North Pittsburgh Systems phone company under pressure to sell
A dissident shareholder group is stepping up the pressure for Richland-based North Pittsburgh Systems Inc. to put itself on the selling block, according to a securities filing on Friday.
The CEO of the rural telephone and Internet provider, which marked its centenary year in 2006, received a pointed letter from its second-largest shareholder. Bulldog Investors labeled North Pittsburgh's stock performance "weak" and called a sale "inevitable."
"We would like to avoid the disruption of a proxy contest but we cannot idly sit by while NPSI's value deteriorates," said the letter to CEO Harry Brown from Andrew Dakos. He is a principal with Bulldog Investors, whose affiliate Full Value Partners manages about $175 million in investments.
Bulldog, of Saddle Brook, N.J., leads a group of investors which controls nearly 1.1 million shares of North Pittsburgh, or more than 7.3 percent. They first contacted the company last June calling for a plan to maximize shareholder value.
North Pittsburgh's stock has fallen fairly steadily from a 52-week high of $27.56 a year ago to at or below $20 this month. The shares closed yesterday at $20.14, up 68 cents.
Matrix USA, an independent securities research firm in New York, maintains a "sell" recommendation on the stock and rated North Pittsburgh with "weak performance" in an analysis yesterday.
The company's businesses include North Pittsburgh Telephone Co.; Penn Telecom, a telecommunications and broadband company serving businesses across Western Pennsylvania; and Pinnatech, which does business as Nauticom Internet service.
North Pittsburgh's management had no comment about the dissident's challenge, said company spokesman Harry Crytzer. The telecom had postponed its 2007 annual shareholders meeting from the customary third Friday in May and has yet to schedule this year's meeting.
"Other than, 'thanks, but no thanks,' we've not heard anything from the company," said Dakos in a phone interview.
Dakos said North Pittsburgh's balance sheet is "pretty strong" but that the telecom eventually could "get crushed" by its huge cable competitors, Armstrong Cable and Comcast.
Bulldog's letter to Brown noted North Pittsburgh peer CT Communications will get a 46 percent premium from agreeing to merge with Windstream Corp., calling it, "another recent example of the accelerating consolidation taking place in the (rural local exchange carrier) industry."
Dakos said yesterday that Windstream would be a good fit with North Pittsburgh because it has assets to the east of the Richland company, "could pay a nice multiple" in a deal and could easily cut costs in a transaction.
Windstream Corp., Little Rock, Ark., provides telephone and broadband services to customers in 16 states, including 3.2 million access lines. Spokesman David Avery said the company does not comment on such speculation.
Dakos said another appropriate suitor would be Embarq Corp., which is based in Overland Park, Kan., and does business in 18 states. Its local operation provides about 52,000 access lines, mostly in Butler County.
Embarq spokeswoman Theresa Brick said the telecom does not comment about potential mergers and acquisitions.
North Pittsburgh Systems Inc.• Headquarters: Richland
• Industry: Telecommunications
• CEO: Harry Brown
• Businesses: North Pittsburgh Telephone, Penn Telecom and Pinnatech. They provide telephone, Internet and broadband services and operate 70,400 business and residential access lines.
• Employees: 320
• Revenue: $103.5 million (2006)
• Earnings: $31.8 million (2006)