LESCO Removes Anti-Takeover Device, Redeems Shareholder Rights Plan

Removal of the poison pill makes sale of the company, which has struggled as of late, easier and has left shareholders wondering if a buyer is in the wings. The board removed the anti-takeover device despite needing an additional 244,000 shareholder votes to prevail - a close enough number for the board to take action into its own hands, R. Breck Denny, LESCO’s chief financial officer, told The Plain Dealer.

In recent months, the Fitzgibbon family - which is the founding family of the Strongsville, Ohio-based company and owns a combined 4 percent stake of the company - and the LESCO board have been at odds over company management and performance.

Michael FitzGibbon - son of LESCO’s founder and a former director - and Naomi FitzGibbon - widow of the company founder - expressed concern about a takeover of the company. However, Denny said takeover defense isn't an issue without an interested suitor or tender offer.

"The pill is not the be-all and end-all," he told The Plain Dealer. "It doesn't really affect us that much because there are in Ohio anti-takeover defenses, and those remain in place."

The company has struggled lately because of weather-related factors in the Northeast and in Florida. In the first quarter, it posted a loss of $5.6 million, compared with a loss of $1.2 million during the same quarter last year, even though sales rose 4 percent to $164 million. Though profitable in the second quarter, net income fell 25 percent to $7.5 million compared with last year.

For the first half of 2001, net income has fallen 78 percent to $1.9 million, even though sales dropped only 1 percent to $254.8 million. The company's stock closed at $10.90 yesterday, down from a 52-week high of $18.38.

James Halloran, an analyst for National City's Private Investment Advisors in Cleveland, Ohio, told The Plain Dealer that there are few logical buyers for LESCO. He said the Scotts Co., Columbus, Ohio, is doubtful because it recently sold its golf and turf business, which represents a large part of LESCO sales. Other possibilities Halloran mentioned were Anderson's, a diversified company based in Maumee, Ohio, that makes lawn and turf products, and Central Garden & Pet Co., a Lafayette, Calif.-based manufacturer of branded lawn, garden and pet supplies.

SHAREHOLDER RIGHTS PLAN REDEEMED. LESCO announced Aug. 22 that its board of directors voted to redeem all of the rights issued under its shareholder rights plan, effective immediately.

The company said shareholders of record on August 24, 2001, will receive a redemption payment of $.01 per right. The redemption payment will be distributed to shareholders on September 10, 2001. Each common share carries with it one right that currently cannot be separated from the common share. There are currently approximately 8,559,760 common shares outstanding. Expenses related to the redemption will be incurred in the current quarter.

The company is advised that the redemption payment is likely to be treated as a dividend for federal income tax purposes. However, holders of the rights should consult their own tax advisors as to the appropriate tax treatment under federal, state and local laws.