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 Directors
Rentech, Inc.
10877 Wilshire Boulevard
Suite
600
Los 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.
Copyright Business Wire 2014