Texas Industries proxy fight garners backing for Shamrock fund members from RiskMetrics

By Susanna Moon

Chicago, Oct. 12 - RiskMetrics Group recommended shareholders vote in favor of the Shamrock Activist Value Fund, LP's three nominees to the Texas Industries board of directors and for all three of its corporate governance shareholder proposals at the company's annual meeting of shareholders scheduled for Oct. 22, according to a press release by Shamrock.

The support of RiskMetrics follows the Oct. 8 recommendation by Proxy Governance, Inc. that Texas Industries shareholders vote for the election of the Shamrock Activist Value Fund's nominees and shareholder proposals, the release noted.

In a separate press release, Texas Industries said it has been engaged in private settlement discussions with Shamrock Capital Advisors about its proxy proposals for the Oct. 22 annual meeting.

"Despite significant concessions ... to Shamrock to avoid continuing an already costly and time-consuming proxy fight, those discussions have been unsuccessful," the release said.

"We are certainly disappointed with Shamrock's lack of interest in a cooperative agreement," Mel Brekhus, Texas Industries' chief executive officer, said in the release.

The company said it believes that Shamrock's demands are "unreasonable, result in benefits to Shamrock far out of proportion to Shamrock's interest in TXI and, most importantly, are not in the best interest of all of TXI's stockholders."

As part of its discussions with Shamrock, Texas Industries said it has offered to welcome all of Shamrock's nominees to its board and to include them on the specific board committees requested by Shamrock. In addition, Texas Industries offered to consider Shamrock's requests for changes in the company's bylaws.

Shamrock protests

However Shamrock disputed the company's characterization of its offer.

"Today's statements by CEO Mel Brekhus are not only inaccurate and disingenuous but a thinly-veiled attempt to distract shareholders from the fact that two of the nation's leading proxy advisory firms - RiskMetrics Group and Proxy Governance, Inc. - unanimously and independently recommended that shareholders vote for our three nominees and for our three corporate governance resolutions," Shamrock said in a statement.

"For example, Mr. Brekhus fails to mention that the Texas Industries proposal for our three nominees to join the board was contingent on the three Texas Industries incumbents remaining in office. The board also informed us that it would not implement two of our three corporate governance resolutions relating to the prompt de-staggering of the board and submitting the company's poison pill to a shareholder vote.

"Unfortunately, Mr. Brekhus' inaccurate and incomplete comments are consistent with our view that the management and board of Texas Industries fail to communicate transparently with shareholders."

Meanwhile Shamrock also cited RiskMetrics' support for its view.

"The presence of the three nominees on the board would likely prove beneficial to shareholder value," RiskMetrics said, according to the Shamrock news release.

"The long-term financial and operational performance of the company, as well as the prevalence of several shareholder unfriendly governance provisions, establish the need for change. Further, we believe the dissidents' diverse skill sets will prove beneficial to the board."

As previously reported, in its proxy analysis, Proxy Governance wrote that shareholders "cannot expect a sustainable recovery [at Texas Industries] without taking the extraordinary actions of shaking up both the board and the corporate governance regime."

On Sept. 23 Shamrock Activist Value Fund, LP urged fellow Texas Industries, Inc. shareholders to support Shamrock's three director nominees and three corporate governance shareholder proposals at the company's annual meeting on Oct. 22.

"Texas Industries' record of poor performance is clear, long and overdue for change," Shamrock said in a letter to shareholders.

According to Shamrock, the company has spent "more than $750 million on capital projects that have so far yielded no profits," and "the company's returns on capital are among the lowest in the industry."

Shamrock proposal

Shamrock's nominees are Marjorie L. Bowen, formerly a managing director at Houlihan Lokey Howard & Zukin; Dennis A. Johnson, managing director of Shamrock Capital Advisors, Inc.; and Gary L. Pechota, president and chief executive officer of DT-Trak Consulting, Inc., a medical coding, billing and data-entry services company.

Shamrock has a 10.2% stake in the company. At the meeting, it will propose that Texas Industries:

• Declassify its board;

• Provide for majority voting in all uncontested elections of directors and require any incumbent who does not receive a majority of the votes cast to resign; and

• Submit Texas Industries' poison pill to a shareholder vote no later than the 2010 annual meeting.

As previously reported, NNS Holding and Nassef Sawiris announced they will vote their shares in favor of Shamrock's proposals.

NNS Holding and Sawiris beneficially own 4,123,939 shares, or 14.87%, of the Dallas-based construction materials company's outstanding stock.

Southern Asset Management, Inc., with a 9% stake in Texas Industries, said earlier in the month it too will support Shamrock's nominees and proposals.

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