PICO Holdings, Inc. (Nasdaq:PICO), based in La Jolla, Calif., is a diversified holding company reporting recurring losses since 2008. PICO owns 57% of UCP, Inc. (NYSE:UCP), 100% of Vidler Water Company, Inc., a securities portfolio and various interests in small businesses. PICO has $664 million in assets and $434 million in shareholder equity. Central Square Management LLC and River Road Asset Management LLC collectively own more than 14% of PICO. Other activists at http://ReformPICONow.com/ have taken to the Internet to advance the shareholder cause.
The Bloggers strategize annual meeting votes. “After consideration of PICO Holdings’ Board of Directors’ dynamics, we arrived at a remarkable conclusion: We believe that PICO shareholders are just a few steps away from having Mr. Hart fired “For Cause,” which means he is immediately removed as CEO and entitled to $0 in termination payments. We call it ‘The Harxit.’”
The bloggers outline a scenario whereby Mr. Brownstein receives more “Against” votes than “For” votes at the Annual Meeting. If this occurs “. . . his Directorship will be considered by the CGNC — which is comprised of Messrs. Machado, Marino, Silvers, Cates and Brownstein.
In this scenario, we believe that Messrs. Cates, Silvers and Marino will ask for Mr. Brownstein’s resignation. Mr. Machado will object, but he will be a lonely supporter of Howie (Mr. Brownstein will have to recuse himself).
Howie’s resignation will produce a six-person Board with the following composition:
Messrs. Hart, Machado, Marino, Silvers, Cates and Speron.
In this scenario, we believe that the younger, shareholder-oriented directors will move to fire Mr. Hart “For Cause” and pay him $0. We believe that Messrs. Silvers, Cates, Speron and Marino will vote “Aye,” with only Mr. Machado voting “Nay.” And even if Mr. Marino does not swing, the vote will still be 3-2, in favor of Harxit.
Cue the ticker tape parade down Prospect Street in La Jolla.”
The bloggers outline what they refer to as “Harxit.” They continue, “When RPN broke PICOGate, we gave the Board the legally defensible means to fire Mr. Hart ‘For Cause’ and pay him $0 in severance. Up until now, the willpower on the Board to do so has not existed. But if Howie receives a majority of “Against” votes, combined with the departures of Messrs. Campbell and Slepicka, the composition of the PICO Board will change dramatically and the advocates of shareholder value will hold a numbers advantage.
We speculate that a vote ‘Against’ Howard Brownstein is a vote to fire The Juicer “For Cause” and pay him nothing. Sounds like a winner to us.”
All PICO shareholders are frustrated, the bloggers note. “It has been almost 8 months since Juicer announced the “Revision to Business Plan,” which pledged to liquidate assets and return capital to shareowners. Since that date, Juicer has sold zero assets, returned zero capital to shareholders and created zero value. In all our years in business, we have never seen so coherent a plan remain dormant for so long and create no value for shareholders.”
The bloggers conclude by noting that two of their least-favorite directors will depart shortly.
“After 18 years on the PICO Board, at the Annual Meeting, Carlos Campbell will create shareholder value for the first time: he will resign. Mr. Campbell’s exit will leave 8 Directors on the PICO Board.
We believe that Kenneth “The Slug” Slepicka is gone (we call it “River Road kill”). The Slug is one of the perpetrators of PICOGate, in which he and The Juicer failed to disclose a material conflict of interest for 6 years. We believe that PICO shareholders have overwhelmingly voted “Against” The Slug (We suggest all shareholders do so). We believe that the Corporate Governance and Nominating Committee will ask for The Slug’s resignation.”