Martinrea dissidents propose asset sales, cost cutting, new CEO

Mon Apr 28, 2014 2:32pm EDT
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By Susan Taylor

TORONTO (Reuters) - The fight for control of auto parts maker Martinrea International Inc (MRE.TO: Quote) gathered speed on Monday, as a dissident slate of directors pitched a plan including asset sales and cost cutting along with picking a former Magna International Inc (MG.TO: Quote) executive as the new chief executive.

Rea Holdings, a Toronto-based holding company controlled by former Martinrea executive Nat Rea, is urging investors to replace the bulk of Martinrea's eight-member board at its June 19 annual meeting with five new nominees, including one-time Magna executive vice chairman Manfred Gingl.

Vaughan, Ontario-based Martinrea, which manufactures a range of auto parts for North American, European and Asian carmakers, such as engine blocks and fuel tanks, was not immediately available for comment on the proxy battle.

Rea, whose holding company owns 100,000 Martinrea shares, or 0.1 percent of the total, argued in an online presentation that the current board lacks independence and industry experience and the company suffers from an overly heavy debt load, operational issues and financial control failures.

Shares of Martinrea have underperformed rivals over the last three years, at a time when North America's auto sector rebounded as the economy improved. Martinrea's stock has increased 28 percent, compared with 158 percent for Linamar Corp (LNR.TO: Quote), 132 percent at Magna and 120 percent at Exco Technologies (XTC.TO: Quote), according to Thomson Reuters data.

The remedy includes independent board representation, balance sheet repairs and improved operational and financial controls, the dissident slate said.

To pay down some of the C$435 million ($394.5 million) in "unsustainable" debt, non-core assets should be sold, the plan suggests, and cost cutting should be accelerated, with cuts to head office and administration expenses. Efficiencies will also help drive earnings growth, it said.

"Our nominees will consolidate operations were possible, rationalize overhead inefficiencies and accelerate cost reductions," the presentation said.   Continued...