ShareThis Page

North Pittsburgh Systems phone company under pressure to sell

| Saturday, June 16, 2007

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.

Additional Information:

North Pittsburgh Systems Inc.

&#149 Headquarters: Richland

&#149 Industry: Telecommunications

&#149 CEO: Harry Brown

&#149 Businesses: North Pittsburgh Telephone, Penn Telecom and Pinnatech. They provide telephone, Internet and broadband services and operate 70,400 business and residential access lines.

&#149 Employees: 320

&#149 Revenue: $103.5 million (2006)

&#149 Earnings: $31.8 million (2006)

TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.

click me