Hedge Fund Keep Sniping at Each Other

Date: Monday, July 28, 2008
Author: Patrick Danner, The Miami Herald

With a proxy fight looming next month, Pompano Beach body-armor producer Point Blank Solutions wants to postpone its annual meeting for a second time so it can continue talks with potential investors.

The disclosure that Point Blank wants another delay comes four days after New York hedge fund Steel Partners II sent out proxy cards urging Point Blank shareholders to vote for its slate of five candidates for the company's board.

Steel, in a statement, blasted Point Blank for a "ploy" intended to "further entrench the current Point Blank management." Steel earlier this week called the first postponement "a brazen, banana-republic-like maneuver" pulled by a board that was "in fear of losing an election contest."

Steel made an offer to buy Point Blank last fall but was rebuffed. Point Blank has struggled to recover from a financial scandal that led to criminal charges against its former chief executive and two other ex-managers. Steel has bashed the company for falling sales and profits.

Point Blank on Friday asked a Delaware court for authority to postpone the Aug. 19 meeting until Nov. 19. The meeting was first set for April 22, but was postponed after the firm said it was going to explore alternatives -- including a possible sale. Steel sued to force Point Blank to hold the meeting sooner than Aug. 19, but Point Blank said the court ruled the meeting should be held on the date unless there was "good cause" for changing it.

OFFER

Steel owns 9.6 percent of Point Blank's shares and offered to buy the defense contractor for at least $5.50 a share, or $281 million, in October. The offer was a 24 percent premium to where the stock was trading at the time. Point Blank's shares closed Friday at $2.50, a 52-week low. Point Blank assembles protective vests for the military and police at plants in Pompano Beach, Deerfield Beach, and Oakland Park.

A Point Blank spokesman declined to comment, but in a statement the company questioned Steel's motives. Point Blank's "board believes Steel, as a prospective purchaser, has an interest in obtaining the lowest possible sale price for the shares."

It added Steel's board candidates "are ill suited to conduct a process to sell the company for the highest price."

The company said it has been contacted by 90 potential investors.

CO-FOUNDER

Point Blank expressed concern that the proxy vote could be "heavily influenced" not only by Steel, but by former chief executive David H. Brooks. He is facing federal criminal charges that he manipulated earnings to inflate Point Blank's shares.

Brooks, who, along with his former wife, holds a 29-percent stake in Point Blank, is involved in two court battles with the company he co-founded. Point Blank said it sued Brooks in New York federal court for failing to pay tax-related liabilities and returning company property. Brooks has sued Point Blank in Delaware to advance him legal fees, the company said.

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