Griffon Corporation (GFF) announces entry into cooperation agreement with Voss Capital

Market Cap: $2.2 billion | Griffon Corporation, through its subsidiaries, provides consumer and professional, and home and building products in the United States, Europe, Canada, Australia, and internationally.

Background

On December 29, 2022, Voss Capital (5%) delivered a letter to the company nominating a slate of seven director candidates for election to the Board at the 2023 AGM. Source

Update

On January 9, 2023, the company announced that it has entered into a cooperation agreement with Voss Capital (6%) and pursuant to it, the company appointed Travis W. Cocke, Chief Investment Officer of Voss, to Griffon’s Board of Directors. Mr. Cocke will serve as a member of the Board’s Committee on Strategic Considerations and Nominating and Corporate Governance Committee.

Past: 

• On November 23, 2021, Voss issued a press release and public letter to the board and

announced its nomination of three candidates for election as directors of the company. Voss Capital stated that the best way to remedy the perpetual conglomerate and governance discount to the company's stock is to take the following steps: (i) immediately refresh the board with truly independent directors who will hold management accountable, (ii) bring management compensation in line with comps and base incentive pay on metrics that more accurately reflect value creation for shareholders (e.g., ROIC), and (iii) form an independent committee of the board to conduct a comprehensive strategic review with the goal of maximizing shareholder value.

Valuation insight

Voss Capital stated that "During one of our attempts to share our view on Griffon with

Mr. Kramer (Chairman of the Board), he admitted to us that the Home and Building

Products business alone, if valued at the current average transaction multiple of 12x

EBITDA, would recoup more than Griffon’s entire enterprise value. However, despite

this admission, he claims that now is not the time to sell".

• On December 21, 2021, the company has entered into a definitive agreement to acquire Hunter Fan Company for $845 million. Source
• On December 21, 2021, Voss issued a statement in opposition to Griffon’s planned acquisition of Hunter Fan Company for $845 million. Voss Capital stated that, "Griffon says their $845 million purchase price is attractive. We disagree. Griffon is paying 9.4x their estimate of fiscal 2023 EBITDA2 for Hunter Fan Company. Griffon currently trades at under 8x EV/FY 2023 EBITDA and is paying a far higher multiple to acquire Hunter Fan Company than Griffon’s current or recent valuation. Given Griffon is trading near a 5-year low valuation and building products transaction valuations are hitting record highs, we believe the Company should be selling not buying". Source

Valuation insight

This year’s vote represents an opportunity to finally add truly independent directors to the Griffon Board who will work to dissolve Griffon’s outdated conglomerate structure and realize value for all shareholders — a process we estimate will yield over $45/share in net cash proceeds for Griffon shareholders.

• On December 29, 2021, Voss Capital filed proxy materials seeking support for its nominees. Also, it has submitted shareholders proposals, (i) To conduct an advisory vote on the compensation of the Company’s executive officers, (ii) To approve an amendment to the Company’s Certificate of Incorporation to phase out the classified structure of the Board, (iii) To approve an amendment to the Charter to reduce the percentage of outstanding voting power required to call a special meeting, (iv) To approve an amendment and restatement to the Company’s 2016 Equity Incentive Plan, (v) To ratify the selection by the Company’s Audit Committee of Grant Thornton LLP to serve as the Company’s independent registered public accounting firm for the Company’s fiscal year ending September 30, 2022, (vi) To transact any other matters that properly come before the annual meeting.
• On January 10, 2022, Voss Capital issued a letter to the shareholders outlining clear path which would yield $50 per share if implemented.

Voss’s 5-Step Plan to Unlock Shareholder Value

1.       Sell Defense Electronics

2.       Explore alternatives for Home and Building Products

3.       Use cash to reduce debt and pay a special dividend

4.       Right-size corporate overhead

5.       Improve margins at the Consumer segment

• On January 19, 2022, Voss Capital announced that another of its director nominees has informed Voss that he must withdraw from the proxy contest at Griffon due to a sudden reversal of approval from his employer. Kindly click here to read the press release
• On January 20, 2022, Voss issued an Investor Presentation titled “Renovating Griffon Opening the door to value creation,” outlining Voss’s history of engagement with the Company, the ongoing issues with Griffon’s conglomerate structure and corporate governance, and opportunities to create value through the addition of Voss’s highly experienced candidate to Griffon Corp.’s Board of Directors.
• On January 28, 2022, Voss issued an open letter to the shareholders, which responds to several misleading statements and mischaracterizations made by Griffon in its recent investor presentation. Kindly click here, to read  the entire letter.
• On February 4, 2022, Voss Capital announced that Glass Lewis has recommended that shareholders vote on the BLUE proxy card for Voss director candidate Charlie Diao for election to the Board.
• On February 7, 2022, Voss Capital announced that ISS has recommended that Griffon shareholders vote on the BLUE proxy card for Voss’s truly independent and engaged director candidate Charlie Diao.
• At the AGM held on February 17, 2022,  shareholders have voted to elect three of the Griffon Board of Directors’ nominees – Michelle Taylor, Louis Grabowsky and Cheryl Turnbull – and one of Voss Capital’s nominees – H.C. Charles Diao to the Board. Shareholders also approved the Company’s two proposals to enhance governance with charter amendments to quickly phase out the classified structure of the Board and reduce the percentage of outstanding voting power required to call a special meeting to 25%. In addition, shareholders approved the Amended and Restated 2016 Equity Incentive Plan and ratified the selection of Grant Thornton LLP to serve as the Company’s independent registered public accounting firm. Shareholders failed to approve Griffon’s advisory vote on executive compensation.