Caesarstone’s Largest Shareholder Calls for Independent Directors to Improve Governance and Accountability

Kibbutz Sdot-Yam Sends Letter to All Caesarstone Shareholders

Asks Shareholders to Vote the GOLD Proxy Card in Support of Two New Highly Qualified, Independent Director Nominees

(Graphic: Business Wire)

MENASHE, Israel--()--Kibbutz Sdot-Yam, the largest shareholder of Caesarstone Sdot-Yam Ltd. (NASDAQ:CSTE) (the “Company”), which owns approximately 32.4% of the Company’s outstanding shares, today sent a letter to fellow shareholders of Caesarstone urging them to vote in favor of electing two new highly qualified and independent nominees to the Company’s board of directors at the upcoming annual general meeting to be held on December 3, 2015. In the letter, Kibbutz Sdot-Yam highlights why the Company needs a fresh perspective and truly independent directors on the board to help the Company manage in a challenging environment and remedy a recent track record of poor corporate governance. To maximize value for all shareholders, Kibbutz Sdot-Yam urges its fellow Caesarstone shareholders to vote the GOLD proxy card today in favor of truly independent board nominees.

The full text of the letter, which can also be found at csteprotect.com along with the Kibbutz’s proxy material and investor presentation, is below:

VOTE THE GOLD PROXY CARD TODAY!

Dear fellow Caesarstone shareholder:

As the largest holder of Caesarstone Sdot-Yam Ltd. (NASDAQ: CSTE), with approximately 32.4% of the shares in the Company, we are writing to you today to voice our concerns about the future of our Company under the leadership and governance of the current board of directors. We have great faith in the true potential of Caesarstone and, as founders of the Company as well as shareholders, we have a strong desire to see it reach the success we know is possible. But we need a strong, independent and highly-qualified board in order to achieve these results. As such, we ask all shareholders to vote on the GOLD proxy card TODAY in support of the new and independent director nominees who will help maximize value for all shareholders.

A Challenging Operating Environment, Poor Stock Performance,
Increased Competition and Declining Results

In recent months, Caesarstone has come up against a series of challenges and difficulties. The Company's recent share price performance, which is down 35% in the past year and almost 50% within a short period of time after the Company's disappointing Q2 earnings, a slowdown in growth rates, the failure to meet forecasts and reduced full year revenue guidance, are tangible proof that the Company needs to turn things around and get back on track. Take a look at the Company’s recent stock prices in the accompanying graphic.

In addition to poor stock price performance, the Company also faces significant issues that require a strong, independent and high-quality board to address. These include:

  • Proper oversight of expenses. In particular, the budget for the U.S. factory expansion ballooned from $70 million to $130 million, yet the factory is still not producing at full capacity.
  • Capitalizing on growth in the North American market. Since 2007, the Company's management has failed to generate significant new sales beyond the Company’s existing markets (U.S.A., Australia, Canada and Israel).
  • Diversifying quartz suppliers. Turkey is the Company’s only source for quartz, making the Company far too dependent on a single supplier. In addition to ramping up U.S. production, the Company needs to find alternative quartz suppliers to ensure adequate supply and diversification.
  • Proper environmental standards. The Company failed to comply with the required environmental protection standards in the sourcing and production of its products.

The Company needs fresh perspectives and truly independent voices on the board to hold management accountable in this challenging environment. As members of this board, we have witnessed the current “independent” directors' cozy relationship with the CEO—refusing to challenge him or stand up to him despite the Company's obvious problems and poor performance. It is evident to us that the Company needs strong, new independent board members to bring fresh perspectives and provide independent oversight and accountability to steer the Company – your Company –in the right direction for the benefit of all shareholders.

After an extensive search process, we identified two highly successful businessmen that we believe, if elected, will be extremely valuable to the board and the Company. These two candidates, Dr. Yitzhak Sharir and Mr. Amnon Dick, have absolutely no ties to the Kibbutz and, as board members, would represent the interests of all shareholders – not only those of the Kibbutz. These nominees are being proposed strictly to strengthen Caesarstone's board of directors, help improve its corporate governance and realize the Company's true potential. As the largest shareholder in Caesarstone, our interests are entirely aligned with yours – our sole concern is how to maximize the long-term value of Caesarstone's stock.

Do Not Be Misled by the Company - We Are NOT Seeking Control of Caesarstone

In direct contrast to what the Company wants you to believe - we are not seeking control of the board of directors. Quite the contrary – we are nominating and recommending for election two new, highly qualified and independent candidates who will help the board oversee and guide the Company as it faces complex challenges and declining performance in today's increasingly competitive business environment. Yitzhak Sharir and Amnon Dick are completely independent from the current board, from management and from the Kibbutz, and can act as the true voice of all shareholders.

Our actions alone prove that we are not seeking control of the board:

  • Reduced Kibbutz board representation. Following the upcoming election, the Kibbutz will have voluntarily reduced the number of directors who are Kibbutz affiliates from five to three of the nine current directors.
  • Ceded chairmanship in favor of independent board chair. We reduced our role on the board by ceding the chairman of the board role – a position that has been held by a Kibbutz member since the Company's IPO. We agreed that the role of chairman should be held by an independent director going forward – a move that further aligns the board with the best interests of all shareholders.
  • Support current management team. We have not, nor do we intend, to seek the removal or replacement of the CEO or his management team. We simply want to introduce more independence for the board and reduce the undue influence of Caesarstone’s CEO on what should be board decisions.
  • Support majority of current nominees. We are nominating only two independent nominees as replacements for existing board members because we believe that substantial continuity on the Caesarstone board will be helpful in ensuring the operational success of the Company without undermining the productive relationship between the board and management. As such, we support the election of the remaining nominees proposed by the Caesarstone board (Proposal 1), consisting of three incumbent directors (Moshe Ronen, Shachar Degani and Amihai Beer) and two new nominees (Amit Ben Zvi and Ronald Kaplan).

In addition, the Kibbutz, and not the Company’s management, proposed the addition of Ronald Kaplan, former CEO and current Chairman of TREX, to the board in order to bring much-needed U.S. credentials and experience to the Company. As the largest shareholder, we have the strongest interest in assisting and positioning the Company to improve its performance.

We believe the highly qualified and independent director candidates, Dr. Yitzhak Sharir and Mr. Amnon Dick, both with very successful records in industry and capital markets, extensive public company board experience and true independence from both the Kibbutz and the current management team can offer the Company fresh perspectives and act as shareholder-friendly voices on the board. We believe the addition of Messrs. Sharir and Dick to the board will help spur the change needed to turn the Company around and improve performance. Vote on the GOLD CARD today for two new, independent board representatives who are committed to bringing about the change needed at Caesarstone to ensure a successful future for the Company and all its shareholders.

Poor Corporate Governance and Lack of Accountability and Oversight of Management

Part of the Company's lackluster performance can be attributed to the significant corporate governance issues at Caesarstone, including:

  • CEO's interference in the role of the board of directors. No executive sessions are held without the presence of the CEO. This imposes severe limitations on the ability of the board to appropriately question management’s decisions and prevents the candid evaluation of management’s performance. Because the board is being prevented from exercising its full power, there exists an imbalance between the power of the board and management.
  • Management controls agendas for board meetings. Only subjects recommended for discussion by management are addressed at board meetings. In addition, the agenda for board meetings is often distributed very late, if it is distributed at all prior to the board meeting, and fulsome relevant background materials are not provided to the directors for consideration.
  • The board should be permitted to seek separate legal counsel. Directors should not rely solely on management for legal advice and strategy.
  • Lack of truly independent directors. "Independent" directors presently function as proxies of the Company's management. Improved oversight of management is needed to better prepare and respond to the challenges faced by the Company.
  • Board turnover and resignations. Deficiencies in corporate governance, among other reasons, led to the resignation of two qualified and professional directors.

The current board lacks the independence and outside perspective to be truly constructive advisers in their oversight of the management team. We believe the Company lacks the appropriate checks and balances between the board and management, which are vital in guiding the Company towards improved performance. The current lack of board independence prevents the board from holding management fully accountable for the Company's stock performance.

Continuing the same strategy will not work for Caesarstone in the current market environment. The Company needs real agents of change who can push management to improved and sustained performance. We are seeking to refresh and reinforce the Company's board of directors by adding two highly qualified and experienced independent directors, with proven and impressive records, who can contribute to the Company's success and improve the board's oversight over the Company's business.

Electing Yitzhak Sharir and Amnon Dick – together with Ronald Kaplan – will constitute a significant addition of strength to the board, help the Company get back on track, cope with the complex challenges that are facing it, realize its true potential and maximize value for all shareholders.

Highly Qualified Director Nominees Bring True Independence to Caesarstone Board

The two new individuals we are nominating who are not included in management's slate of nominees – Dr. Yitzhak (Itzick) Sharir and Mr. Amnon Dick— have impressive professional credentials, are well respected in the business community and have extensive knowledge and understanding of capital markets. We believe that these qualifications, among others, will greatly enhance the composition of the board of directors and its oversight of the Company.

  • Yitzhak (Itzick) Sharir. Dr. Sharir brings significant banking and financial experience to the board of directors. He currently serves as a member of the board of directors of REIT-1 and the board of directors of American Israeli Paper Mills. In the past, Dr. Sharir served as chairman of the board of directors of Discount Capital Markets, as a board member of Zur-Shamir and as a board member of Israel Discount Bank. Furthermore, Dr. Sharir served as president and CEO of Sapiens International Corporation, as general manager of Nilit Ltd. and as president and CEO of Orlite Industries.
  • Amnon Dick. Mr. Dick is an independent businessman and consultant, with significant sales and marketing experience. He currently invests in several telecommunications companies. Mr. Dick serves as a member on the boards of directors of Bank Hapoalim, Israel's largest bank, and Habima Israel National Theatre. Mr. Dick also serves as president of the Friends Association of Tel-Aviv University. In the past, he has served as a member of the board of directors of Israel Chemicals Ltd., as president and CEO of Bezeq - The Israeli Telecommunication Corp Ltd, as chairman and CEO of Elite International, as CEO of Jafora Tabori Ltd., as senior vice president of Elite Industries and as V.P. Marketing & Sales of The Central Bottling Company - CBC (Coca Cola Israel).

Both of our director nominees are independent, with no ties to the Kibbutz or to the Company's management. We believe that they have far more to offer the Company's shareholders than the Company's nominees. We have witnessed first-hand the lack of independence of Yonatan Melamed, who has served on the board alongside the Company's CEO for 8 years and established a close alliance with him. Mr. Melamed has become too close with the CEO to challenge his decisions, resulting in a lack of oversight. Similarly, Ofer Tsimchi worked as a director alongside the Company’s CEO at Tefron Ltd. for three years and is also unlikely to challenge the CEO’s decisions.

We believe that the election of two very successful and qualified businessmen with experience serving as directors of much larger companies, in place of board members who have a history of non-independence from management – together with Ronald Kaplan – will maximize value for all shareholders. We urge all shareholders to vote on the GOLD proxy card today in favor of Resolution 3 and bring true independence and accountability to the board.

Improving Shareholder Value

The Kibbutz seeks to refresh and strengthen the Company's board of directors with professional and qualified candidates, who will help fix the deficiencies in corporate governance, and beneficially expand the board’s role in guiding the Company. The addition of significant strength to the board will help the Company get back on the right track, deal with the complicated challenges it faces, improve its financial results and maximize value to benefit all its shareholders.

Vote The GOLD Proxy Card TODAY!
Support Good Corporate Governance and Help Realize Caesarstone's True Potential

As the Caesarstone annual general meeting quickly approaches on December 3, 2015, we ask all shareholders to consider the value of their investment in the Company and vote on the GOLD proxy card today for true independence, accountability, improved corporate governance and enhanced performance.

We recommend that you vote "FOR" each of the director nominees who are listed in Proposals 1 and 3, and "AGAINST" each of the Company's director nominees, who are listed in Proposal 2. We furthermore recommend that you vote "AGAINST" Proposal 4 (as the current chairman of the board is not among the candidates we are nominating or support) and "FOR" Proposals 5, 6, 7 and 8 to be considered at the meeting.

Even if you have already completed and submitted the WHITE proxy card or voting instruction form sent to you by the Company's board of directors, you can still change your vote by submitting a later-dated GOLD proxy card or voting instruction form. Only your latest-dated, validly executed proxy card will be counted at the meeting.

If you have any questions, require additional copies of our proxy materials or need assistance in voting on your GOLD proxy card, please contact our proxy solicitor at the phone numbers or email listed below:

MacKenzie

Partners, Inc.

105 Madison Avenue
New York, New York 10016
Call Toll-Free (800) 322-2885 (North America) or
Collect at + (212) 929-5500 or

Email: proxy@mackenziepartners.com

 

About Sdot-Yam

Founded in 1937 near Haifa, Israel, Kibbutz Sdot-Yam, today based in Caesarea, is the largest shareholder of Caesarstone Sdot-Yam Ltd. (NASDAQ: CSTE), with approximately 32.4% of the shares in the Company. Initially formed as a fishing and agriculture enterprise, the Kibbutz Sdot-Yam expanded to encompass industrial enterprises, including Caesarstone, a global leader and pioneer in quartz surfaces for a variety of uses and applications such as kitchen countertops, bathroom vanities, flooring, wall cladding and more. Launched by Kibbutz Sdot-Yam in 1987, Caesarstone products are available in more than 40 countries around the world.

Contacts

Investor:
MacKenzie Partners, Inc.
+1 (212) 929-5500
proxy@mackenziepartners.com
or
Media:
Abernathy MacGregor Group
Mike Pascale, +1 (212) 371-5999
mmp@abmac.com
or
Trevor Martin, +1 (917) 226-9788
trm@abmac.com

Contacts

Investor:
MacKenzie Partners, Inc.
+1 (212) 929-5500
proxy@mackenziepartners.com
or
Media:
Abernathy MacGregor Group
Mike Pascale, +1 (212) 371-5999
mmp@abmac.com
or
Trevor Martin, +1 (917) 226-9788
trm@abmac.com