Description
The Elder-Beerman Stores Corp. (Elder-Beerman) operates department stores that sell a wide range of moderate to better branded merchandise, including women's, men's and children's apparel and accessories, cosmetics, home furnishings, and other consumer goods. In addition, the Company owns a specialty shoe store chain and a private label credit card program through its wholly owned subsidiaries, The Bee-Gee Shoe Corp. (Bee-Gee) and The El-Bee Chargit Corp., respectively. Elder-Beerman operates 60 department stores and two furniture stores, principally in smaller Midwestern markets in Ohio, West Virginia, Indiana, Illinois, Michigan, Wisconsin, Kentucky and Pennsylvania. Bee-Gee operates 56 stores (36 shoe outlets and 20 Shoebilee! stores), principally in smaller Midwestern markets in Ohio, West Virginia, Indiana, Illinois, Michigan, Pennsylvania and Virginia. (from Value Line)(9thlargest independent chain)
Mkt. Cap:61 million. Insiders own 38%, Institutions 53%(51 institutions own 86% of float)
143 million in Long-term debt (130M was due in December that was re-financed into long-term debt within the company's credit agreements)TIE = 2.39x
Strategy:-Be the main dept. store in small sized towns with no major competitors-they are accomplishing this well.
return:(1yr) -45.19%, came out of re-org 1997 (ch. 11)
growth:-Sales up 9% per year last3years,operating earnings and net earnings down-not too impressive
P/E:5x's; P/B:.25x
Catalyst
I know, not too impressive so far. But the catalyst is beautiful. On 6/7 the 2nd largest shareholder(13%), an investment fund called PPM America solicited a proxy to shareholders to vote in three new directors, amend articles of incorp. to allow a 20% buyer (Ohio corps do not allow a 20% buyer), change voting structure so only majority is needed, eliminate poison pill plan, and tie executive pay to performance. The other top owners: Snyder Cap.Mng,Bennet Mng.,and David Nierenburg family trust all issued statements that they were going to vote in favor of PPM's proposal. Of course management disapproved. On July 20, the Company issued the following statement: Company Press Release: Elder-Beerman Revises Proxy Statement--Two Largest Shareholders Support Company Proposals Regarding New Directors and Corporate Governance--DAYTON, Ohio--(BUSINESS WIRE)--July 20, 2000--The Elder-Beerman Stores Corp. (Nasdaq:EBSC - news) today announced that it has amended its proxy statement to propose three new director candidates for the four board positions up for election at the company's annual meeting on August 24, 2000. Along with Dennis S. Bookshester, who has been a director of the company since December 1999, the company's new director nominees are Mark F. C. Berner, Eugene I. Davis and Charles H. Turner.
Elder-Beerman also announced that it is proposing changes to its corporate governance rules pending shareholder approval at the annual meeting. Among other changes, the company proposes to eliminate its classified board, placing all directors up for election each year, and to lower the supermajority shareholder approval requirements for various actions to a simple majority. The company also will propose amendments to opt out of the Ohio Control Share Acquisition Act, which imposes restrictions on investors who want to acquire more than 20 percent of an Ohio company, and the Ohio Interested Shareholder Transactions Act, which imposes restrictions on the company to enter into certain transactions with a shareholder who owns more than ten percent of the company's outstanding shares.
Frederick J. Mershad, Chairman and Chief Executive Officer, commented, ``The changes we are proposing to our board and to our corporate governance rules have been developed in consultation with our two largest shareholders, Snyder Capital Management, Inc., and investment funds affiliated with PPM America, Inc. Because of these changes, PPM has agreed not to pursue a proxy contest, and has agreed to support the company's board candidates and the board's proposals at the annual meeting. Our shareholders' interests are of paramount importance to the board and management of Elder-Beerman, and we are pleased to have reached an agreement that we believe will benefit and strengthen our relationship with our entire shareholder base.''
Stuart J. Lissner, a Managing Director of PPM America, Inc., added, ``We are pleased with the actions taken by Elder-Beerman's management. They demonstrate management's commitment to strengthening the Elder-Beerman franchise and improving shareholder value. We have pledged our support for Elder-Beerman's director slate and proposals. With the proposed changes, the shareholders will have a stronger voice in their company.''
Alan Snyder, President of Snyder Capital Management, Inc., stated, ``I believe the new director slate and the changes in corporate governance proposed by Elder-Beerman's management and board of directors are very positive steps. I am pleased that Elder-Beerman and PPM have constructively resolved their differences, and the resulting changes will benefit Elder-Beerman and its shareholders.''
Now all we have to do is wait till 8/24 annual meeting for articles to be amended so a big buyer can come in! This is a perfect situation where big shareholders are forcing the management to do something about the price of the stock b/c those big owners have big losses on their positions. They (the funds) would love a big buyer to buy the company--but they can't b/c of the Ohio rule. After 8/24/00, a big buyer will be able to come in and buy shares in the country's 9th largest dept. store chain (that's independent) for 25% of book value. What a catalyst! Incidentally, this was not the first time that PPM America has tried to stir the pot at EBSC. They have tried numerous times throughout the past year to get management to do something about the share price, to no avail. Finally they issued the proxy for all the revisions mentioned above. Thankfully, management went against their first position on the proxy and now will attempt to bring out the value behind EBSC's assets by voting in favor of all the revisions, etc!