June 24, 2020
Dear Synalloy Shareholders,
Synalloy’s 2020 Annual Meeting of Shareholders will be held virtually on June 30, 2020. As you know, the Dissident Group is seeking to elect five new directors to the Board, which would constitute a majority shift in the Board’s composition. For reasons we have described in our presentation and prior letters to you, we believe this is unwarranted and likely to be value destructive.
As time is short, we encourage you to vote electronically today using management’s BLUE proxy card.
Votes on the BLUE proxy card will be cumulated for five incumbent directors - Craig Bram, Susan Gayner, Henry Guy, Jeff Kaczka and Amy Michtich. As a result, three nominees selected by the Dissident Group will be guaranteed a seat on the refreshed Board of eight directors. We believe this is a fair and reasonable compromise.
So do ISS and Glass Lewis, the two leading proxy advisory firms. Both firms have recommended that shareholders vote on the BLUE proxy card.
Synalloy has been a strong performer since Craig Bram, our CEO, was appointed in 2011. As confirmed by ISS, Synalloy’s stock has outperformed its peers over this time. We have generated strong revenue growth and margin expansion during strong business cycles, while controlling costs and expanding market share and margins during the troughs of the business cycle. Each successive cycle has been better for Synalloy and its shareholders than the prior one. As Privet has acknowledged many times, our acquisitions have been focused and accretive; our operations are more efficient than those of our competition.
Nevertheless, after Privet’s failure to acquire Synalloy twice at undervalued prices, the Dissident Group now wants to change a majority of the Board through this proxy contest, replace Synalloy’s CEO and “integrate” our operations (supply chain, marketing, operations, systems, HR, legal and accounting) with UPG, a private company about which the Dissident Group has disclosed almost nothing. In its analysis, Glass Lewis expressed concern about the inadequate disclosure regarding UPG and the Dissident Group’s plan for integrating Synalloy with UPG.
In fact, the Dissident Group has refused to disclose even the most basic information about UPG, such as UPG’s financial performance, key performance indicators, growth, margins or operations. Because of this failure, we have no idea if “integrating” Synalloy and UPG would result in a stronger or more valuable Synalloy. The Dissident Group has failed to offer any tangible evidence that it will.
Similarly, the Dissident Group has refused to provide detailed biographical information on Chris Hutter, one of the nominees that the Dissident Group intends to name as Synalloy’s interim CEO. As recently as April 2020, Mr. Hutter was listed as a “manager” of a new real estate partnership and, as best as we can tell, has no executive or operational experience running a steel and specialty chemicals business, or any executive experience whatsoever with a publicly-traded company.
Shareholders should be wary. The Dissident Group has put shareholders in a position where they can only guess about UPG’s performance and Mr. Hutter’s role in its operations and merely speculate whether the Dissident Group’s plan can improve on Synalloy’s already impressive performance.
We do not believe it would be wise for shareholders to elect a majority of new directors that intend to replace our successful CEO with a real estate CFO or alter our operational strategy by “integrating” Synalloy with an unknown business entity like UPG. ISS and Glass Lewis both agree.
That said, the Dissident Group owns a combined 25% of Synalloy stock. Accordingly, we believe that the Dissident Group should be afforded the opportunity to elect three directors to our eight-person Board in accordance with the Blue Card Compromise. This would give the Dissident Group more than proportional representation for its combined ownership stake and allow the Board to independently and objectively consider the Dissident Group’s proposals regarding Company leadership and partnership opportunities.
If you support this Blue Card Compromise, we recommend you vote on management’s BLUE proxy card. If instead you vote on the Dissident Group’s proxy card, the Dissident Group may have sufficient votes to cumulate for the election of a fourth and fifth director of its choosing.
To ensure continuity and independence, Synalloy encourages all shareholders to follow the ISS and Glass Lewis recommendations and accept the Blue Card Compromise by voting on the BLUE proxy card.
The Synalloy Board of Directors