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GenCorp board faces shake-up: CEO steps down; Steel Partners II, a hedge fund, wins directors' seats.(Sacramento Bee, The (CA) (KRT) Via Thomson Dialog NewsEdge) Mar. 6--GenCorp Inc.'s president and chief executive resigned Wednesday as part of a deal that yields much of the control of Aerojet's parent to a New York shareholder who has been hounding management for years. Besides securing the resignation of Terry Hall, who has led the company since 2002, New York hedge fund Steel Partners II obtained three seats on the GenCorp board of directors. Steel Partners' general partner Warren Lichtenstein, whose firm is GenCorp's largest shareholder, took one of those seats. Eventually Lichtenstein and his group will control four of the nine board seats. While Aerojet's top executive, J. Scott Neish, was named GenCorp's interim CEO, Lichtenstein will lead the search for a permanent replacement. It's unclear what the move means for the long-term future at GenCorp and Aerojet, the rocket-engine manufacturer whose heyday was decades ago. The Rancho Cordova complex employs some 1,700 workers, making it one of the area's largest employers, but its performance has been bumpy in recent years, and it has increasingly turned its attention to developing its vast land holdings along U.S. Highway 50. Though Lichtenstein has complained about GenCorp's management for years, he has never spelled out how he would run things differently. But other dissident shareholders have suggested in recent years that GenCorp should move more aggressively to turn its real estate into cash, perhaps by selling off the thousands of acres. GenCorp's land development efforts have been crawling through the government approval process. Wednesday's announcement came just a month after Steel Partners, which once tried to buy GenCorp, launched a proxy fight to gain six seats on GenCorp's board. The deal means the fight, set for the March 26 annual shareholders meeting, has been called off. "I wouldn't call it necessarily a capitulation or a surrender," said GenCorp spokeswoman Linda Cutler. The agreement is "in the best interests of the company, to avoid a long and protracted fight," she said. Hall was unavailable for comment. Steel Partners, which owns 14 percent of GenCorp, made a $700 million hostile takeover bid for GenCorp in 2004 but was foiled when GenCorp issued a slew of new shares, effectively raising the takeover price. The two sides reached a truce of sorts when GenCorp let Steel Partners send a nonvoting representative to GenCorp's board meetings. But analysts said Steel Partners, known as a tenacious fighter, wouldn't stay idle forever. A month ago it launched the proxy fight for board control, saying it was tired of "GenCorp's significant underperformance and deterioration of share price." GenCorp stock traded in the $20 range two years ago but has been in the mid- to low teens for much of the past year. It closed Wednesday at $10.59, up 20 cents, on the New York Stock Exchange. The deal with Steel Partners was announced after the market closed. As part of the deal, Lichtenstein and two allies joined GenCorp's board immediately. The new CEO to be hired with Lichtenstein's approval will take a fourth seat. They will replace four current board members, including Hall, who resigned his seat immediately, and three others who will depart at the annual meeting in three weeks. Three other seats were captured in 2006 by another disgruntled shareholder, Pirate Capital. The head of the board will remain Timothy Wicks, a health care executive who became chairman in 2005. "We are confident that the GenCorp Board can represent the interests of all shareholders," Lichtenstein said in a press release. The glory years at Aerojet came during the 1950s and 1960s, when the Rancho Cordova site employed some 22,000 workers developing rocket engines for the space race and Cold War. But employment fell below 2,000 decades ago. Aerojet's owner GenCorp, the successor to the old General Tire conglomerate, tried selling the business in 1994, but the engine company's groundwater contamination problems scared off bidders. In 2000 it tentatively agreed to a deal that would have transferred much of Aerojet's operations to rival Pratt & Whitney's facilities in San Jose and Florida. That deal fell apart, however, and GenCorp remained in the rocket-engine business. But other subsidiaries have been disappointing, including an auto-parts operation that was sold for a hefty loss. GenCorp did earn $69 million in 2007, reversing a $38.5 million loss from the year before. The company cited a gain on discontinued operations, better results in aerospace and settlements of some tax issues. Neish, the new interim CEO, has been running Aerojet since 2005. He joined the company in 2002, when GenCorp bought the company where he worked, a division of General Dynamics. He declined through a spokeswoman to be interviewed. To see more of The Sacramento Bee, or to subscribe to the newspaper, go to http://www.sacbee.com/. Copyright (c) 2008, The Sacramento Bee, Calif. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |