CTW Investment pushes for Kellwood sale

An activist labor-backed pension fund investor on Wednesday called on the board of Kellwood Co. to consider a sale after the clothing company in October rejected an unsolicited $21 a share acquisition offer for the business by Sun Capital Securities Group LLC.
CTW Investment Group, based in New York, is seeking to have St. Louis-based Kellwood’s board set up a special committee of independent directors to explore strategic alternatives such as a sale. “The combination of long-term poor performance combined with poor governance is what has attracted pension fund resistance,” said CTW director Michael Garland.
CTW owns 200,000 Kellwood shares, significantly less than 1% of the company’s outstanding shares. Kellwood has a $451 million stock market capitalization.
A key problem for institutional investors, including CTW, was the legal counseling work provided in the past by a Kellwood director, Jerry M. Hunter, a partner at Bryan Cave LLP in St. Louis. Hunter’s payments as a Kellwood director may not have breached recently approved New York Stock Exchange listing requirements, but Garland and other investors consider his business relationship with the company a conflict of interest.
According to CTW filings with the Securities and Exchange Commission, roughly 49% of participating shareholders voted against Hunter at Kellwood’s June 2007 meeting. Garland said that if broker votes weren’t included, that number would rise to roughly 54%. Broker votes are votes submitted by brokers for management’s slate on behalf of retail investors that fail to cast a vote one way or the other. In 2005, the majority of participating shares gave Hunter a vote of no-confidence. (The company subsequently moved Hunter off key board committees.) — Ron Orol
Ron Orol is a Washington-based reporter for The Deal and author of Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World.