-- Urges Shareholders to Vote "FOR" ALL of
Servotronics' Highly-Qualified
Directors on the BLUE Proxy Card –
-- Highlights Strategy to Create Shareholder
Value and Refreshed Board of Directors --
ELMA, N.Y., May 4, 2023 /PRNewswire/ -- Servotronics, Inc.
(NYSE American – SVT) a designer and manufacturer of servo-control
components and other advanced technology products today sent a
letter to shareholders in connection with its June 9, 2023 Annual Meeting of Shareholders (the
"2023 Annual Meeting"). Shareholders of record as of April 24, 2023, will be entitled to vote at the
2023 Annual Meeting.
The definitive proxy materials and other materials related to
the 2023 Annual Meeting are available at
https://www.proxy-direct.com/svt-3328.
The full text of the letter being sent to shareholders
follows:
To All Servotronics Shareholders:
The past year has been one of transformation and progress at
Servotronics. Since joining as CEO, I have worked closely with the
Board of Directors and other leaders at the Company to identify key
areas of growth and profitability that will lead to increased
shareholder value.
As a Servotronics investor, you face a critical decision at the
Company's annual meeting of shareholders to be held on June 9, 2023. Your vote is more important than
ever this year. Star Equity Fund, LP (together with its affiliates,
"Star") is conducting an unnecessary proxy contest in an attempt to
remove members of your Board of Directors. We believe this proxy
fight is ill-timed as the Board has already seen significant
turnover as a result of its refreshment plan over the last year and
the current Board has been actively involved in overseeing the
development of our new strategic plan. We urge you to support your
Board by voting the BLUE proxy card today "FOR" all Servotronics
director nominees. When voting the BLUE proxy card, consider the
following accomplishments we have achieved in the past year
including:
- Brought me on as the new CEO to lead Servotronics' operations
to the next level with market share gains and increased operational
performance.
- Established a culture of integrity and accountability
throughout Servotronics to drive ethical operations in every aspect
of our business.
- Refreshed the Board of Directors with new members who have
varied, relevant functional experience and expertise.
- Accelerated the expiration of the shareholder rights plan,
effectively terminating the "poison pill".
- Brought on resources to lead new business development and
strategic priorities.
- Developed our long-term strategic vision to maximize
shareholder value.
- Initiated the review of strategic alternatives for the CPG
group to focus on key end markets and increase shareholder
value.
As you cast your vote at our upcoming annual meeting of
shareholders, you will be faced with a stark choice. The
Board and management team of Servotronics have made significant
progress in transforming our Company, but understand that this
involves deliberate actions and much work remains. Our new
strategic plan lays out the actions we are taking to drive growth
and profitability. Star proposes to make changes to
Servotronics, and we want to provide you with relevant information
for your consideration:
- Star's Board nominees do not appear to substantially add to the
experience of the current Servotronics Board.
- Star proposed a merger with Servotronics in 2022. Your
Board and management, along with outside advisors, carefully
considered such a transaction and determined that the risks of
pursuing it outweighed any potential benefits, which appear to be
nominal.
- Star criticizes the performance of our business and share
price, but they ignore the significant underperformance of their
own shares and operations. While we have a plan to
continuously improve our operational and financial performance,
shareholders should understand the differential performance of
Servotronics relative to Star.
- Finally, we note that Star's assertions that our Board is
entrenched do not stand up to the facts. Indeed, two-thirds
of our Directors are new in the past year, which is contrary to
typical signs of an entrenched Board.
Further details on the above points follow. As
previously discussed, we have made several fundamental changes to
the way that Servotronics operates, including changes to our
governance practices. To start, I was brought on as the new CEO
with the goal of establishing and implementing a comprehensive
refreshed growth strategy for Servotronics based on my years of
successful leadership in the Aerospace industry. A
foundational element to our strategy surrounded our leadership
style and corporate culture. This starts with me as the CEO
and extends to each of our leaders and employees.
We have established a culture of integrity and accountability
within Servotronics. In my opinion, integrity is
non-negotiable, and we will consistently act in an ethical and
professional manner with customers, suppliers, shareholders, and
our team members. This is a key element to establish the
trust and relationships required for Servotronics' long-term
success. Accountability entails the responsibility of each
member of the Servotronics team to deliver on our commitments to
each other and provide the quality products and service that our
clients demand and deserve.
Regarding our corporate governance, we revitalized the Board to
enhance our public company knowledge and leverage director
expertise. We have added four new directors since the
beginning of 2022, and we believe that we have the right Board to
advise the Company in the correct strategic direction that will
drive shareholder value. While we are pleased with the
achievements we have made over the past year, we understand that
this is a continuous process.
Our unwavering commitment to integrity, accountability,
transparency, and value creation will allow us to deliver robust
growth, increase operational excellence, and bolster our
relationships with key customers and stakeholders. Servotronics has
a tremendous team in place that is committed to delivering the
highest quality products to all our customers across the globe. We
continue to focus on the attraction and retention of employees, and
this is a high priority of our operating strategy. We have
also refined our strategic focus as our Board recently made the
decision to pursue strategic alternatives for our Consumer Products
Group. With that shift, our Company will now focus on the
core growth markets in commercial aerospace and related adjacent
opportunities.
The efforts of our Board and management team to lead
Servotronics into being a world-class supplier to the aerospace
industry will take hard work. We understand this
transformation is not an "easy fix" but rather a deliberate,
strategic process for which our team has the ability to
accomplish.
An alternative to our continued progress has been proposed by
Star. They have nominated two candidates for our Board
who we do not believe adequately represent the diverse interests of
our shareholder base. In fact, we believe that the interests
of Star and their nominees present significant risks to the future
success and long-term growth of Servotronics.
When Star first approached us in October
2022 about a potential combination of our two companies, we
carefully considered the strategic implications and potential risks
of such a transaction. In considering the potential synergies
for the two entities, we saw nominal administrative cost reduction
opportunities and no strategic or operational benefits given that
Star's investments are concentrated in construction and healthcare,
with no relevance to the aerospace industry that we serve.
Based on this assessment, we believe that Star's interest is to
acquire Servotronics as a purely financial investment.
As a financial transaction, we considered Star's ability to
pursue and ultimately execute the purchase of Servotronics.
At the time, our market capitalization was approximately
$30 million, but Star had a reported
cash balance of just $8 million,
which has recently declined to less than $5
million. We considered their potential access to
credit with which to fund a potential acquisition and found they
had very little availability under their existing credit lines, and
moreover, they were not in compliance with the loan covenants of
their largest credit agreement. Further, they proposed
utilizing their stock as partial compensation for the acquisition
of Servotronics, stock that has not surpassed $1 per share thus far in 2023, and their market
capitalization is just modestly more than $10 million. Given this dynamic, the Board
and management team were concerned that a potential combination
could result in Star leveraging Servotronics' assets for additional
borrowing that might put our business at existential risk, and
leave Servotronics shareholders with Star shares that have been
declining in value.
When considering a transaction of this magnitude, we do not
believe that it is in the best interests of Servotronics
shareholders to allow their Company to serve as a cushion to
bolster another entity's balance sheet.
As a prudent Board and management team, we also looked at the
results that Star had generated from previous business combination
transactions, to provide some insight into how they might manage
Servotronics. We saw a troubling track record, as most
recently Star sold DMS Health Technologies in March 2021 for $18.75
million, about half of the $36
million that Star paid for the business five years
earlier. This sort of value destruction raised more concerns
with our Board and management team.
Beyond the performance of Star's most recent acquisition, we
reviewed the performance of Star as an entity and found equally
troubling patterns of underperformance. Over the past two
years, Star has incurred losses from continuing operations
exceeding $14 million, raising
concerns about Star's management ability and decision
making.
With regard to share price performance, we saw further causes
for concern. First, we noted that since the beginning of
2020, Star has completed two public offerings totaling 11,725,000
shares, with warrants to purchase an additional 11,725,000 shares,
bringing their total shares outstanding to 14,751,000. This
represents an astounding level of dilution to their
shareholders. Looking further at share price performance,
since their initial public offering in July
2004, Star's share price has declined more than 99% from
$91 to a recent price of 68 cents. If measuring from the time that Star
transitioned to a holding company structure in September 2019, their share price has declined
more than 84%, from $4.48 to less
than 70 cents. This
underperformance resulted in the Listing Qualifications Department
of the Nasdaq Stock Market sending a letter to Star on January 19, 2023, notifying Star of its failure
to meet continued listing requirements for the Nasdaq Global Market
because its share price had been below $1 for 30 consecutive days. Over those same
periods, Servotronics shares have shown significant improvement in
shareholder value. Since July
2004, Servotronics shares have more than doubled, rising
113% from $5.70 to a recent price of
$12.15, and measuring from
September 2019, Servotronics' share
price has risen nearly 237% from $9.90 to $12.15.
The actions taken by the Board and management over the past year
demonstrate that neither is "entrenched," as claimed by Star.
Your newly refreshed Board accelerated the expiration of the
Company's poison pill defense, effectively cancelling it. The
many actions taken are not indicative of entrenched directors or
management, but rather the responsible actions of individuals
performing their fiduciary duties and acting in the best interests
of all stakeholders.
I would like to express my appreciation to all our shareholders
for their continued support during this time of change. Our
employees, customers, and other stakeholders have provided
Servotronics the foundation that is required to deliver quality
products while exploring new applications of our technologies. As a
team, we are committed to delivering value to our shareholders and
we look forward to the bright future that lies ahead for
Servotronics.
VOTE THE BLUE PROXY CARD TODAY "FOR" ALL SERVOTRONICS' DIRECTOR
NOMINEES
We urge you to use the enclosed BLUE proxy card to vote today
"FOR" ALL of Servotronics' nominees. Simply follow the easy
instructions on the enclosed proxy card to vote by Internet or by
signing, dating and returning the BLUE proxy card in the
postage-paid envelope provided. Please DISCARD all white proxy
cards and materials sent to you by Star Equity.
Shareholders who have any questions or need assistance voting
may contact the Company's proxy solicitors, Georgeson, LLC,
toll-free at (866) 767-8867.
On behalf of your Board and the management team, thank you for
your continued support.
With sincere appreciation,
William F. Farrell, Jr.
Chief Executive Officer
ABOUT SERVOTRONICS
The Company is composed of two groups – the Advanced Technology
Group (ATG) and the Consumer Products Group (CPG). The ATG
primarily designs, develops and manufactures servo controls and
other components for various commercial and government applications
(i.e., aircraft, jet engines, missiles, manufacturing equipment,
etc.). The CPG designs and manufactures cutlery, bayonets, pocket
knives, machetes and combat knives, survival, sporting,
agricultural knives and other edged products for both commercial
and government applications.
IMPORTANT INFORMATION
The Company has filed with the Securities and Exchange
Commission (the "SEC") a definitive proxy statement on Schedule 14A
on May 1, 2023, containing a form of
BLUE proxy card and other relevant documents with respect to its
solicitation of proxies for Servotronics' 2023 annual meeting of
shareholders (the "2023 Annual Meeting"). INVESTORS AND SECURITY
HOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT (INCLUDING
ANY AMENDMENTS OR SUPPLEMENTS THERETO) FILED BY SERVOTRONICS AND
ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN
THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT ANY SOLICITATION. Investors and security holders
may obtain copies of these documents and other documents filed with
the SEC by Servotronics free of charge through the website
maintained by the SEC at www.sec.gov. Copies of the documents filed
by Servotronics are also available free of charge by accessing
Servotronics' website
https://servotronics.com/investor-relations/.
The Company, its directors and its executive officers may be
deemed participants in the Company's solicitation of proxies from
shareholders in connection with the matters to be considered at the
upcoming annual meeting of shareholders. Information about the
Company's directors and executive officers is set forth in the
Company's definitive proxy statement for the 2023 Annual Meeting,
which was filed with the SEC on May 1,
2023 and is available at the SEC's website at
www.sec.gov.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this press
release should be considered "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements may be identified by
words such as "may," "will," expect," "intend," "anticipate,"
"believe," "estimate," "plan," "could," "should," "would,"
"continue" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking
statements contain these identifying words. Examples of
forward-looking statements include, among others, statements about
the Company's plans, objectives, expectations, intentions,
estimates and strategies for the future and other statements that
are not historical facts. These forward-looking statements are
based on the Company's current objectives, beliefs and
expectations, and they are subject to significant risks and
uncertainties that may cause actual results and financial position
and timing of certain events to differ materially from the
information in the forward-looking statements. These risks and
uncertainties include, among others, general economic and business
conditions affecting the commercial aviation industry and other
industries served by the Company, conditions affecting the
Company's customers and suppliers, the introduction of new
technologies and the impact of competitive products, the
willingness and ability of the Company's customers to fund
long-term purchase programs, and market demand and acceptance both
for the Company's products and its customers' products which
incorporate Company-made components, the Company's ability to
accurately align capacity with demand, the availability of
financing and changes in interest rates, the outcome of pending and
potential litigation, the severity, magnitude and duration of the
COVID-19 pandemic, including impacts of the pandemic and of
businesses' and governments' responses to the pandemic on our
operations and personnel, and on commercial activity and demand
across our and our customers' businesses, and on global supply
chains, the ability of the Company to obtain and retain key
executives and employees and the additional risks discussed in the
Company's filings with the Securities and Exchange Commission.
Additionally, there may be other factors of which the Company is
not currently aware that may affect matters discussed in the
forward-looking statements and may also cause actual results to
differ materially from those discussed. The Company does not assume
an obligation to publicly update or supplement any forward-looking
statement to reflect actual results, changes in assumptions or
changes in other factors affecting these forward-looking statements
other than as required by law. Any forward-looking statements speak
only as of the date hereof or as of the date indicated in the
statement.
SERVOTRONICS, INC. (SVT) IS LISTED ON NYSE
American
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SOURCE Servotronics, Inc.