Relevant Document:Q2 ReportTakeaways
- Shareholder Fondren Asset Management is putting pressure behind closed doors on California-based global transportation group CAI International to sell the business, according to three sources familiar with the situation.
- Mangrove Partners, with a stake of 6.25%, appears to also be supportive of a sale, one of the sources said.
Shareholder Fondren Asset Management is putting pressure behind closed doors on California-based global transportation group CAI International to sell the business, according to three sources familiar with the situation.
Fondren, which according to its most recent
disclosure controls 1.41% of CAI, is following in the footsteps of Weiss Asset Management, a 5.67% shareholder, which in a regulatory
filing on Aug. 23 urged CAI to explore strategic options including a sale.
The two shareholders are working independently toward a common goal, the sources said.
Mangrove Partners, with a stake of 6.25%, appears to also be supportive of a sale, one of the sources said. It is unclear whether the company would attract enough interest from buyers, the same source noted, adding that larger competitor Triton International would a logical suitor.
CAI is an asset that could appeal to private equities, an industry advisor said. But with insiders sitting on a classified board, the risk is that directors will entrench themselves rather than listening to shareholders, he said.
One of the six directors, Andrew Ogawa, is a member of the company’s founding family, owning 5.8% of the shares. Another, Gary Sawka, was part of the company’s top management before shifting to directorship.
Only two board members, including CEO Victor Garcia, will be up for re-election at the next year’s annual general meeting, which is expected to be held around June.
It is early to say if the company and its disgruntled shareholders will be able to find common ground with the AGM so far ahead, the first source said. But at least one of them would like to see more engagement from the company already, he added.
Financial and legal advisors are working with CAI in response to shareholders’ pressure, two sources said.
CAI is taking steps to get back on track following lackluster
results in the second quarter, which were impacted by trade tensions between the United States and China.
The company sells, leases and manages containers and rail cars for the transportation industry. Its business is divided into four main segments: containers, rail cars, logistics North America and logistics international.
The weak quarterly performance was paired with the company’s decision to exit the rail cars segment and restructure its logistics unit in order to refocus on the core containers business and potentially return more cash to shareholders.
But Weiss took an activist stance after these announcements were made, which seems to indicate it does not believe these moves will be enough, one of the sources said.
Fondren is the investment manager of BLR Partners, a hedge fund that Bradley Radoff has used to run activist campaigns against companies including Monotype, Acacia Research Corp. and Casey’s General Store.
CAI has rebounded since Weiss released its regulatory filing on the company and is now off about 6% year to date. It was down roughly 20% until the shareholder revealed its activist agenda, lamenting a steep discount to the company’s book value.
The company's share price is $21.80 with a market cap of approximately $380 million.
Fondren and Mangrove declined to comment. CAI and Weiss did not respond to requests for comment.
--David Carnevali