HOUSTON, April 28, 2015 /PRNewswire/ -- JCP
Investment Management, LLC ("JCP"), a significant shareholder of
Casella Waste Systems, Inc. ("Casella" or the "Company") with
aggregate ownership of approximately 5.0% of its outstanding Class
A shares, announced today it had formally notified Casella
back on April 7, 2015 of its
intention to seek the election of three independent,
highly-qualified director candidates to the Board of Directors of
Casella (the "Board") at the upcoming 2015 annual meeting of
Casella shareholders (the "2015 Annual Meeting").
JCP is seeking Board change because we are dedicated to
maximizing shareholder value and improving corporate governance at
Casella and we are confident that enhancing the Board is a critical
first step towards these goals. In our view, Casella is deeply
undervalued as a result of poor investment and operational
decisions and a dual capital structure that has eroded shareholder
rights and value. We believe substantial shareholder representation
is needed on the Board to ensure that appropriate actions are taken
to drive better financial performance and create value for all
shareholders.
We are puzzled that having had almost a month's notice of our
nominees' candidacy, and having interviewed them recently, the
Board has nevertheless taken the questionable step of delaying its
annual meeting of shareholders until an undefined date in the
future. The Board claims it needs the delay to identify
candidates with "industry experience." Notably, this is
precisely what JCP's nominees offer to bring to the Board.
Two of our three nominees are proven waste management industry
leaders with extensive experience in the field.
It is alarming that rather than allow shareholder representation
in the boardroom and let shareholders vote in a timely manner on
the candidates they believe will best represent their interests,
this Board is trying instead to preempt shareholder input by adding
to the Board candidates of their own choosing and postponing
indefinitely shareholders' opportunity to vote on the matter. We
strongly advise against any unilateral Board changes prior to a
shareholder vote at the 2015 Annual Meeting. Such actions are
inconsistent with a Board that open-mindedly and in good faith
welcomes shareholder input. We continue to be open, as we always
have been, to a constructive engagement with the Board, but will
closely monitor the Board's actions to ensure they are driven by
the best interests of Casella shareholders above all.
Disappointing Total Shareholder Return (TSR)
The current Board has presided over a prolonged
underperformance. Casella continues to lack a strategically
coherent plan to stop the value destruction. Casella's Total
Shareholder Returns over the last -1, -3, -5 and -10-year periods
on an absolute basis and relative to its peers and the S&P 500
Index have been abysmal. The Company has delivered negative returns
to shareholders over many consecutive years.
|
|
Share Price
Performance (1)
|
|
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Republic Services
Inc
|
|
22%
|
47%
|
58%
|
144%
|
Waste Connections
Inc
|
|
5%
|
47%
|
104%
|
220%
|
Waste Management
Inc
|
|
27%
|
63%
|
79%
|
170%
|
|
|
|
|
|
|
Most Similar
Competitors
|
|
18%
|
52%
|
80%
|
178%
|
|
|
|
|
|
|
S&P 500
Index
|
|
13%
|
54%
|
74%
|
84%
|
|
|
|
|
|
|
2014 CWST Proxy Group
(2)
|
|
16%
|
43%
|
83%
|
225%
|
|
|
|
|
|
|
Casella Waste
Systems Inc
|
|
7%
|
-10%
|
6%
|
-53%
|
|
|
|
|
|
|
|
|
|
|
|
|
Underperformance vs.
S&P 500 Index
|
|
-5%
|
-64%
|
-68%
|
-137%
|
|
|
|
|
|
|
Underperformance
vs. 2014 CWST Proxy Group
|
-9%
|
-53%
|
-77%
|
-278%
|
|
|
|
|
|
|
Source: Bloomberg
as of April 24, 2015
|
|
|
|
|
|
1. Figures are
adjusted for dividends.
|
|
|
|
|
|
2. Progressive
Waste Solutions is calculated with Canadian listed equity
unadjusted for US dollar.
|
|
|
Republic Services, Waste Management and Waste Connections have
successfully: (1) controlled their debt load, (2) issued dividends
and (3) produced significant value to their shareholders over the
last 10 years. Casella has accomplished none of the above
over the last 10 years.
Since Casella's initial public offering in October 1997, the Company's stock price has
declined by a staggering 70% to $5.38
per share as of market close on April 27,
2015 from $18.00 at the time
of the IPO. Nearly half of the incumbent directors have been on the
Board since the IPO and oversaw this massive destruction of
shareholder value under their watch.
Abysmal Corporate Governance
The Company has a dual class capital structure that creates a
gap between the economic investment of shareholders and their
voting power. The Class B shares which have 10 votes per
share are 100% held by John and Doug
Casella. Such an unbalanced capitalization structure
effectively allows insider control with a lesser economic stake in
the Company and significantly impairs the rights of public
shareholders. Furthermore, according to our research total
payments to John and Doug Casella
from related party transactions with the Company over the past 10
years aggregate to more than $70
million.
The Board is classified and stale. Average incumbent
tenure is over 14 years, with 4 directors having been on the Board
for more than 20 years and only one addition (Emily Nagle Green) in the past 7 years.
Absence of proactive change on the Board has been coupled with
severe restrictions on the ability of shareholders to effect Board
change. Shareholders are prohibited from calling special
meetings and cannot act by written consent, which effectively means
shareholders cannot seek Board change between annual
meetings. Not surprisingly, leading proxy advisory firm,
Institutional Shareholders Services (ISS) has raised high concerns
with Casella's corporate governance and has assigned the Company a
governance score of 9 out of 10 (with 10 being the highest
governance concern).
Poor Operational and Financial Performance
Casella has suffered multi-year stagnation in cash flows and
EBITDA while the rest of the industry continues to show growth and
solid capital allocation.
In 2005, Casella's EBITDA was approximately $107 million. Today, the Company forecasts
approximately $105 million in EBITDA
for 2015, showing a deterioration rather than growth in the past
decade. Over that 10-year period, Casella has produced
approximately $900 million to $1
billion in EBITDA and more than $600
million in cash flow from operations. Yet public
shareholders have not seen a dime. Capital allocation through
organic growth and acquisitions has not produced additional earning
power and the Company has paid out more than $70 million to entities controlled by
John and Doug Casella.
Over this same time period, the share count has increased more
than 60% without any increase in earning power. Shareholders
continue to experience dilution, with the most recent issuance in
September 2012.
Summary
As a significant shareholder of Casella, JCP has serious
concerns with the chronic underperformance of the Company and the
inability or unwillingness of this Board to take the right steps to
enhance shareholder value. In our view, the underlying cause
for these problems is a capitalization structure and
decision-making construct that is heavily skewed to protect
insiders at the expense of public shareholders. This has led
in our view to complacency on the Board and lack of urgency in
delivering value for public shareholders.
Public shareholders must have a voice in the boardroom to ensure
that decisions are made with their best interests in mind. We
find it insincere that this Board which has resisted change for so
long and has erected barriers to shareholder-initiated improvements
to the Board, is now purporting to proactively seek candidates for
addition to the Board and is delaying a critically important
shareholder referendum on their performance, only now that they are
facing shareholder pressure from JCP. We also question their
purported explanation that they need time to find candidates with
"industry experience" when JCP has identified two highly qualified
candidates with impressive industry experience.
We always have been, and remain, open to constructive engagement
with the Board. We intend to continue to work hard to reach
an amicable resolution on Board composition. However, to the
extent that no agreement is reached, we will not hesitate to take
all actions we believe necessary to protect the best interests of
ALL Casella shareholders.
JCP nominees are:
Brett W. Frazier –
currently retired after serving in multiple executive roles for
Waste Management, Inc. ("Waste Management"), North America's leading provider of
comprehensive waste management environmental services, from 2000
until July 2012. Mr. Frazier most
recently served as Senior Vice President – Southern Group, where he
had full P&L accountability for Waste Management's largest and
most profitable operating group, and Senior Vice President –
Eastern Group, where he had full P&L responsibility for the 13
states in the Northeast. From 1980 until 1999, Mr. Frazier held
various leadership roles with Browning-Ferris Industries, Inc. (BFI
Waste Services), formerly the second largest solid waste disposal
company in the world, including Area Vice President – Marketing and
Sales and Vice President of Investor Relations. Mr. Frazier's
professional experience also includes serving as a Regional Vice
President for TruGreen Limited Partnership, America's top lawn care
company based on market share. Mr. Frazier earned an MBA from
Tulane University. Mr. Frazier's
extensive leadership experience and expertise in the waste
management services industry will make him a valuable addition to
the Board.
James C. Pappas – Managing
Member of JCP Investment Management, LLC and the sole member of JCP
Investment Holdings, LLC. Mr. Pappas has also served as a director
of Jamba, Inc., a leading health and wellness brand and the leading
retailer of freshly squeezed juice, since January 2015. Previously, Mr. Pappas served as a
director of The Pantry, Inc., a leading independently operated
convenience store chain in the southeastern United States and one of the largest
independently operated convenience store chains in the country,
from March 2014 until the completion
of its sale in March 2015. He also previously served as
Chairman of the Board of Morgan's
Foods, a then publicly traded company, from January 2013 until May
2014, when the company was acquired by Apex Restaurant
Management, Inc., after initially joining as a director in
February 2012. Mr. Pappas also served
as a director of Samex Mining Corp, a junior resource company, in
2013. Previously, Mr. Pappas was with the Investment Banking
/ Leveraged Finance Division of Goldman Sachs Group, Inc. where he
advised private equity groups and corporations on appropriate
leveraged buyout, recapitalization and refinancing alternatives,
and prior to that with Banc of America Securities, where he focused
on Consumer and Retail Investment Banking, providing advice on a
wide range of transactions including mergers and acquisitions,
financings, restructurings and buyside engagements. Mr. Pappas
received a BBA, and a Masters in Finance from Texas A&M University. Mr. Pappas' significant
experience in the valuation and management of investment securities
in addition to his experience in investment banking and corporate
finance from his career with major investment banking firms will
enable him to provide invaluable oversight to the Board.
Joseph B. Swinbank –
Partner of each of Sprint Waste Services LP, a waste collection and
disposal company and the largest privately owned trash hauler in
the Houston area with
approximately $100 million in
revenue, Sprint Fort Bend County Landfill, L.P., a Type IV landfill
facility in Texas, Sprint Sand and
Clay, LLC, a provider of sand and clay to various industries, and
Sprint Transport, LLC, a tank trailer transport company. Mr.
Swinbank also currently serves as a director of Community Bank of
Texas and was a Founding Director
of Vista Bank from 2006 until its merger with Community Bank of
Texas in August 2013. From 2004 until its sale in
March 2012, Mr. Swinbank served as a
Partner of Sprint Pipeline Services, LP, a construction and
maintenance company. Mr. Swinbank's professional experience
includes 41 years as an entrepreneur involved in the
transportation, environmental services, frac tank rental, mining,
safety and construction materials industries. Mr. Swinbank earned a
B.S. in Agricultural Economics from Texas
A&M University. Mr. Swinbank's track-record of building
and leading successful businesses, including in the waste
management industry, well qualifies him to serve on the Board.
CERTAIN INFORMATION CONCERNING PARTICIPANTS
JCP Investment Management, LLC, together with the participants
named herein, intends to file a preliminary proxy statement and
accompanying proxy card with the Securities and Exchange Commission
("SEC") to be used to solicit votes for the election of their slate
of three highly-qualified director nominees at the 2015 annual
meeting of stockholders of Casella Waste Systems, Inc., a
Delaware corporation (the
"Company").
JCP INVESTMENT MANAGEMENT STRONGLY ADVISES ALL SHAREHOLDERS OF
THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS
AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO
CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN
ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE
COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON
REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE
PARTICIPANTS' PROXY SOLICITOR.
The participants in the proxy solicitation are JCP Investment
Partnership, LP ("JCP Partnership"), JCP Single-Asset Partnership,
LP ("JCP Single-Asset"), JCP Investment Partners, LP ("JCP
Partners"), JCP Investment Holdings, LLC ("JCP Holdings"), JCP
Investment Management, LLC ("JCP Management"), James C. Pappas, Brett
W. Frazier and Joseph B.
Swinbank (collectively, the "Participants").
As of the date hereof, JCP Partnership beneficially owned
1,483,435 shares of Class A Common Stock, $0.01 par value per share ("Common Stock").
As of the date hereof, JCP Single-Asset beneficially owned 496,670
shares of Common Stock. JCP Partners, as the general partner of
each of JCP Partnership and JCP Single-Asset, may be deemed the
beneficial owner of the 1,980,105 shares of Common Stock owned in
the aggregate by JCP Partnership and JCP Single-Asset. JCP
Holdings, as the general partner of JCP Partners, may be deemed the
beneficial owner of the 1,980,105 shares of Common Stock owned in
the aggregate by JCP Partnership and JCP Single-Asset. JCP
Management, as the investment manager of each of JCP Partnership
and JCP Single-Asset, may be deemed the beneficial owner of the
1,980,105 shares of Common Stock owned in the aggregate by JCP
Partnership and JCP Single-Asset. Mr. Pappas, as the managing
member of JCP Management and sole member of JCP Holdings, may be
deemed the beneficial owner of the 1,980,105 shares of Common Stock
owned in the aggregate by JCP Partnership and JCP Single-Asset. As
of the date hereof, Messrs. Frazier and Swinbank did not
beneficially own any shares of Common Stock.
About JCP Investment Management:
JCP Investment Management, LLC is an investment firm
headquartered in Houston, TX that
engages in value-based investing across the capital
structure. JCP follows an opportunistic approach to investing
across different equity, credit and distressed securities largely
in North America.
Investor Contacts:
James C. Pappas
JCP Investment Management, LLC
(713) 333-5540
John Glenn Grau
InvestorCom, Inc.
(203) 972-9300 ext. 11
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SOURCE JCP Investment Management, LLC