The Shareholder Forum

supporting investor interests in the use of their capital to produce goods and services


Purpose & History of Services

The Shareholder Forum

The Shareholder Forum supports investor interests in corporate enterprise value with services that require independence – and that may benefit from the Forum’s network resources and recognition for advocacy of long term investor interests – to assure a definition of relevant issues and fair access to information that can be relied upon by both corporate and investor decision-makers.

The policies that provide a foundation for the Forum’s marketplace functions have been carefully developed and tested to allow any investor to participate in its communications, either anonymously or visibly, without acting in concert. Established originally to accommodate professional fund managers, this independent moderator function has proved to be consistently effective in managing orderly processes of issue definition for rational analysis by fiduciaries who are responsible for informed decisions.

Initiated in 1999 by the CFA Society of New York (at the time known as the New York Society of Security Analysts) with lead investor and former corporate investment banker Gary Lutin as guest chairman to address the professional interests of its members, and independently supported by Mr. Lutin since 2001, Forum programs have achieved wide recognition for their effective definition of important issues and orderly exchange of the information and views needed to resolve them. The Forum's ability to convene all key decision-making constituencies and influence leaders has been applied to subjects ranging from corporate control contests to the establishment of consensus marketplace standards for fair disclosure, and has been relied upon by virtually every major U.S. fund manager and the many other investors who have participated in programs that addressed their interests.

Currently important applications of the Forum’s independent position include the support of corporate managers who wish to provide the leadership expected of them by responding to activist challenges with orderly reviews of issues relevant to long term investor interests.

Requests for Shareholder Forum consideration of support may be initiated confidentially by any investor or by the subject company, or by the professional advisors to either.  


The New York Times
June 9, 2005

Pathmark Vote Tests Wider Issues of Shareholder Control

After years of investor activism, are shareholders winning or losing the struggle to be treated with the respect that company owners deserve? A vote today by investors in Pathmark Stores may provide an answer.

The shareholders of Pathmark, a supermarket chain in New York, New Jersey and Philadelphia, are voting on the purchase of a potentially controlling stake in the company by the Yucaipa Companies, an investment firm based in California. Yucaipa is run by Ron Burkle, a supermarket magnate who is better known as a major Democratic contributor.

The $150 million deal will initially give Mr. Burkle's company a 40 percent interest in Pathmark, if it goes through. But Yucaipa would also receive warrants to buy additional Pathmark shares that would increase the firm's stake to 60 percent. Pathmark's directors have recommended that shareholders approve the transaction.

Under the proposal, Yucaipa would buy its stake for about $7 a share. None of the Yucaipa money will go to Pathmark shareholders; it will go to the company, which will use it to spruce up some of the 142 Pathmark stores, build new ones and pay down debt. Pathmark's stock closed yesterday at $8.60.

If shareholders say yes to Yucaipa, Mr. Burkle's company will receive five board seats and will be in a position to prevent any future bidders from taking over the company. Yucaipa would also receive a five-year consulting contract worth $3 million a year, as well as the repayment of expenses up to $500,000 a year. Under the contract, Yucaipa would provide advice to Pathmark on corporate strategy, marketing and retail development.

The Yucaipa bid is certainly a ray of sunshine for Pathmark shareholders, who have endured some bleak years. The company, which emerged from bankruptcy protection in September 2000, said last week that it lost $2.1 million in the first quarter of fiscal 2005 and that sales at stores open at least a year inched ahead just 0.1 percent from the same period in 2004. The stock hit a low of $3.50 last fall after the company repeatedly reduced its earnings projections.

But some Pathmark shareholders question why the company's board continues to recommend the Yucaipa deal over competing bids that are far higher and that would actually put money in its owners' pockets.

For example, one bidder, which the company has not identified, said it would pay $8.75 a share to buy Pathmark outright. This offer is backed by a financing commitment, Pathmark regulatory filings have noted. (None of the bidders have identified themselves.)

Nevertheless, when they vote today, Pathmark shareholders will not be allowed to choose the better of the various offers that have been made for the company. Rather they will decide to accept or reject the Yucaipa transaction. Because they have been given so few details about competing bids for the company - such as who is making them and how they would be financed - Pathmark's shareholders are being asked to trust that their board has done the necessary due diligence to arrive at the appropriate decision on the deal.

Institutional Shareholder Services, an influential investor advisory firm in Rockville, Md., has advised its clients to vote against the Yucaipa deal. The firm said that Pathmark's board had failed to provide the company's shareholders with adequate rationale for rejecting an apparently superior bid for the entire company in favor of the offer of a partial investment from Yucaipa at a lower price.

"It's never been clear to us that the board went through all the steps to ensure that they had the best bid on the table," said Pat McGurn, special counsel at I.S.S. "There have been filings made in the last 48 hours talking about new bids coming in. It's one of those situations where from our clients' perspective we wanted to indicate that the process should play out a little bit longer."

Harvey M. Gutman, Pathmark's spokesman, said the company was disappointed by I.S.S.'s view. "The proxy contains full and complete information of the extensive process that we have conducted," he said, "and we believe that the Yucaipa transaction is in the best interests of the shareholders."

Mr. Gutman declined to make Pathmark directors available to discuss their recommendation that shareholders approve the deal.

Among the reasons Pathmark's directors have given urging shareholder approval of the Yucaipa deal were the investment firm's "generally successful record" and the promise that stockholders would participate in any upside that might result from improved performance at the company in coming years.

The fairness opinion on the Yucaipa proposal, provided by Dresdner Kleinwort Wasserstein Securities, did not address the relative merits of any alternative bids for Pathmark.

But Pathmark's board said that the $8.75-a-share offer was not a better deal because it was unlikely to be completed for several months, while the Yucaipa transaction could be done this month. In addition, the board said that further documentation from the bidder's lead lender was needed.

Under the terms of the Yucaipa deal, Pathmark's current management will stay on. But the transaction, if it is approved by shareholders, will result in a change of control at Pathmark, allowing its executives to cash in all their stock options. The company did not disclose, however, the amounts its executives stand to receive from the options or from severance agreements that may be activated by the deal.

Mr. McGurn called Pathmark's disclosure on such matters inadequate. He added that the results of today's vote could be seen as a barometer of the current state of shareholder activism.

"Ultimately, if Pathmark is forced to delay this meeting or they don't get adequate votes they will have gotten a strong message from investors that they didn't feel there was enough information upon which they could make a decision," Mr. McGurn said. "That would be a warning shot across the bow for companies who think that if they approve a deal, their shareholders aren't going to question it."





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Publicly open programs of the Shareholder Forum are conducted for free participation of all shareholders of a subject company and any fiduciaries or professionals concerned with their decisions, according to the Forum’s stated "Conditions of Participation." In all cases, each participant is expected to make independent use of information obtained through the Forum, and participation is considered private unless the party specifically authorizes identification.

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Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.