Tuesday, February 06, 2007

Investor to Fill Home Depot Board Seat

Ralph Whitworth and Relational Investors were able to accomplish their goal of obtaining a board seat at Home Depot, so that they can continue to push for increased shareholder value, as reported in today's WSJ.

Investor to Fill Home Depot Seat

By ANN ZIMMERMANFebruary 6, 2007; Page A10

Home Depot Inc., in an effort to avoid a proxy battle, named activist investor David H. Batchelder to its board.

Mr. Batchelder, 57 years old, is a principal and co-founder of Relational Investors LLC, a San Diego investment fund that was a leading critic of Home Depot's performance under former Chief Executive Robert Nardelli. The new chief executive, Frank Blake, has been reaching out to investors since taking the reins of the nation's largest home-improvement retailer early last month.

In return, Relational Investors dropped a proxy battle to gain at least one board seat.
Relational Investors strongly opposed Mr. Nardelli's efforts to diversify by purchasing wholesale companies that sell building supplies. Ralph Whitworth, a Relational Investors principal and co-founder, said Home Depot should instead be focused on fixing its home-improvement stores, which have been plagued by anemic sales. Mr. Blake, while saying he intends to stay in the supply business, has pledged to make its Home Depot stores a priority.

Mr. Batchelder, who would join the Home Depot board Feb. 22, will be appointed to the company's leadership-development and compensation committee and its audit committee. In addition, Home Depot will nominate and support Mr. Batchelder or another Relational Investors recommendation to the board for each of the next three years as long as the investment fund continues to own a significant stake in the company. It presently owns about 1.3% of Home Depot's shares. In turn, Relational Investors would support each slate of directors nominated by the board.

In December, Relational Investors informed the home-improvement retailer that it planned to launch a proxy battle for at least one board seat if the company didn't form an independent committee to reassess its business strategy and management.

At the time, Home Depot said its board fully supported the company's management and business direction. On Jan. 2, Mr. Nardelli stepped down after he refused to curb his compensation package significantly. Relational Investors said at the time that Mr. Nardelli's resignation wouldn't deter it from seeking board representation.

Two weeks ago, Messrs. Batchelder and Whitworth met with Home Depot's Mr. Blake and two other board members in Los Angeles. The two sides continued to negotiate after the meeting. In exchange for Mr. Batchelder joining the Home Depot board, Relational Investors agreed to withdraw a resolution asking the company to establish an independent committee.

Relational Investors and Home Depot reached agreement on other issues. For example, when Mr. Nardelli stepped down, Home Depot said it was waiving mandatory retirement for a year for three directors who otherwise would have to step down because they are past 72 years old.
The company now has agreed to not extend their retirement past the May 2008 annual meeting, when Home Depot co-founder and board member Ken Langone will also hit the mandatory retirement age.

Mr. Batchelder is currently a director of Washington Group International Inc. and ConAgra Foods Inc.

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Anonymous said...

Banks are falling over themselves to lend money, at ultra-low interest rates and with no strings attached. And the private equity firms do not even need to have a good credit rating. They secure the debt they borrow on the assets of the companies they buy. With pre-determined debt interest costs, any increase in profits from reducing staff numbers, for example, goes straight to the Los Angeles business investors.