officer of Engaged Capital, a California based activist
investment firm and registered advisor with the SEC focused on
investing in small and mid-cap North American equities. Prior to
founding Engaged Capital in February 2012, Mr. Welling was
Principal and Managing Director at Relational Investors LLC
(“Relational”), a $6 billion activist equity fund and registered
investment adviser with the SEC, from June 2008 to October 2011 and
served as its consultant from October 2011 until April 2012. Mr.
Welling managed Relational’s consumer, healthcare and utility
investments and was responsible for investment selection, strategic
development and catalyzing change at Relational’s portfolio
companies. Prior to Relational, Mr. Welling was a Managing Director
at Credit Suisse Group AG (“Credit Suisse”) (NYSE:CS), a leading
global financial services company, where he was the Global Head of
the Investment Banking Department's Advisory Businesses, which
included The Buy-Side Insights (HOLT) Group, Financial Strategy
Group and Ratings Advisory Group. Mr. Welling served in such
capacities at Credit Suisse from February 2002 to May 2008.
Previously, Mr. Welling served as Partner and Managing Director of
HOLT Value Associates L.P. (“HOLT”), a then leading provider of
independent research and valuation services to asset managers, from
October 1999 until January 2002 when HOLT was acquired by Credit
Suisse. Prior to HOLT, he was the Managing Director of Valuad U.S.,
a financial software and training company, and senior manager at
A.T. Kearney, one of the world’s largest global management
consulting firms. Mr. Welling also teaches executive education
courses at The Wharton School of Business and is a frequent speaker
at finance and investing conferences. He graduated from The Wharton
School of the University of Pennsylvania where he currently serves
as the Chairman of the school’s tennis program and as a member of
the Wharton School’s Executive Education Board. Mr. Welling’s
expertise in working with senior management teams and boards of
directors to assist them in understanding the drivers of valuation
and the strategies they can employ to increase the value of their
companies, including his experience with Relational and his
investment bank experience with Credit Suisse in a senior executive
capacity, will enable him to provide effective oversight of the
Company as a member of the Board.
We understand members of RTK’s Board would like to avoid a long,
drawn out and embarrassing proxy contest. In an attempt to be
constructive, we communicated an alternative path to Messrs.
Washburn and Burke during our December 13th meeting. As significant
and engaged shareholders for the past year, we have witnessed this
Board and management team’s penchant for destroying shareholder
value first hand. Our discussions with numerous large shareholders
have clearly indicated we are not alone in our frustration with the
Company’s direction. Given the widespread shareholder frustration,
the Company’s dreadful track record, and the strength of our
nominees, we are fully prepared to take our platform for change to
the 2014 Annual Meeting.
Our communications with the Board and management over the past
twelve months have made it abundantly clear that lack of
independent thought in the boardroom is a serious problem. We are
confident that shareholder representation in the boardroom is a
critical component of any solution. A public airing of our concerns
and the futility of our prior communications with the Board and
management team will subject the current leadership to embarrassing
scrutiny. This situation can be resolved without public
embarrassment. We welcome a solution that allows us to work
constructively in resolving the issues facing the Company and
ensures that RTK’s future path is paved by directors who hold the
interest of shareholders paramount.
Sincerely,
Concerned Rentech Shareholders
CERTAIN INFORMATION CONCERNING PARTICIPANTS
Engaged Capital, LLC and Lone Star Value Management, LLC,
together with the other members of the Concerned Rentech
Shareholders and the participants named herein, intend to file a
preliminary proxy statement and accompanying proxy card with the
Securities and Exchange Commission (“SEC”) to be used to solicit
votes for the election of their slate of four highly-qualified
director nominees at the 2014 annual meeting of stockholders of
Rentech, Inc., a Colorado corporation (the “Company”).
CONCERNED RENTECH SHAREHOLDERS STRONGLY ADVISE ALL STOCKHOLDERS
OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY
MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO
CHARGE ON THE SEC’S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION,
THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF
THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ PROXY
SOLICITOR.
The participants in the proxy solicitation are Engaged Capital
Master Feeder I, LP (“Engaged Capital Master I”), Engaged Capital
Master Feeder II, LP (“Engaged Capital Master II”), Engaged Capital
I, LP (“Engaged Capital I”), Engaged Capital I Offshore, Ltd.
(“Engaged Capital Offshore”), Engaged Capital II, LP (“Engaged
Capital II”), Engaged Capital, LLC (“Engaged Capital”), Engaged
Capital Holdings, LLC (“Engaged Holdings”), Glenn W. Welling, Lone
Star Value Investors, LP (“Lone Star Value Investors”), Lone Star
Value Investors GP, LLC (“Lone Star Value GP”), Lone Star Value
Management, LLC (“Lone Star Value Management”), Jeffrey E.
Eberwein, Jeffrey J. Brown and Larry Holley (collectively, the
“Participants”).
As of the date of this filing, Engaged Capital Master I
beneficially owned 7,607,276 shares of Common Stock. As of the date
of this filing, Engaged Capital Master II beneficially owned
898,366 shares of Common Stock. Engaged Capital I, as a feeder fund
of Engaged Capital Master I, may be deemed the beneficial owner of
the 7,607,276 shares of Common Stock beneficially owned by Engaged
Capital Master I. Engaged Capital Offshore, as a feeder fund of
Engaged Capital Master I, may be deemed the beneficial owner of the
7,607,276 shares of Common Stock beneficially owned by Engaged
Capital Master I. Engaged Capital II, as a feeder fund of Engaged
Capital Master II, may be deemed the beneficial owner of the
898,366 shares of Common Stock beneficially owned by Engaged
Capital Master II. Engaged Capital, as the investment adviser to
each of Engaged Capital Master I and Engaged Capital Master II, may
be deemed to beneficially own the 8,505,642 shares of Common Stock
owned in the aggregated by Engaged Capital Master I and Engaged
Capital Master II. Engaged Holdings, as the managing member of
Engaged Capital, may be deemed to beneficially own the 8,505,642
shares of Common Stock owned in the aggregated by Engaged Capital
Master I and Engaged Capital Master II. Mr. Welling, as the founder
and chief investment officer of Engaged Capital and the sole member
of Engaged Holdings, may be deemed to beneficially own the
8,505,642 shares of Common Stock owned in the aggregated by Engaged
Capital Master I and Engaged Capital Master II. As of the date of
this filing, Lone Star Value Investors beneficially owned 2,000,000
shares of Common Stock. Lone Star Value GP, as the general partner
of Lone Star Value Investors, may be deemed the beneficial owner of
the 2,000,000 shares of Common Stock beneficially owned by Lone
Star Value Investors. Lone Star Value Management, as the investment
manager of Lone Star Value Investors, may be deemed the beneficial
owner of the 2,000,000 shares of Common Stock beneficially owned by
Lone Star Value Investors. Mr. Eberwein, as the manager of Lone
Star Value GP and sole member of Lone Star Value Management, may be
deemed the beneficial owner of the aggregate of 2,000,000 shares of
Common Stock beneficially owned by Lone Star Value Investors. As of
the date of this filing, neither of Messrs. Brown or Holley
beneficially owned any shares of Common Stock.
About Engaged Capital:
Engaged Capital, LLC, (“Engaged Capital”) was established in
2012 by a group of professionals with significant experience in
activist investing in North America and was seeded by Grosvenor
Capital Management, L.P., one of the oldest and largest global
alternative investment managers. Engaged Capital is a limited
liability company owned by its principals and formed to create
long-term shareholder value by bringing an owner’s perspective to
the managements and boards of under-valued public companies.
Engaged Capital manages both a long-only and long/short North
American equity fund. Engaged Capital’s efforts and resources are
dedicated to a single investment style, “Constructive Activism”
with a focus on delivering superior, long-term, risk-adjusted
returns for investors. Engaged Capital is based in Newport Beach,
California.
About Lone Star Value Management:
Lone Star Value Management, LLC (“Lone Star Value”) is an
investment firm that invests in undervalued securities and engages
with its portfolio companies in a constructive way to help maximize
value for all shareholders. Lone Star Value was founded by Jeff
Eberwein who was formerly a Portfolio Manager at Soros Fund
Management and Viking Global Investors. Lone Star Value is based in
Old Greenwich, CT.
Media:Bayfield Strategy, Inc.Riyaz Lalani,
416-907-9365rlalani@bayfieldstrategy.com
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