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Basch Report
Jax Daily Record Thursday, Mar. 31, 202205:00 AM EST

Hedge fund pressuring Rayonier AM; CSX stockholders warned of underpriced offer

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Board implements “poison pill” strategy to fend off activist fund.
by: Mark Basch Contributing Writer

An activist hedge fund continues to pressure Rayonier Advanced Materials Inc., calling on the Jacksonville-based company to refinance its debt.

While Chatham Asset Management said it is not interested in taking over the maker of cellulose specialties products, Rayonier AM’s board responded by implementing a “poison pill” plan that would ward off a hostile takeover.

Chatham started its campaign with a March 10 Securities and Exchange Commission filing saying it had acquired 6.3% of Rayonier AM’s stock and requesting discussions with management about refinancing the debt. 

The New Jersey-based fund also has a large position in Rayonier AM bonds. Chatham said it owns 72% of Rayonier AM senior notes that are due June 1, 2024, and is proposing a refinancing of those bonds.

“While Chatham itself would stand to benefit significantly from implementation of its proposals, such transactions would be detrimental to the Company and its other investors. Therefore, these transactions are not in the best interest of the Company and its stockholders,” Rayonier AM Chairman DeLyle Bloomquist said in a March 21 news release.

Rayonier AM also announced a stockholder rights plan, commonly known as a poison pill.

The company is issuing one right to purchase preferred shares for every outstanding common share.

The rights are exercisable if a new investor acquires 10% or more of the company’s common stock.

“The Board and management team are committed to acting in the best interests of all of the Company’s stockholders. We want investors to realize the full long-term value of their investment and receive fair and equal treatment, and the Rights Plan is designed to ensure this,” Bloomquist said in a news release about the plan.

According to the company’s March 18 annual proxy statement, one firm, BlackRock Inc. already has 15.06% of Rayonier AM’s stock. Chatham is the second-largest shareholder.

Chatham responded to the plan in a March 24 news release saying it has been “slowly accumulating shares” since June 2021.

“Our position was not the result of any rapid accumulation nor have we ever indicated any interest in attempting a hostile takeover of the Company,” it said.

“Rather than engage with Chatham in good faith or even respond to our outreach directly, the Board instead rejected our proposed refinancing term sheet – which was solely intended for discussion purposes and sent to the Company at management’s suggestion – and unilaterally adopted a poison pill,” the firm said.

Rayonier AM has been struggling in difficult markets for its products. The company had a loss from continuing operations of $49.8 million in 2021, its third-straight year of losses.

“As stated on its February earnings call, the Company expects a challenging start to the year as it manages through extraordinary inflation costs and supply chain constraints along with extensive maintenance outages to make reliability-enhancing investments in its core assets,” the company said in the release announcing the rights plan.

Despite the challenges, Rayonier AM said it anticipates business improvements this year which “are core to the Company’s refinancing strategy.”

International Baler to go private

International Baler Corp. and its majority shareholder have agreed on a buyout plan that will take the Jacksonville-based company private.

International Baler said in a March 25 SEC filing that Avis Industrial Corp., which already owns 81.1% of the stock, agreed to buy the remaining publicly traded shares for $1.74 each.

The shares were trading at $1.56 before the filing.

Avis owned 4.2 million of International Baler’s 5.18 million outstanding shares as of Dec. 31, leaving few shares available for trading.

Indiana-based Avis owns several competitors that make balers, which are used by businesses to bundle waste for disposal and recycling.

International Baler had disclosed in April 2021 that Avis offered to buy the remaining shares but another SEC filing in September said the parties were unable to reach an agreement and called off negotiations. There had been no update since then.

Avis is owned by the estate of Leland Boren, its former CEO who died in 2018.

Boren and his wife began buying shares of International Baler, then known as Waste Technology Corp., in 2005 and became the majority stockholder by 2007, according to SEC filings.

International Baler has been a mostly under-the-radar public company since moving its headquarters from Rockville Centre, New York, to Jacksonville in 1993.

The company briefly looked to expand by opening a new subsidiary in Baxley, Georgia, called International Press and Shear Corp. in 1995.

However, that division lost money for four years before Waste Technology sold off the business.

The company consolidated operations back to its Jacksonville subsidiary, International Baler. In 2009, it changed the name of the publicly traded parent from Waste Technology to International Baler.

The company employed 45 people as of Oct. 31, 2021, at its 62,000-square-foot facility at 5400 Rio Grande Avenue in Northwest Jacksonville, according to its annual report.

Revenue for the fiscal year ended Oct. 31 was $10 million.

The offer from Avis is contingent on holders of more than 50% of the shares not owned by Avis accepting the deal.

If the tender offer is accepted, International Baler will become a subsidiary of Avis.

CSX stockholders get underpriced ‘mini-tender’ offer

CSX Corp. said it was notified of an unsolicited “mini-tender” offer by TRC Capital Investment Corp., a company known for making similar offers at other big companies.

CSX said TRC is offering to buy up to 4 million shares of the Jacksonville-based railroad company at $34.75 each, which is below the trading price of $36.34 on March 18 before the offer commenced.

The 4 million shares would be a tiny fraction of CSX’s 2.18 billion shares outstanding.

TRC similarly made a mini-tender offer in September to buy shares of Jacksonville-based Fidelity National Information Services Inc., or FIS, at a price 4.4% below the company’s market price at the time.

FIS cautioned stockholders that investors make these offers hoping to get a bargain by finding stockholders who do not keep up with market trading prices.

Since TRC usually offers to buy less than 5% of a company’s shares, it does not have to make SEC filings related to the purchase. So, the number of FIS shares acquired by TRC was not revealed.

CSX recommended its shareholders reject the TRC offer.

FIS adds two directors

FIS said March 21 it added two new directors to its board: Vijay D’Silva, recently retired senior partner at the McKinsey & Co. consulting firm, and Kenneth Lamneck, retired CEO of technology firm Insight Enterprises.

D’Silva and Lamneck joined the board March 16 but will be up for reelection at the company’s annual meeting on May 25.

ParkerVision loses to Qualcomm

ParkerVision Inc. lost another round in its long court battle with Qualcomm Inc.

U.S. District Judge Paul Byron in Orlando issued a judgment March 22 for Qualcomm in a patent infringement suit filed in 2014 by Jacksonville-based ParkerVision.

ParkerVision said the court’s order is sealed but it intends to appeal.

“We are disappointed that Judge Byron was unwilling to allow us the opportunity to present our case to a jury – a case that we believe has strong merit,” CEO Jeff Parker said in a news release.

“This summary judgement ruling clears the path for ParkerVision to appeal this court’s decisions to the federal circuit – a step that we plan to move forward on expeditiously,” he said.

ParkerVision has filed a number of lawsuits against major telecommunications product companies over the past decade alleging they have infringed on the company’s patented wireless technology.

The company has abandoned manufacturing products and has focused on pursuing its patent lawsuits.

The legal action began with a 2011 lawsuit filed against Qualcomm. A jury in the Orlando Division of the U.S. District Court for the Middle District of Florida ruled for ParkerVision in October 2013 and awarded the company $173 million in damages.

However, U.S. District Judge Roy B. Dalton Jr. tossed out the verdict in June 2014.

The case in the latest legal decision was filed in May 2014 and involved different patents than the suit filed in 2011.

Treace files patent infringement suit

Unlike ParkerVision, Ponte Vedra-based Treace Medical Concepts Inc. continues to market and sell its main product, a bunion surgery procedure it calls Lapiplasty.

But Treace on March 28 said it filed a lawsuit against an Arizona company, Fusion Orthopedics, alleging infringement of its patents on the procedure.

“Our intellectual property is a critical component in advancing bunion patient care,” CEO John Treace said in a news release.

“We remain committed to protecting our proprietary technology and intellectual property, which drives our ability to continue to innovate solutions that benefit patients,” he said.

Fusion responded with a news release saying the “disruptive nature” of its product, called LapiLock, “has caught the attention of Treace.”

The company said its procedure is “is different than and superior” to Treace’s procedure and it “disputes the baseless claims set forth by Treace, as filed in the U.S. District Court of Arizona.”

Dallas company acquires J.D. Mullens

Integrity Marketing Group said March 24 it acquired J.D. Mullens, a Glen St. Mary marketing company that helps consumers acquire health insurance coverage through the Affordable Care Act.

J.D. Mullens was formed in 2006 to offer final expense and life insurance products to seniors and is expanding to provide health insurance products for the senior market, Integrity said.

Dallas-based Integrity provides life and health insurance products and offers wealth management and retirement planning services.

Terms of the acquisition were not disclosed.

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