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Activist shareholder targets Pasadena's Ameron, calls CEO's pay 'excessive'

March 31, 2010 |  1:15 am

A New York hedge fund is trying to shake things up at Pasadena-based Ameron International Corp., an industrial-products company that historically hasn’t attracted a lot of Wall Street scrutiny.

The fund, Barington Capital Group, on Monday sent a five-page letter to Ameron’s 69-year-old chief executive, James Marlen, listing a number of steps that Barington believes the company should take to boost its “significantly undervalued” stock.

High on the list: steep pay cuts for top executives, including Marlen. That’s one way to get a CEO’s attention.

The letter’s timing wasn’t a coincidence: Ameron will hold its annual shareholder meeting Wednesday at the Pasadena Hilton.

Barington, under Chairman James Mitarotonda, has sought to make a name for itself as an activist shareholder since 2000, pushing for changes at companies such as department-store chain Dillard’s Inc. and auto-parts retailer Pep Boys.

Jamesmarlen Mitarotonda and Marlen know each other from stints as directors of an Ohio plastics company. Earlier this year Mitarotonda sought to be nominated to Ameron’s board, but the company declined his request. That set the scene for his latest move.

Ameron, which dates back to 1907, produces infrastructure goods such as concrete and steel water pipelines and fiberglass pipe for the oil and chemical industries. The businesses aren’t glamorous, but Ameron’s stock from 2005 to mid-2008 rocketed amid investors’ excitement over the global infrastructure build-out.

The company’s fortunes then plunged with the crash in global markets beginning in September 2008. The stock dived from a record high of $130 in July 2008 to a low of $33 that November. It has since recovered to about half its all-time high, closing at $67.39 on Tuesday.

Ameron’s sales sank 18% to $547 million last year and earnings slumped 43% to $33.3 million, or $3.63 a share. Fiscal first-quarter results, reported early Wednesday, also were weak. Marlen, who has been CEO for 17 years, says he believes the company is poised to rebound “when the economy turns around.”

But Barington, which says it represents investors who have accumulated 3.7% of Ameron’s stock over the last year, wants action now. In the letter to Marlen, Mitarotonda said he believed that Ameron had “vast value potential that is not being realized.” . . .

Mitarotonda, who declined to comment beyond the letter, makes some standard activist-shareholder suggestions, including that Ameron cut costs further, sell non-core businesses and make better use of its $181-million cash hoard.

But he also gets personal about the company’s executive pay levels, telling Marlen: “Given the size of Ameron, the payments to the company’s executive team, and in particular to you as its chief executive officer, appear to us to be excessive.”

Marlen took home $39 million in total compensation from 2004 through 2008, compared with an average of less than $22 million for CEOs of 12 peer companies, Mitarotonda wrote. He also cited reports from three independent corporate-governance evaluation firms criticizing Ameron’s compensation practices.

In an interview, Marlen rejected Mitarotonda’s pay objections, insisting that “we have followed ‘best practices’ ” on compensation.

And in a letter to Mitarotonda early Wednesday, Marlen wrote that "while we wholeheartedly agree with you that Ameron’s stock is undervalued . . . we disagree with many of your theories as to why Ameron is undervalued."

But Marlen appeared to leave the door open to talks, saying he looked forward to disussing the “positive attributes” of Ameron “with Barington and all of our valued shareholders in the future.”

-- Tom Petruno

Photo: James Marlen. Credit: Ameron