Marcato Capital is a long-term shareholder of Horizon Global Corp (NYSE:HZN), having invested in the company shortly after it went public in 2015. So far this has been an abysmal investment, with the stock down by 47% since the IPO and trading at all-time lows. According to its latest regulatory filing, the fund holds 784,400 shares or 3.14 of the company’s outstanding stock.
Richard McGuire seems to have finally run out of patience, as Marcato has recently fired a letter to Horizon Global Corp (NYSE:HZN)’s board of directors in which it severely criticizing the company’s management and its development strategy. In the letter signed by Shawn Badlani, a partner at Marcato, the fund laments the management’s failure to deliver on its promises for 2017, as the company registered no margin improvements and financial performance was nowhere near the management’s full-year financial guidance. They have also criticized the company’s recent M&A efforts and the board’s failure to tax the management for its poor results.
Going forward, Marcato insist that Horizon Global Corp (NYSE:HZN) should refrain from any new acquisitions and terminate the proposed takeover of Brink Group. Instead, the management should focus on delivering on their promises regarding organic growth and consider buying back its own stocks rather than pursue the acquisition of Brink. Should the management fail to achieve the proposed 2018 financial targets, Marcato argues a change in management would be necessary and the board should prepare a plan for succession. The other alternative would be to sell the company. Marcato plans to step up its interest and has proposed a phone call or a meeting with the Horizon Global’s board.
Although the stock jumped by 15% following the disclosure, it has since dropped again to the $8 level.
Another stock that Marcato Capital has increased its exposure to is Rent-A-Center Inc (NASDAQ:RCII), the provider of rent-to-own furniture and electronics. The company has been the subject of activist efforts by Marcato Capital as well as Glenn Welling’s Engaged Capital for the past year. Marcato first disclosed its stake in Rent-A-Center back in April 2017 and has since grown it to 1.22 million shares. Engaged Capital holds 8.98 million shares or roughly 17% of the company’s common stock.
Although activist investors were pushing for a Rent-A-Center Inc (NASDAQ:RCII) turnaround in the beginning, they have since changed their minds and would prefer the company to sell itself. One of Rent-A-Center’s largest shareholder, Vintage Capital Management LLC is reportedly in talks with the company’s board concerning a potential buyout. Rent-A-Center has already rejected two offers from Vintage Capital. Marcato’s decision to keep on increasing its stake in the company could signal that things are going in the right direction.
Disclosure: none.
