Lesco investor reiterates dissatisfaction with proposed Deere merger

By Lisa Kerner

Charlotte, N.C., March 12 - A group of Lesco, Inc. shareholders led by Hawkshaw Capital Management, LLC with a 13.63% stake in the company sent a second letter to Lesco's board denouncing the proposed "fire sale" of the company to Deere & Co. for $14.50 per share.

The March 12 letter was sent following the investors' review of Lesco's preliminary merger proxy statement, according to a schedule 13D filing with the Securities and Exchange Commission. Hawkshaw, Lesco's second-largest shareholder, reiterated that it will vote against the transaction, according to the filing.

In the letter, Hawkshaw said that the company's intrinsic value is "demonstrably higher than $14.50" and that Deere's proposed acquisition price is "completely inadequate."

Hawkshaw also noted that this view is supported by Lesco's own internal five-year forecast of revenue and operating profit that was included in the proxy.

"You are asking us to sell to Deere, in exchange for $137 million, a business that within five years you believe will be generating approximately $1 billion in sales at a 3.6% operating margin (or $37.5 million)," Hawkshaw said in the letter.

"We would much rather proceed as an independent company under the leadership of Jeff Rutherford than hand over significant future profits at a bad time to a very smart strategic investor. Deere no doubt appreciates the normalized earnings opportunity of the Lesco franchise, irrespective of the significant synergies that also exist," Hawkshaw added.

In its Feb. 20 letter to the board, Hawkshaw questioned the proposed merger and suggested the company increase shareholder value by rebuilding its direct sales force and grow the number of high return-on-capital service centers.

Shares (Nasdaq: LSCO) of the Cleveland landscape services company closed at $14.37 on March 9.

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