FAB SHARE PRICE CALLED INTO QUESTION
Byline: Scott Malone
NEW YORK — A shareholder of knit-fabric mill Fab Industries has proposed that the company either sell or liquidate itself due to its current low stock price.
The proposal, made by Ralph A. Young, of Harrison, N.Y., who holds 30,666 shares of Fab, was included in the company’s proxy statement filed with the Securities & Exchange Commission on Monday. Young’s stake represents less than 0.6 percent of the more than 5.3 million Fab shares outstanding.
The board, which along with management holds almost 1.8 million shares, urged other shareholders to vote the proposal down.
Young’s proposal suggested that the board “retain the services of an investment banking company, not previously retained by Fab, for the sole purpose of studying and recommending the best course of action between the choices of selling, liquidating or continuing the operations.”
In a supporting statement, Young noted that despite the nation’s recent economic prosperity, Fab shares over the past two years have traded at levels as low as one-third of their recent high.
In a telephone interview, Young identified himself as a private investor who has held a stake in Fab for over a decade. He noted that he has holdings in other textile concerns, as well.
In Monday trading on the American Stock Exchange, Fab shares remained unchanged at 12. The 52-week high was 16 1/2, while the low was 9 7/8. In early 1998, Fab shares reached a high of around 30.
In the SEC statement, Young pointed out that management has considered recent low earnings to be “caused by competition from cheaper imports.”
“The U.S. is publicly committed to fair-trade policies that will continue to permit these imports,” he wrote. “It has, in fact, recently signed trade agreements permitting even more imports in the future. A reasonable person could well question the long-term viability of Fab if something dramatic does not occur quickly.”
He noted that the stock has traded as low as half of the company’s book value.
For the fiscal year ended Nov. 27, Fab reported net income of $517,000, off 91.4 percent from $6 million the prior year. Sales were $128.9 million, down 14.9 percent from $151.4 million.
Over a similar time frame, a significant number of publicly traded apparel textile companies reported losses or earnings declines. Most have cited competition from imports, as well as charges related to restructuring intended to make their operations more competitive.
In its response to Young’s statement, Fab’s board said it opposed such a move, noting that there was no proof that there were any buyers who would want to pay book value for the company and that a sale could have a negative effect on Fab’s relationships with its customers.
“The board has always acted and will continue to act in what it considers to be the best interests of the company’s stockholders,” the response said.
“The board has reviewed and will continue to review all available strategic alternatives to maximize the overall value to the company’s shareholders.”
In a telephone interview, Samson Bitensky, Fab’s chairman and chief executive, said Young is overly optimistic in his belief that the company could be sold for substantially more than the price at which its shares are trading. But he acknowledged that Fab’s stock is at a frustratingly low level.
“I feel bad for him,” said Bitensky, who owns more than 1.5 million Fab shares, adding, “Just like I feel bad for myself.”