MEDINA, OH — Paint and coatings manufacturer RPM International Inc. announced several new initiatives designed to bolster operational and financial improvement and enhance shareholder value. The initiatives include the appointment of two new independent directors to RPM’s Board of Directors, Kirkland (Kirk) B. Andrews and John M. Ballbach, and the formation of a new Operating Improvement Committee (OIC) of the board. The company also announced that it will approve and recommend amendments to its Amended and Restated Certificate of Incorporation to provide for an annually elected board. These initiatives follow dialogue and collaboration with Elliott Management Corporation (Elliott) and entry into an associated cooperation agreement between RPM and affiliates of Elliott.
RPM’s newly formed OIC will be composed of four independent directors: Kirk Andrews and Robert Livingston (who will serve as Co-Chairs), Thomas Gross and John Ballbach. Frank Sullivan, Chairman and CEO of RPM, will serve as a non-voting ex officio member. The OIC’s review, among other things, will focus on operational and financial initiatives to create and enhance shareholder value. Certain of these initiatives will center around setting and achieving new company margin targets based on top-performing industry standards and optimization of RPM’s balance sheet, including streamlining working capital and implementing new capital allocation guidelines and capital return plans. The company has engaged AlixPartners LLP, an outside management consulting firm, to work with the OIC and management on this review. RPM expects to provide a comprehensive update to the market as promptly as practicable, but in no event by later than Nov. 30, 2018. Concurrent with the announcement, the company will introduce transparent metrics to track achievements relative to plan on a regular basis.
“Over the past year, RPM’s board and management have begun working on initiatives to drive greater efficiency across our operations while maintaining our growth momentum,” said Sullivan. “We have made some progress in reducing SG&A and identified key opportunities to improve manufacturing efficiencies, lower operating costs, and improve working capital. The initiatives announced today position us to progress significantly on these plans. Both Kirk and John add new perspectives and proven operational track records to our board, and we look forward to benefitting from their expertise and experience as we take action to drive operational efficiencies, long-term performance and value creation.”
Jeff Rosenbaum, Portfolio Manager at Elliott Management, said, “We are pleased to have worked constructively with RPM’s board and management team on the initiatives announced today. RPM has an outstanding collection of leading brands, and we believe the company has significant potential for further operating, financial and balance sheet improvements. Kirk Andrews brings strong portfolio and operational review and execution experience with his leadership in NRG’s recent $855 million cost and margin enhancement program, and John Ballbach brings strong industry know-how and leadership skills from his work as a Valspar senior executive. They will both add immediate value to RPM’s board and newly formed Operating Improvement Committee. We are confident that this ‘no stone unturned’ review will lead to several hundred basis points of margin improvement, capital returned to shareholders, and superior overall results for the company.”
The appointments of Andrews and Ballbach are effective immediately and expand the size of RPM’s board from 12 to 14 members, 13 of whom are independent.
Under the terms of the cooperation agreement between RPM and Elliott, Elliott has agreed to customary standstill, voting and other provisions. The full cooperation agreement will be filed on a Form 8-K with the Securities and Exchange Commission.