No kisses were being tossed on Valentine’s Day at St Joe Company as a dispute over board governance, management compensation and a possible battle for control broke into the open in the battered Florida real estate market.
Bruce Berkowitz and Charles Fernandez, executives of the $20 bn Miami-based Fairholme Capital Management, resigned from the board of Florida land developer St Joe. The pair also withdrew their names from the proxy for election at the company’s upcoming annual meeting.
The resignations follow last week’s announcement by St Joe that it had hired Morgan Stanley to help it evaluate alternatives to enhance shareholder value, including ‘a revised business plan, operating partnerships, joint ventures, strategic alliances, asset sales, strategic acquisitions and a merger or sale of the company.’
Tactically, the Fairholme executives are in a better position to attempt to take control of the company if they are not on the board, so stay tuned.
Berkowitz and Fernandez, representing 29 percent of the company’s shares, joined the board only in December 2010, with pledges to work with the board and management to unlock shareholder value.
Berkowitz had been defending St Joe against another hedge fund manager, David Einhorn, who had been shorting the stock and saying the company needed to write down its real estate holdings, according to media reports.
Bloomberg reports that Berkowitz and Fernandez had put former Florida governor Charlie Crist forward for board membership, but were rebuffed. Bloomberg also reports that St Joe issued a statement calling the resignations ‘not in the best interest of all St Joe shareholders’.
‘While on the board, Fairholme’s representatives had advised the company that they substantially agreed with the business plan and approved the exploration of strategic alternatives,’ the company states.
St Joe, with extensive undeveloped land holdings in northern Florida, reported a net loss of $130 mn on revenue of $138.3 mn in 2009 and a loss of $50.3 mn on $62.4 mn of revenue through the first nine months of 2010.
In an amended 13G filing yesterday, Fairholme reported that Berkowitz and Fernandez sent the following terse email to the other board members:
‘Directors of St Joe: The two of us have discussed the situation at St Joe and its nominating and governance process. We will not stand for reelection except as part of a board where a majority of the directors are committed to shareholder value, pay for performance and effective corporate governance.
‘After working with the current board over these past weeks, we have concluded that [it] is not in a position to propose such a slate of directors. Accordingly, we withdraw our names from consideration by the nominating and governance committee for election at the annual general meeting, and we resign from the board of St Joe, effective immediately. Bruce & Charlie.’
