Citing poor company performance and a lack profitability, an activist investor from the Milwaukee area has nominated a slate of six candidates – all with ties to Bucyrus International
– to become the new board of directors for Cicero, Illinois-based Broadwind, Inc.
Broadwind has a heavy fabrications plant in Manitowoc. The company designs and manufactures precision structures, equipment and components for clean tech.
Elm Grove-based WM Argyle Fund, which is led by chief executive officer Ryan Bogenschneider,
owns approximately 1% of Broadwind’s common stock, worth about $1.2 million. Bogenschneider said the move to nominate a new board of directors was years in the making and ties back to the group’s time working at Bucyrus, a manufacturer of mining equipment that was based in South Milwaukee. The company was sold to Caterpillar for $7.6 billion in 2011.
Bogenschneider worked on mergers and acquisitions and business strategy at Bucyrus.
“Part of our responsibility was identifying companies that could grow Bucyrus and help diversify the company. One of the companies identified was actually Broadwind because a majority of their employees and their major operations are in Manitowoc,” said Bogenschneider.
He first identified Broadwind as a company with room to grow around 2010, when wind energy was starting to become more popular. He, along with a group of former Bucyrus employees, kept their eyes on Broadwind, even after Bucyrus was sold to Caterpillar.
“Bucyrus did two things really well and that was large fabrication and gearing and that’s exactly what Broadwind is,” said Bogenschneider. “Years later, I happened to check in on the company and I noticed that the stock was miniscule compared to what it was. It seemed like it needed some help.”
The group nominated to serve as Broadwind’s new board include Bogenschneider; Jay Armburger,
former vice president of engineering excellence at Bucyrus; Ken Bergman,
former vice president and director of taxes for Bucyrus; Christine Candela,
former vice president of human resources – global benefits and HRIS for Bucyrus; Kristina Harrington,
former executive director of new equipment and aftermarket sales for Bucyrus; and James Robinson,
former general counsel of Bucyrus.
Of all six candidates nominated, only Armburger no longer resides in the metro Milwaukee area.
The group sent their first letter to Broadwind’s current board of directors in July of 2022, seeking to share some of its ideas to make Broadwind profitable, but Bogenschneider said the group received no willingness from the company to talk.
This was when Bogenschneider decided to raise money for the WM Argyle Fund to purchase a large stake in Broadwind. A filing with the Securities and Exchange Commission shows at least $575,000 was raised for the fund.
“We had zero intention of trying to nominate an entire slate,” said Bogenschneider. “We thought there were several issues hindering the company and that if they refocused on those issues, it could really benefit shareholders.”
Concerns for Broadwind’s performance
In a press release announcing the newly nominated board, WM Argyle Fund listed numerous reasons for its desire for new leadership.
“BWEN is an unsuccessful company with great potential. The current board of BWEN think they can bring about change despite already having over a decade to do so,” reads the press release. “They have signed previous tower orders worth tens of millions of dollars and yet the company is still unprofitable. They also have wasted tens of millions of dollars on acquisitions that have been written off. The execution risk is just too high for this board to stay in place.”
Among other listed concerns are that Broadwind has only had one profitable year since 2008, accumulated a lifetime deficit of $346 million, wrote off more than two-thirds of all acquisitions, and has seen shareholder equity fall 53% from 2012 to quarter three of 2022.
The press release from the fund does note that Broadwind has recently secured a two-year, $175 million wind tower order.
“The company has engaged with the fund, as it would with any stockholder, and is disappointed that the fund has chosen to initiate a costly and disruptive proxy contest, particularly given the company’s recent track record of value creation,” said Broadwind in a statement. “Broadwind believes that the fund’s attempt to take over Broadwind’s full board represents a disguised attempt to seize control of the company without paying a premium. However, Broadwind remains committed to maintaining an open dialogue while continuing to represent the best interests of all stockholders.”
Broadwind leadership argues the company has created “significant value” for stockholders and that on a trailing three-year basis, Broadwind’s stock price has increased approximately 250%.
Bogenschneider added the group doesn't want to see Broadwind fail to capitalize on legislation such as the Inflation Reduction Act, which provides significant tax credits to U.S. domestics producers.
A date for the company’s 2023 annual meeting has yet to be set. During that meeting, shareholders will be able to vote on their choice of board candidates.
Bogenschneider believes the new candidates will have an edge due to an amendment the Securities and Exchange Commission made to federal proxy rules. The amendment states that universal proxy cards must be used by management and shareholders to solicit proxy votes. A universal proxy card lists all candidates nominated for an election in one place, regardless of who nominated them. This is opposed to a shareholder receiving several proxy cards.
“I think you’ll start seeing a lot more activism at the smaller company level because of this,” said Bogenschneider.