It’s up to Enercare investors
The battle lines have been drawn and now it’s up to the shareholders of Enercare Inc. to decide which vision to endorse. Over the past few days, both Enercare and Octavian Advisors
LP, its major shareholder with a 13% stake, have mailed their circulars.
The circulars cap a process started late last year when Octavian requested a special meeting to expand EnerCare’s board to 10 by adding four Octavian nominees. (During the process, Enercare added two directors.) The process will end at month-end when Enercare holds its annual meeting. Here are the highlights:
❚ Enercare: A good part of the circular is given over to rejecting Octavian’s requests. That message starts on the front page: “Don’t let Octavian pull the plug on your investment.” Below that caption is an electrical outlet with a cord inserted into one of the two receptacles.
On the next page, Enercare gives five arguments: Octavian’s only interest is its own short-term gain, a plan that requires that Enercare be put up for sale given the difficulty of selling its block separately; Octavian’s representatives will disrupt the company’s long-term strategic plan and pursue Octavian’s own quick sale agenda at the expense of other shareholders; Octavian’s demand for four board seats is disproportionate to the size of its investment; Octavian is not committed to building and maximizing longterm shareholder value, and Octavian would not protect Enercare’s regular monthly dividends. (Enercare recently raised the monthly dividend.)
One constant theme of the circular: Octavian wants to put Enercare up for sale. It points to a possible sale to Macquarie Bank Ltd. in 2010 at $6.45 a share, a plan supported by Octavian. Enercare closed Tuesday at $9.89.
❚ Octavian: It wants shareholders to support a 10-person board, four of whom are its nominees, with the other six being on the Enercare slate. Accordingly, Octavian, a shareholder for more than two years, is not seeking board control — just representation — and “will not alone be able to adopt resolutions.”
It says its “highly qualified nominees” will work for Enercare shareholders to address what it deems as Enercare’s long-term underperformance, the entrenchment of the current board, which collectively have an interest of less than 0.3%. It said it’s “not necessarily pushing for a sale, just an objective evaluation of all available options to increase shareholder value.”
It disagrees with how it has been characterized by Enercare. It is not a “short-term investor,” adding that Enercare “falsely alleged that Octavian’s nominees would take away shareholders’ monthly dividend. In fact, it was Octavian that urged EnerCare to increase the dividend a year ago, long before the current board authorized the recent increases.”
On shareholder performance, it takes a longer-term view than EnerCare: The stock has lost value from its initial public offering and vastly underperformed the index until Octavian requested a shareholder meeting four months ago. It claims the shares are undervalued “due largely to the actions and inactions of the current board of directors, led by its chairman, James Pantelidis, and their repeated attempts to disenfranchise shareholders.”
Not surprisingly, Pantelidis is not on the six-person slate Octavian is asking shareholders to support. Jerry Patava is another Enercare director Octavian doesn’t want returned. Pantelidis and Patava are Enercare’s two longest-serving directors: Both have been at it since December 2002.