Ohio-based specialty chemicals producer Ferro Corp. (NYSE: FOE) is nearing its final exit round, reportedly drawing competing bids from private equity firms CVC Capital Partners, Apollo Global Management LLC (NYSE: APO) and Rhone Capital. Ferro has a market capitalization of $1.13 billion, and an enterprise value of $1.53 billion.
“The three private equity firms are expected to hand in final offers for Ferro this month,” said Bloomberg reporter Kiel Porter.
On May 9, Ferro said that “its Board of Directors is exploring possible strategic alternatives,” and that the company “has retained Lazard Frères & Co. as its financial advisor.”
The move was in response to pressure from activist investor FrontFour Capital Group LLC, a Greenwich, Connecticut-based hedge fund which holds a stake of over 3% in Ferro. On March 14, FrontFour sent a letter to the company’s chairman Peter T. Thomas, urging its board of directors “to pursue strategic alternatives, including a potential sale of the company.”
“Given Ferro’s significant operational improvement, strong market share positions, robust free cash flow generation and deep acquisition pipeline, we believe that Ferro would receive strong interest from both strategic and private equity buyers, at a price reflecting a significant premium to Ferro’s current trading levels,” Frontfour added. Co-founders David A Lorber and Zachary R George, alongside partner Stephen E Loukas, co-manage the firm’s flagship fund, FrontFour Capital Partners LP.
“You work for us,” FrontFour hedge fund executives are known to remind their target companies’ senior management, after becoming significant shareholders.
On March 5, 2016, in a rare public appearance, FrontFour’s Zach George delivered the keynote address at an investment summit hosted by three of Canada’s leading independent financial publishers: Oil and Gas Investments Bulletin, HRA Journal and CEO.CA.
FrontFour became a Ferro shareholder in 2012 and embarked on a proxy contest in early 2013, which it subsequently settled in exchange for nominations on the company’s board of directors, Reuters said.
Ferro is a leading global functional coatings and color solutions company that supplies technology-based performance materials, including glass-based coatings, pigments and colors, and polishing materials. The company’s products are sold into the building and construction, automotive, appliances, electronics, household furnishings, and industrial products markets.
Ferro Corp. was founded in 1919 and is headquartered in Mayfield Heights, Ohio. The company has approximately 4,860 employees globally and reported 2015 sales of $1.1 billion.
Photo: Hedge fund activist investor Zach George of FrontFour Capital, delivering the keynote address at the Subscriber Investment Summit on March 5, 2016 at the Hilton Toronto. (Calgary Herald / Colleen De Neve)