sec document
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/X/ Soliciting Material Under Rule 14a-12
ANGELICA CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
STEEL PARTNERS II, L.P.
STEEL PARTNERS, L.L.C.
WARREN G. LICHTENSTEIN
JAMES HENDERSON
JOHN QUICKE
--------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
--------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
-2-
Steel Partners II, L.P. ("Steel"), together with the other participants
named herein, is filing materials contained in this Schedule 14A with the
Securities and Exchange Commission ("SEC") in connection with the solicitation
of proxies in favor of certain proposals to amend the Restated Articles of
Incorporation of Angelica Corporation (the "Company") and for the election of
its two director nominees at the Company's 2006 annual meeting of shareholders
(the "Annual Meeting"). Steel has not yet filed a proxy statement with the SEC
in connection with the Annual Meeting.
Item 1: On May 23, 2006, Steel issued the following press release.
FOR IMMEDIATE RELEASE
STEEL PARTNERS, ANGELICA CORPORATION'S LARGEST SHAREHOLDER, TELLS BOARD IT IS
DISAPPOINTED OVER COMPANY'S POOR FINANCIAL PERFORMANCE;
CALLS AMENDMENTS TO BY-LAWS SELF-SERVING
NEW YORK, May 23/ PRNewswire/ - Steel Partners II L.P., the largest individual
shareholder of Angelica Corporation (NYSE: AGL), today told that company's Board
of Directors that it "is extremely disappointed by Angelica's continued poor
financial performance and the Board's self-serving amendments to Angelica's
by-laws, the primary purpose of which, we believe, is to entrench itself, as
well as to continue the Board's disenfranchisement of Angelica shareholders."
"The fact that we continue to own our significant investment in Angelica should
not be interpreted as an endorsement of the incumbent Board or management, Steel
Managing Member Warren G. Lichtenstein said in a letter to the Board.
Mr. Lichtenstein continued, "Despite recent `lip service' by the Board in
self-serving press releases regarding appointing a special committee to address
issues raised by Steel Partners, we see no true change. On the contrary, our
grave concerns about the Board's ability to adequately oversee the Company's
operations, are now heightened and we are at red alert."
In the letter, Mr. Lichtenstein described Angelica's recent string of
acquisitions as "financial and operational disasters" that have saddled the
company with additional debt and significantly decreased shareholder value. Mr.
Lichtenstein also protested recent attempts by the Board to entrench itself at
the expense of shareholders, such as delaying the annual shareholder meeting,
amending the company's by-laws to prevent shareholders from calling special
shareholder meetings and extending to three years the period directors can sit
on the board before facing reelection.
Steel Partners holds over 19% of Angelica's outstanding shares.
The text of the letter from Steel Partners to the Board of Directors of Angelica
follows:
-3-
STEEL PARTNERS II, L.P.
590 MADISON AVENUE
32ND FLOOR
NEW YORK, NEW YORK 10022
May 23, 2006
Board of Directors
Angelica Corporation
424 South Woods Mill Road
Chesterfield, Missouri 63017-3406
Ladies and Gentlemen:
As we highlighted in our previous communications with the Board, Steel Partners
II, L.P. ("Steel"), the largest stockholder of Angelica Corporation
("Angelica"), is extremely disappointed by Angelica's continued poor financial
performance and the Board's self-serving amendments to Angelica's by-laws the
primary purpose of which, we believe, is to entrench itself, as well as to
continue the Board's disenfranchisement of Angelica shareholders. The fact that
we continue to own our significant investment in Angelica should not be
interpreted as an endorsement of the incumbent Board or management.
Despite recent "lip service" by the Board in self-serving press releases
regarding appointing a special committee to address issues raised by Steel
Partners, we see no true change. On the contrary, our grave concerns about the
Board's ability to adequately oversee the Company's operations, as well as the
Board's accountability to Angelica's shareholders, are now heightened and we are
at red alert.
Angelica's recent operating performance has been extremely disappointing and the
Board's decisions have been even worse.
The string of recent acquisitions by Angelica can only be classified as
financial and operational disasters.
o INSTEAD OF MAXIMIZING SHAREHOLDER VALUE THROUGH ACCRETIVE
ACQUISITIONS, WE BELIEVE THE STRING OF NINE ACQUISITIONS FOR
OVER $100 MILLION (FUNDED WITH A SUBSTANTIAL INCREASE IN
BORROWINGS) HAVE BEEN DILUTIVE AND HAVE SIGNIFICANTLY
DECREASED SHAREHOLDER VALUE.
o ANGELICA OVERPAID FOR MANY OF ITS ACQUISITIONS. COMPOUNDING
THE PROBLEM, WE BELIEVE CURRENT MANAGEMENT HAS FAILED TO
PROPERLY INTEGRATE SUCH ACQUISITIONS AS A RESULT OF THE LACK
OF GOOD STANDARD WORK PRACTICES THROUGHOUT THE ANGELICA
ORGANIZATION, FURTHER DESTROYING SHAREHOLDER VALUE.
During the past three years Angelica's gross margins have declined to an
alarming level.
-4-
o GROSS MARGINS HAVE DETERIORATED FROM 19% IN FISCAL 2003 TO
12.9% IN FISCAL 2005 (AND WERE ONLY 10.6% IN THE FOURTH
QUARTER OF FISCAL 2005). THIS DETERIORATION IN GROSS MARGIN
HAS VIRTUALLY ELIMINATED ANGELICA'S PROFITABILITY.
Contributing to the gross margin erosion has been management's poor control of
expenses.
o AS A RESULT OF POORLY MANAGING NATURAL GAS COSTS, CURRENT
MANAGEMENT HAS PERMITTED UTILITIES COSTS AS A PERCENTAGE OF
SALES TO INCREASE FROM 7.3% IN FISCAL 2003 TO 9.8% IN FISCAL
2005.
Current management has not effectively managed Angelica's
natural gas costs. They have entered into long term sales
contracts that do not provide for escalations to recover
increases in natural gas prices and have compounded the issue
by poorly timed natural gas hedges. Partially as a result of
entering into natural gas hedges at very high prices, natural
gas costs will increase by $3,000,000 in fiscal 2006, further
reducing gross margins.
o AS A RESULT OF A LACK OF STANDARD WORK PRACTICES AND POOR
UNION RELATIONS, WE BELIEVE CURRENT MANAGEMENT HAS ALLOWED
PRODUCTION EXPENSES AS A PERCENTAGE OF SALES TO INCREASE FROM
41% IN FISCAL 2003 TO 45.5% IN FISCAL 2005.
o ANGELICA CONTINUES TO HAVE BLOATED STAFFING, MAINTAINING A 15
PERSON CORPORATE STAFF IN THEIR ST. LOUIS OFFICE, WHICH ONLY
MANAGES ONE BUSINESS UNIT, RATHER THAN EFFICIENTLY COMBINING
THE ST. LOUIS OPERATIONS WITH OPERATING HEADQUARTERS IN
ATLANTA.
Despite the Company's poor performance, the Board does not seem to be
recognizing that problems exist. Instead, the Board has rewarded an ineffective
management with generous restrictive stock grants.
We understand that in light of its record members of the Board may feel
extremely vulnerable to shareholder criticism and action, and in fact may be
concerned that they will be voted out at the next election of directors. Could
this be the reason for recent actions by the Board which we believe are
primarily designed to entrench the Board? Some recent examples of egregious
actions taken by the Board include the following:
o DELAYING THE ANNUAL MEETING UNTIL OCTOBER 31, 2006
We are deeply concerned with the timing of the 2006 Annual
Meeting of Shareholders. Angelica has consistently for more
than a decade held its Annual Meeting in the last two weeks of
May. However, this year, where we have questioned the Board's
actions and have provided notice of nominating directors and
proposing Bylaw amendments, the Annual Meeting Date has
inexplicitly been delayed to October 31, 2006, and the Bylaws
have been amended to provide for such date. BYLAWS WERE
AMENDED APRIL 28, 2006.
o AMENDING THE BYLAWS TO PROHIBIT SHAREHOLDERS FROM CALLING
SPECIAL MEETINGS OF SHAREHOLDERS
We believe that the Board has forgotten who are the owners of
the Company. Annual and Special Meetings of Shareholders are
important tools for shareholders voices to be heard. Not only
has the Board delayed the Annual Meeting, but it has
completely disenfranchised shareholders by prohibiting
shareholders from calling a special meeting. In our December
14, 2005 letter to the Board we recommended that the Bylaws be
amended to allow shareholders who own more than 10% of
Angelica shares to call special meetings, rather than the
prior 50% standard. Instead, the Board amended the Bylaws to
prohibit shareholders from calling a special meeting under any
-5-
circumstances. BYLAWS WERE AMENDED MARCH 20, 2006. DOES THE
BOARD REALLY BELIEVE THAT SHAREHOLDERS SHOULD NOT BE PERMITTED
TO ACT, EVEN THOUGH WE ARE THE TRUE OWNERS OF ANGELICA?
o AMENDING THE BYLAWS TO PERMIT DIRECTORS APPOINTED BY THE BOARD
TO SERVE ON THE BOARD FOR UP TO THREE YEARS BEFORE HAVING TO
STAND FOR ELECTION BY SHAREHOLDERS, RATHER THAN HAVING TO
STAND FOR ELECTION AT THE NEXT ANNUAL MEETING
Allowing the Board to appoint directors whose nominations do
not have to be submitted to shareholders for up to three years
is just a further way the Board has insulated itself from
accountability to Angelica's true owners, the shareholders.
BYLAWS WERE AMENDED JANUARY 17, 2006.
We believe the aggressive actions recently taken by the Board clearly contradict
general standards of good corporate governance. We are concerned that the
interests of the Board and management may not be clearly aligned with the
interests of Angelica's shareholders. Steel's 1,847,250 shares owned in Angelica
in contrast to the 258,490 shares actually owned by all directors and officers
as a group, clearly demonstrate that Steel's interests are closely aligned with
that of all of Angelica's shareholders.
We continue to believe that Angelica's significant inherent value will continue
to deteriorate unless immediate action is taken by the Board. It is imperative
for the Board, in fulfilling its fiduciary duties to shareholders, to be
attentive to the objectives of its shareholders as the Board attempts to enhance
the value of Angelica's common stock and to address issues raised by significant
shareholders.
Steel Partners is committed to working to improve Angelica's performance, and
would welcome the opportunity to do so with the Board. However, as a significant
shareholder of Angelica, Steel Partners will not permit itself to be held
hostage to a Board acting to protect its own interests, rather than the
interests of shareholders. Steel Partners stands ready to meet with the Board of
Directors and its representatives as soon as possible if the Board is willing to
constructively address its concerns. Please contact the undersigned at (212)
520-2330 in order to schedule a meeting.
Steel Partners II, L.P.
Warren G. Lichtenstein
Managing Member of General Partner
CERTAIN INFORMATION CONCERNING PARTICIPANTS
Steel Partners II, L.P. ("Steel Partners"), together with the other Participants
(as defined below), intend to make a preliminary filing with the Securities and
Exchange Commission ("SEC") of a proxy statement and accompanying proxy card to
be used to solicit votes for the election of its slate of director nominees at
the 2006 annual meeting of shareholders of Angelica Corporation, a Missouri
corporation (the "Company"), which has not yet been scheduled.
-6-
STEEL PARTNERS STRONGLY ADVISES ALL SHAREHOLDERS OF THE COMPANY TO READ THE
PROXY STATEMENT WHEN IT IS AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT
INFORMATION. SUCH PROXY STATEMENT WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S
WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THE
SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE UPON
REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY
SOLICITOR, MORROW & CO., INC., AT ITS TOLL-FREE NUMBER: (800) 662-5200.
The participants in the proxy solicitation are anticipated to be Steel Partners,
Steel Partners, L.L.C. ("Partners LLC"), Warren G. Lichtenstein, James Henderson
and John Quicke (collectively, the "Participants"). As of the close of business
on May 22, 2006, Steel Partners beneficially owned 1,847,250 shares of common
stock of the Company (the "Shares"), constituting approximately 19.6% of the
Shares outstanding. As the general partner of Steel Partners, Partners LLC may
be deemed to beneficially own the 1,847,250 Shares owned by Steel Partners,
constituting approximately 19.6% of the Shares outstanding. As the sole
executive officer and managing member of Partners LLC, which in turn is the
general partner of Steel Partners, Mr. Lichtenstein may be deemed to
beneficially own the 1,847,250 Shares owned by Steel Partners, constituting
approximately 19.6% of the Shares outstanding. Mr. Lichtenstein has sole voting
and dispositive power with respect to the 1,847,250 Shares owned by Steel
Partners by virtue of his authority to vote and dispose of such Shares.
Currently, Messrs. Henderson and Quicke do not beneficially own any Shares.
-7-