Full Article….from CNBC portions below:
A source close to the situation tells CNBC Berkowitz, whose mutual fund Fairholme Capital Management LLC, owns 29.7% of the company, is proposing to remove the company’s chairman Hugh Durden and three other directors. Under Fairholme’s proposal, Berkowitz, would become chairman and Charles Fernandez, President of Fairholme would become vice chairman of the board. Both men are current directors and plan to decline all compensation, including the reimbursement of expenses, until the company breaks even. The source said Fairholme plans to achieve this within six months by cutting $60 million dollars in expenses at St. Joe.
In addition Fairholme plans to hire a financial advisor to explore possible bolt on acquisitions and/or joint ventures for commercial and residential real estate development. A person close to the situation also said a deal to lease 41,000 acres of timberland is close to being signed and will generate between $80 million to $100 million for St. Joe over a twenty year period. Much of the money from the deal will be paid up front, providing needed cash for acquisitions and joint ventures.
All this makes perfect sense. JOE has massive tracks of land…really valuable land. There isn’t any reason they shouldn’t be bringing in outside people to develop it. The current CEO isn’t the one who got them in the state they are now, but the Board is the same. They do need to go. I have said this for months now and I still think it stands as reasonable. JOE and HHC ought to merge. Perfect operational synergies and the operational mgmt at HHC is a step above JOE. They would extract value for JOE for shareholders.
The company’s board is meeting on Monday and Tuesday in Watersound, Florida. A source close to Fairholme said St. Joe’s current directors have been informed of the proposal.
The source said Fairholme asked Wm. Britton Greene to remain as President and CEO. The mutual fund is proposing Greene and Thomas Fanning, CEO of Southern Company, remain on the board, and asked Durden and three other current directors, Michael Ainslie, Delores Kesler and John Lord to step down at the annual meeting on May 1st. Fairholme is nominating Rodney Barreto, Chairman of Florida’s Fish and Wildlife Conservation Commission, and Howard Frank, Vice Chairman and Chief Operating Office of Carnival Cruise line be elected to the board.
If the current directors do not accept Fairholme’s proposal, the mutual fund plans to call a special shareholder meeting. The mutual fund, which owns 27 million shares, is in a strong position to achieve its goal should it be able to persuade top institutional shareholders like T. Rowe Price and Janus its plan is the right one for St. Joe. Janus and T. Rowe own a combined 24% of the stock, add in Fairholme’s 30% and you have a majority. CNBC’s sources say Fairholme has yet to reach out to these institutional holders.
Bottom line? Berkowitz has the votes and I have a real hard time believing that either Janus or T.Rowe are going to attempt to derail his plans.
St. Joe owns 577,000 acres in northwest Florida. has reported operating losses in 2008 and 2009, and for the first three quarters of 2010, hurt by the real estate downturn and more recently, by the BP oil spill in the Gulf of Mexico. Along with timberlands, the company operates properties with 12 million square feet of commercial space, 31,000 residential properties on acreage that allows for the development of 12,000 more.
As of January 14th, 27 million shares of St. Joe were sold short, up from 25.67 million the month before. The firm’s short interest ratio stood at a hefty of 16.3, meaning it would take a short seller 16.3 days to cover their short positions if the stock begins to rise
Yes……we could very easily see an epic short squeeze…..epic
What to do? This one is tough because at its current prices, JOE is in noway cheap. But it does have the wild card kicker of a potential short squeeze like we have not seen since VW/Porche. I do think Berkowitz will eventually be very successful with JOE, it will just take some time.
Like I said before, no matter how you slice this it is entertaining to watch. .