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Michael Baker attracts interest from second investor

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By Thomas Olson
Thursday, Dec. 27, 2012, 2:14 p.m.
 

Another shareholder of Michael Baker Corp. is pressing the engineering company's board to put it up for sale and vowed to nominate its own slate of directors if the current ones don't act.

Crescendo Partners, based in New York, sent the Moon Township company's board a letter late Thursday, in care of Chairman Richard Shaw, urging the sale and suggesting it could fetch at least $30 a share.

“Michael Baker's an incredible engineering franchise, but the valuation is very, very low” relative to its peers and to cash flow, said Arnaud Ajdler, senior managing director of Crescendo Partners, by phone Thursday. “That's what got us interested in the first place.”

Crescendo's push comes a week after an unsolicited offer of $24.25 a share made Dec. 19 by DC Capital Partners of Alexandria, Va. The firm, which owns 5.2 percent of Michael Baker, proposes to merge it into KS International LL of McLean, Va., an engineering company controlled by DC Capital Partners.

Michael Baker shares closed on Thursday at $24.30 a share, up 27 cents.

“Crescendo has a history of doing proxy fights” since its founding in 1998, said Ajdler. “This would not be the first time for us to do this.”

For instance, Crescendo staged a proxy fight with chain restaurant operator O'Charley's Inc. in early 2008. As a result, the company expanded its board size to accommodate Crescendo's slate and agreed to hold director elections more frequently. O'Charley's was sold for $221 million in cash to Fidelity National Financial Inc. last February.

In the letter to Michael Baker, Crescendo said shareholders are “frustrated by the company's poor performance,” citing a 40 percent drop in share value over the past five years.

Ajdler did not disclose how many company shares Crescendo owns. Investors are required to disclose if they own more than 5 percent.

The partnership also argued that the sudden resignation of Michael Baker CEO Bradley Mallory on Dec. 12 “complicates any turnaround efforts of the company,” which recently embarked on a cost reduction plan.

Michael Baker's board is reviewing Crescendo Partners' letter and will “respond in due course,” said company spokesman Daivd Higie.

“Crescendo believes a sale of the company at this time would be the most prudent and effective way to deliver maximum value to shareholders on a risk-adjusted basis for both the short- and long-term,” read the letter from Ajdler.

Thomas Olson is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or tolson@tribweb.com.

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