Voss Capital backs a strategic review at Griffon, and a new opportunity to create value may emerge

Business: Griffon operates done 2 segments. Consumer and Professional Products ("CPP") conducts its operations done AMES. Founded successful 1774, AMES is the starring North American shaper and a planetary supplier of branded user and nonrecreational tools and products for location retention and organization, landscaping and enhancing outdoor lifestyles. CPP sells products globally done a portfolio of starring brands including True Temper, AMES, and ClosetMaid. Home and Building Products ("HBP") conducts its operations done Clopay. Founded successful 1964, Clopay is the largest shaper and marketer of store doors and rolling alloy doors successful North America. Residential and commercialized sectional store doors are sold done nonrecreational dealers and starring location halfway retail chains passim North America nether the brands Clopay, Ideal and Holmes. Rolling alloy doorway and grille products designed for commercial, industrial, institutional, and retail usage are sold nether the CornellCookson brand. The CPP concern has astir $1.2 cardinal successful yearly gross and $115 cardinal successful EBITDA, and the HBP concern has astir $1 cardinal successful yearly gross and $181 cardinal successful EBITDA.

Stock Market Value: $1.8B ($31.75 per share)

Percentage Ownership: 5.17%

Average Cost: $25.91

Activist Commentary: Voss is simply a Houston-based hedge money focused connected underfollowed peculiar situations. They are not accepted activists but person successfully utilized activism arsenic a instrumentality successful the past.

Voss archetypal reported holding Griffon successful their Q3 2021 13F filing. On Nov. 23, 2021, anterior to exceeding 5% ownership, it nominated 3 directors for predetermination to the committee and aboriginal reduced it slate to 2 directors.

Throughout their proxy fight, the steadfast released letters and presentations detailing its content that Griffon has mediocre firm governance and excessive enforcement compensation, and that the institution should commence a strategical review. In a January 2022 presentation, it stated that Griffon's banal could beryllium worthy $50/share (it's presently successful the debased $30's) done the implementation of a program that includes (i) selling the Defense Electronics business, (ii) exploring alternatives for Home and Building Products, (iii) utilizing currency to trim indebtedness and wage a peculiar dividend, (iv) right-sizing firm overhead, and (v) improving margins astatine the Consumer segment. Voss besides criticized Griffon's M&A strategy, specifically highlighting its disapproval of the company's acquisition of Hunter Fan for $845 cardinal from MidOcean Partners. Ultimately, astatine the 2022 Annual Meeting, shareholders elected 1 of Voss's manager candidates, H.C. Charles Diao, to the committee wherever helium presently serves arsenic a director.

Fast guardant six months: Voss has present accrued their ownership from 2.3% to 5.2% today. In its 13D filing, the steadfast states that it is "pleased by the Issuer's announcement successful May 2022 that the Board had initiated a process to reappraisal a broad scope of strategical alternatives to maximize shareholder worth including a sale, merger, divestiture, recapitalization oregon different strategical transaction." Voss past noted that it accrued its concern based connected its anticipation that the strategical reappraisal volition effect successful a transaction that volition unlock value.

So, the hard portion is done. Voss launched a proxy fight, won a committee spot and present it is endorsing the company's strategical review. Since Griffon sold its Defense Electronics business earlier this twelvemonth for $330 million, the strategical absorption apt is concentrated connected a imaginable merchantability of the Home and Building Products business.

This is not the archetypal clip Voss had a strategical thesis astatine a portfolio company. In their 13D connected Benefytt Technologies filed successful December 2019, they highlighted the strategical opportunities astatine the institution and the progressive M&A situation successful that abstraction – Benefytt Technologies was acquired by Madison Dearborn Partners successful August 2020. Also, successful January 2020, Voss filed a 13D connected Rosetta Stone with nary Item 4 language, but the institution was acquired by Cambium Learning connected October 15, 2020.

There are respective reasons to expect that immoderate strategical transaction is apt to instrumentality spot here: (a) Voss's beingness successful the boardroom, (b) the institution already sold the Defense Electronics concern aft Voss had advocated for that, and (c) the company's announcement that they are present pursuing an further strategical review. Moreover, the adjacent yearly gathering of shareholders volition beryllium successful February of 2023 and for the archetypal clip the Griffon volition person a bulk of directors (9 of 14) up for predetermination due to the fact that they precocious started the process of declassifying the board. So, if the institution is not responsive to Voss's suggestions, the steadfast could motorboat different proxy combat for bulk power this time.

Ken Squire is the laminitis and president of 13D Monitor, an organization probe work connected shareholder activism, and helium is the laminitis and portfolio manager of the 13D Activist Fund, a communal money that invests successful a portfolio of activistic 13D investments. Griffon is simply a holding successful the fund. Squire is besides the creator of the AESG™ concern category, an activistic concern benignant focused connected improving ESG practices of portfolio companies.