Steel Partners Renews Insurgency at GenCorp

So much for short term activists.

Activist investor Steel Partners is resurrecting a long-silent insurgency effort at aerospace conglomerate GenCorp Inc., a company he first publicly agitated for change in December, 2002.

The activist investor on Thursday launched his second proxy contest at the Rancho Cordova, Calif.-based company, which specializes in rocket-propulsion systems and components.

This time Steel Partner’s Warren Lichtenstein nominated six candidates for GenCorp’s board. Lichtenstein argues in a Securities and Exchange Commission filing that he had been seeking to reach some sort of settlement with the company, but was unsuccessful. The proxy contest was a “last resort,” the filing added.

The activist investor offered $700 million in 2004 to buy GenCorp, after attacking the conglomerate for its subpar financial performance and questioning the company's dealmaking record. After GenCorp rejected the offer, Lichtenstein launched his first proxy contest. In consultation with Steel Partners, GenCorp agreed to add a corporate governance expert to its board, in return for which Lichtenstein dropped his proxy contest. As part of the deal, Lichtenstein was permitted to send a nonvoting representative to GenCorp's board meetings.

GenCorp has another activist investor that it needs to think about. Sandell Asset management Corp., which owns a 6.9% GenCorp stake, launched its public insurgency at the company in March 2005. That year Sandell requested that GenCorp make more changes to improve governance and also sell a chemicals unit. Sandell Asset portfolio manager Thomas Sandell said in letter addressed to GenCorp's board (and included in a recent government filing) that he wants the company to remove a raft of anti-takeover defenses, among them a poison pill and staggered board elections, which make it difficult to mount change-of-control proxy contests. He wants annual elections for the whole board. Sandell also wants GenCorp to allow large stakeholders to call special shareholder meetings.

So much for short term activists.