Machado Replaced by Bandera’s Bylinsky as Director

As originally appeared in the Troubled Company Reporter.

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 $662 million in assets and $426 million in shareholder equity. Central Square Management LLC and River Road Asset Management LLC collectively own more than 11% of PICO. Other activists at http://ReformPICONow.com/ (RPN) have taken to the Internet to advance the shareholder cause.

On January 30, 2016, PICO announced a Settlement Agreement with 4.2% shareholder Bandera Partners, whereby Bandera Managing Director and Portfolio Manager Gregory Bylinsky will be nominated as Director at the 2017 Annual Meeting. In the meantime, Mr. Bylinsky will serve as an “Observer.” Mr. Bylinsky will replace Michael Machado as Director, who will not stand for reelection at the 2017 Annual Meeting.

The bloggers are only partially pleased. “Like other self-interested Directors Hapless Howie Brownstein and Raymond “Delaymond” Marino, the ignoble Desperado Machado will take a full year’s pay for only 4 months work. If these men had a shred of dignity, they would forfeit 2/3 of their 2017 compensation. If you see these men at the Annual Meeting, there is only one appropriate question: If you work for 4 months, shouldn’t you be paid for 4 months?”

The bloggers welcome Mr. Bylinksky to the PICO Board. “We view the nomination and almost-certain election of Mr. Bylinsky as positive for shareowners. Mr. Bylinsky has an impeccable academic background; he studied undergrad at Yale and earned a JD from Harvard Law School in 1994. He worked as an Associate at Kaye Scholer LLP until 1998, where he specialized in litigation. Bored with law, Mr. Bylinsky entered finance with a position at Tower Research Capital LLC from 1998 through 2006.

In 2006, Mr. Bylinsky and Jeff Gramm (the latter recently authored the excellent book ‘Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism’), started hedge fund Bandera Partners.

Bandera is a respected, value-oriented hedge fund with a diverse portfolio from nanocap (TST: market cap $29 million) to megacap (GOOGL: market cap $285 billion). Assets are about $150 million.”

The bloggers want Mr. Bylinsky appointed to the PICO Compensation Committee. “There are a number of unanswered questions that are best resolved by those with an economic interest.

First and foremost, PICO has publicly stated, in cryptic fashion, that it is considering Director/Executive compensation in the event of a monetization of UCP. We call on the PICO Board to reveal its conclusions before taking binding action. Neither we, nor any other shareholder/observer of PICO perceives any justification for compensation when the UCP stake is sold. One astute PICO observer recently stated, ‘The payment of any bonus to any executive or director for the sale of PICO’s stake in UCP is crazy.’ We agree.”