GenCorp Activist Effort Drags On

A five year old activist campaign by activist investor Steel Partners at GenCorp. Inc. shows that insurgencies are not all short-term affairs.

One month after Steel Partners resurrected an activist push at the Rancho Cordova, Calif.-based aerospace conglomerate with a proxy contest to install six directors, Steel Partners and GenCorp. late March 5 settled up- the latest step in a campaign that has lasted since 2002. Steel Partners agreed to drop its proxy contest and in return GenCorp agreed to install three Steel Partners nominees including the activist fund’s manager, Warren Lichtenstein. They replace three incumbent directors that management nominated for the company’s March 26 annual meeting.

Lichtenstein argues in a Securities and Exchange Commission filing that he had been seeking to reach some sort of settlement with the company which makes rocket propulsion systems and components, 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.

Steel Partners isn't the only activist battling GenCorp management. 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.-- Ron Orol