Clinton Group fires back at Griffon

By Lisa Kerner

Charlotte, N.C., June 28 - Griffon Corp. investors led by the Clinton Group accused chief executive officer Harvey R. Blau of mischaracterizing the investors' recapitalization proposal.

Specifically, Clinton Group disputed Blau's assertion that the proposal is indefinite.

"Its terms were set forth with specificity, and when we later discussed it with your investment bankers; they seemed to understand it quite clearly," Clinton Group's Conrad Bringsjord said in a letter to Blau included in a schedule 13D filing with the Securities and Exchange Commission.

The investors also denied any attempts to take control of Griffon with a $65 million investment.

"In reality, we are attempting to RETURN control of the company to the stockholders and, to achieve this, our proposal reflects an ADDITIONAL investment of $65 million that, when added to our existing position as the second largest stockholder, and combined with the proposed 50% reduction in shares as a result of the tender offer, would result in our owning close to 20% of the company," the letter stated.

Clinton Group also took issue with the idea that its intentions are as a short-term profit motive at the expense of other stockholders.

"Your filing also stated that our proposal reflected a valuation for the company that was lower than our initial valuation. The stockholders will be afforded the opportunity to decide for themselves whether the valuation reflected in the tender offer is appropriate in deciding whether or not to tender their shares," Clinton Group wrote.

"While the company's financial advisers were polite in our meeting, it was clear that neither they nor the board has any current intention to negotiate the terms of our proposal."

Clinton Group said it may solicit support to call a special meeting of shareholders to vote "on matters relating to improving corporate governance and stockholder value."

Bringsjord urged the board not to attempt to add a poison pill, "as this would only serve to further entrench management at the expense of stockholders."

On June 4, Griffon said Bringsjord and the Clinton Group "mischaracterized" their prior dealings with the company. Blau responded to the investors' May 31 letter claiming they did not receive a "meaningful response" from the company in regards to the group's proposed $25 per share public recapitalization of Griffon.

The group had asked for the opportunity to outline its transaction to the board, according to a news release. Under the investors' proposal, up to 50% of shares outstanding would be purchased through a tender offer, with each existing shareholder entitled to have a minimum of 50% of their current holdings purchased if proration is required.

Funding for the recapitalization was expected to come from $395 million of first-lien bank financing, $130 million of second-lien bank financing and some $65 million of incremental capital from Clinton Group, or its affiliates and co-investors.

The proposal was contingent on several factors, including the Clinton Group initially appointing a majority of the directors to the board and the engagement of a restructuring firm to manage the company on an interim basis.

The Clinton Group beneficially owns 2,669,740 shares, or 9.0%, of the Jericho, N.Y., diversified manufacturing company's outstanding stock.

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