ELDER-BEERMAN HOLDERS FUSS, AS PRESIDENT EXITS
Byline: Arnold J. Karr
NEW YORK — Elder-Beerman Stores Corp. removed its president and chief operating officer Friday, but the move appears unlikely to placate dissident shareholders who also have sought, among other moves, dismissal of its chief executive and chief financial officer.
The departure of John Muskovich as president, chief operating officer and director leaves Frederick Mershad in place as chairman and chief executive and Scott Davido as chief financial officer. It also sets the stage for what increasingly is beginning to look like a stormy annual meeting in EB’s headquarters city of Dayton, Ohio, on Aug. 24.
EB said in a statement that Muskovich’s responsibilities would be assumed by other “senior members of the Elder-Beerman executive team, and the position of president will be combined with the position of chief executive officer.”
In a 13-D filing with the Securities and Exchange Commission on Feb. 24, The D3 Family Fund, which has a 6 percent stake in the department store company, said that it would like to see the firm replace the three top executives. In a separate 13-D that week, PPM America, which owns 13.2 percent of Elder-Beerman’s stock, suggested either a sale to the highest bidder or a stock buyback.
PPM has put forward 12 separate shareholder proposals to be addressed at the annual meeting and also proposed three alternative directors to sit on the company’s board, Mark Berner, Moira Cary and Eugene Davis.
Reached by WWD in his Canas, Wash., offices, David Nierenberg, president of the Nierenberg Investment Management Company, general partner of D3, said he hadn’t anticipated Elder-Beerman’s move. “In my opinion, the single most needed move is the removal of Mershad, and I wonder when we’ll see that,” he said.
He expressed skepticism about the ability of Wasserstein Perella & Co. to find a buyer for EB or to effect other significant change, as it was appointed to do in February. Unlike PPM, he said, “I haven’t advocated an immediate sale because I don’t believe it’d be propitious at this time. Several potential acquiring companies are in bad shape themselves. What I’d like to see is new management that would get the company in better shape.”
He added that his only contact with Wasserstein Perella came shortly after it was retained by Elder-Beerman. “Basically, they tried to get me to leave, and I declined to do so,” he said.
In its 13-D, D3 said, “If EB’s outside directors do not quickly replace management, D3 will vote its shares against management’s nominees for the board at the next, and at future, annual meetings+. We would study with considerable interest any proxy from PPM or from other shareholders proposing a more shareholder-oriented slate of directors.”
PPM’s slate will be pitted against a trio of current EB directors standing for reelection to the board, all of whom have estimable credentials in the areas of retailing and crisis management. Dennis Bookshester, who became a director last year, is ceo of Fruit of the Loom, in Chapter 11 since last December. Stewart Kasen, a private investor, was the ceo of Factory Card Outlet Corp., in Chapter 11 since March 1999, after serving in the same capacity at Best Products, a company that passed through Chapter 11 twice in the 1990s. The third outside director on the slate is John Wiesner, interim ceo of Stage Stores, which filed Chapter 11 last month.
Muskovich was also listed as a proposed director on the preliminary proxy filed with the SEC last week. Officials at EB wouldn’t comment on how that seat would be filled. Calls to Mershad and Davido weren’t returned.
Elder-Beerman last year had sales of $667.1 million, up 9.3 percent from fiscal 1998, while net earnings dropped 40 percent to $15.3 million.
Shareholder reaction to EB’s move at the end of last week may be critical when shareholders meet in Dayton next month because, in addition to the approximately 19.2 percent of EB stock held by PPM and D3, James Bennett holds 7.4 percent of the stock and has indicated his support for the other dissident shareholders in separate 13-D filings.
Snyder Capital Management of San Francisco is the single largest shareholder, with a 20.9 percent stake, and its support would push opposition to EB management above 47 percent of the shares outstanding. Davis, who is retained by PPM and has been proposed for EB’s board, told WWD, “We’ve been in touch with the people at Snyder and I’m confident they’ll do right by their investment.”
Asked about his qualifications — and those of Berner and Cary — to run a retail company, Davis replied, “They’ve got plenty of retailing expertise at Elder-Beerman. What they need are people who understand corporate governance and shareholder value.”
Muskovich’s departure, Davis noted, “is a sign that management is worried. I’ve been involved in about half a dozen proxy fights, and it’s typical that management will do something dramatic if they think they stand to lose. This is a classic example. Wednesday they put out a preliminary proxy with Muskovich’s name in it, and then on Friday, he’s gone, not even 48 hours later.”