NEW YORK, Feb. 3, 2020 /PRNewswire/ -- D.C. Capital
Partners, L.P. (together with its affiliates "D.C. Capital"), a
significant stockholder of Superior Industries International, Inc.
(the "Company") (NYSE: SUP), beneficially owning approximately 4.8%
of the Company's outstanding common stock, today issued an open
letter to its fellow stockholders expressing its serious concerns
with the Company's persistently low stock price and operational
underperformance. D.C. Capital also announced today that it
has nominated Raynard Benvenuti for
election to the Company's Board of Directors (the "Board") at the
upcoming 2020 annual meeting of stockholders. Despite
repeated efforts to engage with the Company on a private basis,
D.C. Capital has grown frustrated by the Board's apparent
complacency with the status quo. D.C. Capital believes the
Board, led by Chairman Timothy C.
McQuay, lacks the requisite leadership to adopt the
necessary changes to drive value for all stockholders. D.C.
Capital believes Mr. Benvenuti possesses the requisite experience
as a senior executive and advisor to various aerospace, automotive
and manufacturing companies, including in turnaround situations,
and stockholder mindset to change the boardroom dynamics that have
impeded Superior's performance.
The full text of the letter can be found below:
D.C. Capital Partners, L.P.
800 Third Avenue
39th
Floor
New York, New
York 10022
________
(212) 446-9330
Fax (212) 750-9264
February 3, 2020
Dear Fellow Stockholders,
D.C. Capital Partners, L.P. ("we" or "D.C. Capital") is a
significant stockholder of Superior Industries International, Inc.
(the "Company" or "Superior"), beneficially owning 1.2 million
shares of the Company's common stock or approximately 4.8% of the
outstanding common stock. We are not a traditional activist
investor. In fact, this is our first public letter of this
nature in our 28 years of operating. We are writing because
we have grown increasingly concerned with the Company's prolonged
underperformance and lack of meaningful response from the Company's
Board of Directors (the "Board") to address this
underperformance.
For many months leading up to this letter, we sought to engage
with the Company to address our concerns with the Company's
performance and persistently low stock price. In our view,
the Board's poor decisions and oversight have materially and
adversely affected the Company's operating results, led the Company
to be highly leveraged, encumbered its ability to change, and
depressed its stock price. While we had hoped to keep
our discussions with the Company private, the Board, led by
Chairman Timothy C. McQuay, seems
too complacent with the status quo to make changes. When we
wrote and requested that the Board be reduced in size and
refreshed, Mr. McQuay remarked that "the Board is appropriately
sized and incorporates the right skillset to address the challenges
and pursue the opportunities ahead of Superior." That
response is hard to accept given it ignores the Board's stewardship
over the Company's disastrous stock price and operating
performance.
In our view, the Board lacks the requisite leadership to drive
the changes necessary to restore value for all
stockholders. Accordingly, we felt compelled to take
the step of nominating our own candidate, Raynard D. Benvenuti, for election to the Board
at the 2020 Annual Meeting of Stockholders (the "2020 Annual
Meeting"). We strongly believe that Mr. Benvenuti, who
possesses over 30 years of experience as a senior executive and
advisor to various aerospace, automotive and manufacturing
companies, including in turnaround situations, will bring a
stockholder results-oriented mindset to the Board to change the
moribund Boardroom dynamics that we believe have hampered
Superior's progress.
About D.C. Capital Partners, L.P.
D.C. Capital is a private New York
City-based investment fund that was founded in 1992. We are
value investors focused primarily on small to mid-capitalization
companies, a number of which are in industrial sectors, such as
aerospace, materials, automotive and truck manufacturing, and oil
and gas. We are attracted to companies where expectations are low
but change is underway - such as a major acquisition or
divestiture, or where a portfolio reshuffling is redirecting
resources to areas of competitive strength from those of
weakness.
We seek to support management teams as they implement change and
provide guidance, encouragement and criticism where we feel it is
appropriate. Our objective is that the companies we are
involved with increase their focus on and get stronger in areas
where they have leverageable strengths.
We have yet to make an investment in a company with an intent to
be an activist. The situation at Superior has been frustrating for
us, as we see a clear and urgent need for improved performance and
various paths to make that happen, but the business is saddled with
a self-satisfied Board that seems oblivious to the destruction of
shareholder value. We believe Superior can be put on a path to a
much brighter future with a reconstituted Board and the time for
change is now.
Superior's Share Price Underperformance
Over a five-year period ending January
31,
2020, Superior's stock has delivered a negative 79% total
return to investors. The Nasdaq Composite and
Russell 2000, by comparison, have delivered positive returns of
110% and 48% over the same period.
This decline in Superior's stock price suggests that
stockholders are increasingly disillusioned with the Company's
prospects.
Superior's stock performance over one- and
three-year periods paints a similar picture, as summarized
below.
Superior's Total
Stock Return
|
Performance
|
|
Period Ending Jan.
31, 2020
|
Name
|
1-Year
|
3-Year
|
5-Year
|
SUPERIOR
INDS
|
-35%
|
-85%
|
-79%
|
Benchmark
Performance
|
|
|
|
S&P 500
INDEX
|
22%
|
50%
|
79%
|
NASDAQ COMPOSITE
INDEX
|
27%
|
69%
|
110%
|
RUSSELL 2000
INDEX
|
9%
|
23%
|
48%
|
Superior's Proxy Peer
Group*
|
1%
|
6%
|
37%
|
Source: Bloomberg;
Superior 2019 Proxy Statement
|
*Proxy Peer Group
includes: CTB, DORM, LCII, GNTX, THRM, MTOR, MOD
|
PKOH, SHLO, FLOW,
SMP, SRI, TKR, and VC.
|
One hundred dollars invested in
Superior since January 31, 2015 is
now worth $21, while $100 invested in the Nasdaq Composite or Russell
2000 would be worth $210 or
$148, respectively.
Superior's Poor Execution Has Had Severe Consequences
Superior's operating underperformance can be traced to early
2017. In May 2017, led by a new
CEO and recently appointed Chairman of the Board, Timothy C. McQuay, the Company completed the
acquisition of Uniwheels, a European aluminum wheel manufacturer,
essentially doubling the size of the Company to $1.4 billion in revenue. The acquisition price
was approximately $715 million. At
the end of the transaction, Superior had assumed approximately
$800 million of debt and preferred
equity to fund the acquisition. Management promised that
significant operational and revenue synergies would be harvested
from the combination and that U.S. operations were poised for a
significant increase in revenues and profitability given recently
received contract awards, a strategic focus on larger, higher
value-added wheels, and output from a new PVD coating facility then
under construction. This increase in North America profitability and deal synergies
were a key part of making the deal financeable, and were expected
and necessary to pay down the acquisition debt.
Fast forward, this increase in profitability has not
materialized. In 2016, before the Uniwheels acquisition, the
Company reported gross margins of 11.8% on $733 million of revenue. For the last nine months
of 2019, the Company reported $1.1
billion of revenue, at a disappointing 8.4% gross margin.
Shortly after the Uniwheels deal was announced in 2017, Superior
had released a 2020 EBITDA goal in excess of $230 million. In comparison, as part of the
Company's last quarterly release, the Company provided 2019 EBITDA
guidance of $165-175 million, over
$50 million short of the 2020
original target.
In perspective, this profitability shortfall amounts to
approximately $1 million per week or
$2 per common share (pre-tax) per
year. Most significantly, unless reversed, the Company has
essentially no ability to make any meaningful debt pay down from
operating cash flow before its term loan facility matures in
May 2024 or in advance of its
revolver facility maturity ("currently undrawn") in May 2022.
While the CEO who promoted and executed the Uniwheels
acquisition is no longer with the Company, the Board that approved
this deal and presided over this period of underperformance is for
the most part unchanged.
D.C. Capital Recommendations
Aggressive Debt Repayment. During our
various meetings with management and members of the Board, we
outlined our beliefs that the Company needs to substantially
improve its profitability and cash flow in order to pay down its
debt. When the Company purchased Uniwheels, the Company detailed
substantial profitability improvements, through cost and revenue
synergies, that would pay down the acquisition debt. These goals
have not been realized and the Company has not outlined a
comprehensive recovery plan that will generate meaningful debt
repayment. We believe that the Company's depressed common stock
share price is a reaction to the high financial leverage from the
Uniwheels acquisition and the operational missteps in North America. We are discouraged by a seeming
lack of urgency by the Board and management team to develop a
strategy to generate more cash from operations and aggressively
target a set reduction in the Company's debt.
Refresh Board. We firmly believe that the
Board needs to be refreshed with new, independent and objective
perspectives, including the addition of a stockholder
representative on the Board. We believe the Board needs new
members who have fresh views unencumbered by failed decisions. In
our view, the Board is stale and ineffective. There are nine Board
members, with five of those members having an average tenure of
eight years. Chairman McQuay has been on the Board since 2011 and
was interim Executive Chairman of the Board in 2017, the year of
the Uniwheels acquisition and the start of the dramatic decline in
stockholder equity value. While TPG Growth, which owns $150 million (initial value) of convertible
preferred stock, has a representative on the Board, its economic
interest is senior to those of the common stockholders and appears
to be diverging as the common share price sits far below the
conversion price of its preferred. Accordingly, we do not believe
there is adequate Board representation for common stockholders.
Another major stockholder, GAMCO Asset Management Inc.
("GAMCO"), has repeatedly gone public with their concerns.
GAMCO lost a proxy fight against Superior in 2015, when they
nominated three candidates for election to the Board. The
Company rejected GAMCO's initiative in 2015 with the assertion that
the status quo was just fine. Since this failed proxy
election attempt, Superior's share price has declined 83%. Just
recently, acting independently of D. C. Capital, GAMCO publicly
announced it had submitted notice to the Company of its intention
to nominate one person for election to the Board at the 2020 Annual
Meeting. We welcome their initiative.
For our part, we have nominated Raynard
Benvenuti for election to the Board because we believe the
Board needs a renewed sense of urgency to address the operational
and financial issues facing the Company. We believe Mr.
Benvenuti will bring outstanding qualities of intellect, judgment,
experience and drive to the Board. A detailed biography of Mr.
Benvenuti is set forth below.
Raynard Benvenuti (Age 63)
- Mr. Benvenuti is the founder of Concord Investment Partners, an
investment and advisory firm focused on making private and public
investments in aerospace, automotive and industrial companies,
including in undermanaged and distressed situations.
- Previously, Mr. Benvenuti served as a Managing Partner and an
operational practice leader for the aerospace and automotive/truck
sectors at Greenbriar Equity Group. For Greenbriar, Mr. Benvenuti
served on five boards, three as Chairman, and as interim CEO of an
aerospace portfolio company. Earlier, as President and CEO, Ray led
the award winning turnaround of Stellex Aerostructures Inc., a
manufacturer of large structural components for commercial and
military aircraft, culminating in a successful sale to GKN,
plc.
- Mr. Benvenuti previously worked at Forstmann Little & Co.,
a private equity firm, and McKinsey & Company, a global
management consulting firm.
- Mr. Benvenuti's senior executive and advisor experience make
him highly qualified to provide valuable strategic, financial,
operational, turnaround and corporate governance expertise to the
Board.
- Mr. Benvenuti was recently appointed to the board of NN, Inc.,
a NASDAQ-traded industrial manufacturer of high-precision metal and
plastic components and assemblies.
We look forward to engaging with you in the coming weeks as we
advance to the 2020 Annual Meeting.
Yours truly,
/s/ Douglas L. Dethy
Douglas L. Dethy
Investor Contacts:
D.C. Capital Partners, L.P.
Douglas L. Dethy
(212) 446-9330
Saratoga Proxy Consulting LLC
John Ferguson / Joe Mills
(212) 257-1311
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
D.C. Capital Partners, L.P., a Delaware limited partnership, together with
the other participants named herein, (collectively, "D.C.
Capital"), intends to file a preliminary proxy statement and
accompanying WHITE proxy card with the Securities and Exchange
Commission (SEC") to be used to solicit votes for the election of
its highly qualified nominee at the 2020 annual meeting of
stockholders of Superior Industries International, a Delaware
Corporation (the "Company").
D.C. CAPITAL STRONGLY ADVISES 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 CHANGE ON THE SEC'S WEBSITE 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 PARTICIPANT'S PROXY
SOLICITOR.
The "Participants" in this proxy solicitation are anticipated to
be D.C. Capital Partners, L.P. a Delaware limited partnership ("D.C. Capital
Partners"), D.C. Capital Advisors, Limited ("D.C. Capital
Advisors"), a Delaware limited
company, D.C.R. Partners, L.P. ("D.C. GP"), a Delaware limited partnership, Douglas L. Dethy and Raynard D. Benvenuti.
As of the date hereof, the Participants beneficially own in the
aggregate 1,232,500 shares of Common Stock, par value $0.01 per share, of the Company (the "Common
Stock"). As of the date hereof, D.C. Capital Partners directly owns
1,200,000 shares of Common Stock. As the investment advisor of D.C.
Capital Partners, D.C. Capital Advisors may be deemed the
beneficial owner of the 1,200,000 shares of Common Stock directly
owned by D.C. Capital Partners. As the general partner of D.C.
Capital Partners, D.C. GP may be deemed the beneficial owner of the
1,200,000 shares of Common Stock directly owned by D.C. Capital
Partners. As the general partner of D.C. GP and the managing
director of D.C. Capital Advisors, Mr. Dethy may be deemed the
beneficial owner of the 1,200,000 shares of Common Stock directly
owned by D.C. Capital Partners. As of the date hereof, 32,500
shares of Common Stock are beneficially owned by Mr. Benvenuti
through the Raynard D. Benvenuti Trust-2009, which Mr. Benvenuti
controls.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/dc-capital-issues-open-letter-to-stockholders-of-superior-industries-international-300998021.html
SOURCE D.C. Capital Partners, L.P.