BROOKLYN, N.Y.--(BUSINESS WIRE)--Cohen Capital Management (“Cohen Capital”), one of the largest investors of Chicago Bridge & Iron Company N.V. (NYSE: CBI) (“CBI” or “the Company”) with an almost 1% stake in the Company, today issued a letter to CBI Chairman of the Board, L. Richard Flury, calling out CBI’s dismal financial performance, utter lack of go-forward strategy, and management’s overall disregard for acting in the best interests of shareholders. In the letter, Cohen Capital suggests implementing immediate changes to management, including the termination of presiding President and CEO Philip K. Asherman, to effect real change for shareholders.
A copy of the letter follows:
August 24, 2016
Mr. L. Richard Flury
Chicago Bridge & Iron Company N.V.
One CB&I Plaza
2103 Research Forest Drive
The Woodlands, TX 77380
I am the principal and managing director of Cohen Capital Management, a New York family office with investments in both public and private equity. We hold almost one percent of the common stock of Chicago Bridge & Iron Company N.V. (“CBI” or the “Company”). As one of the Company’s largest shareholders, I must express my deep concerns about the dismal performance and misguided direction of the Company. On multiple occasions, my office and I have reached out to senior leadership in an effort to engage constructively about the present plight and future of this potentially great company. It appears that the leadership is dodging me to try to avoid answering very serious shareholder concerns.
I have over twenty years of investment experience with extensive interests in, among other things, the oil and gas sector and real estate sector. Cohen Capital pursues long-term investment opportunities in durable value creation, generally with a 5-10 year investment horizon. As the leader of the organization, I focus on investments in companies run by honest, able, and shareholder-friendly management teams who can create long-term, sustainable value for its owners.
In my career, CBI is the only company where the alarming failures of management and the Board have compelled me to approach the Board in this manner. However, the consistent, appalling and dramatic mismanagement of CBI that has fumbled along destroying shareholder value and shrouding what should be a strong business has forced me to make my concerns public.
Absolutely Unacceptable Shareholder Returns
In the past two years, the Company stock price has melted down from a high of $89.22 reached on April 04, 2014, to $31.91, as of yesterday, August 23, 2016. In a period of less than two years, the Company has destroyed over $6 billion in shareholder value. Furthermore, CBI’s total shareholder returns under a decade of leadership with its President and Chief Executive Officer, Mr. Phillip K. Asherman, have been an abysmal 17% while the S&P 500 has returned over 116% during the period – a staggering difference of over 99%.
Clearly Incapable Management
As shareholders know too well, the Company made a regrettable deal to acquire Shaw Group in 2012 for a reported enterprise value of $2.0 billion and a staggering 7.0x transaction multiple to Shaw’s fiscal 2012 adjusted EBITDA. The Company publicized to shareholders and the market that the acquisition would give it access to new revenue lines, additional customers and a broader revenue base. Instead, the acquisition has been a complete and utter disaster that continues to cost shareholders to this day.
After the Company’s acquisition of Shaw Group, the Company worked on two nuclear projects for over three years, without ever being paid for its work. In addition, the Company continued to tell its shareholders that eventually it would receive a payout for all the money owed in arrears. Facing a resulting cash crunch, the Company was forced to raise billions of dollars in fresh capital through the debt markets to fund its operations resulting from the billions in losses sustained from the nuclear projects. Subsequent to that, and the loss of many billions of dollars in cash flow, the Company decided to sell its nuclear operations to Westinghouse at another multi-billion dollar loss, with the provision that it would eliminate all future liability from these operations for the Company.
However, the stunning mismanagement of this business continues to haunt shareholders. Only recently did shareholders learn that Westinghouse is challenging the premise of its deal with the Company and seeking an additional two billion dollars. My efforts to understand this complex and now clearly failed transaction with resulting litigation have been consistently rebuffed. While I hope the Company can once and for all put an end to this saga, I have no faith in management or its legal strategy based on its consistent failed performance.
Appalling Lack of Accountability
Despite nearly a decade of squandering shareholder value on failed transactions, a lack of strategy and blatant mismanagement there has been no accountability at the highest levels of CBI.
The Company’s senior leadership has an obligation to take immediate corrective action to remediate all of these significant issues plaguing the Company. Indeed, since the Shaw Group acquisition and its ensuing multi-billion dollar debacle, there has been not one senior leadership change. It is clear that those fiduciaries charged with overseeing and managing the Company have a tin ear to – or simply don’t care about – the strongly held views of the shareholder base that accountability at the senior management level is needed, and that a strategic vision and accompanying concrete action plan for the future is needed.
For our Company to move forward on the right footing, we demand the immediate termination of President and CEO Philip K. Asherman, under whose leadership the wrong-headed acquisition and ensuing problems occurred. He has lost the confidence of the core constituencies and, frankly, has an abysmal track record that clearly justifies his removal.
As a result of Mr. Asherman’s abysmal leadership, CBI has underperformed the market massively over the last 1, 5 and 10 years. During this time, Mr. Asherman has sold millions in stock while the Company’s true owners, the shareholders, have suffered. In the last week, he destroyed what little credibility he had with shareholders by dumping his personal stake while the stock traded near multi-year lows.
While markets rallied around the world, Mr. Asherman sold 468,600 of his own shares last week between $32 and 34 per share. This is right near CBI’s low share price of $31.30 for the year. After his latest sales, he is now left with 328,050 shares according to a form 4 filed on August 18, 2016. Shareholders are left with no choice but to see he has no confidence in the Company and that he believes the share price is headed even lower.
With a highly qualified, proven leader at the helm, we are confident that CBI can turn the corner and deliver on its inherent potential to create shareholder value. It is time for the Board to vigorously tackle the job at hand; listen to the concerns of shareholders and make the significant change so desperately needed.
As a shareholder of CBI, I reserve my right to pursue whatever actions are necessary, including a potential proxy fight to replace board members and force this change if the Board is unwilling to act for its shareholders. I sincerely hope that this action will prove unnecessary in the coming weeks if positive, concrete steps to change the management and trajectory of the Company are implemented immediately.
About COHEN CAPITAL MANAGEMENT
Founded by Daniel Cohen in 1992, Cohen Capital Management, LLC provides investment advisory services and invests capital on behalf of Cohen’s family and a limited number of outside investors. The Company offers investment advice, portfolio management, securities, and other financial services. The firm manages money both in the United States and abroad for private families and institutional investors. CCM employs a research-intensive approach, based solely on rigorous corporate fundamental analysis to determine undervalued companies and generate above average returns for our clients over a five to ten year period.