Federal Signal secures major investor
Struggling Oak Brook-based Federal Signal Corp. will receive a $31 million cash infusion through a deal announced Thursday with investment group RCG Starboard Advisors LLC.
Under the agreement, RCG willobtain 4 percent of Federal Signal stock andtwo seats on its board.
"I don't think it's really going to make a difference," Morningstar analyst Min Ye said. "This company has so many problems I'm just not very excited about this one event."
The deal encompasses funds managed by RCG and its affiliates, including international investment firm Ramius LLC.
As part of the agreement, Federal Signal, a manufacturer of security products and tools for municipal, government, industrial and airport customers, agreed to appoint to its board Dennis J. Martin, retired chairman and CEO of Lincolnshire-based General Binding Corp. and currently an independent adviser to businesses. Federal Signal will nominate Martin for a three-year term at the company's 2008 annual meeting next month.
If elected at that meeting, Martin will have the right to appoint another board member for a one-year term. At that point, the board will have 10 members. RCG will also reserve the right to appoint an observer to the board who would be present at all meetings and have access to written information.
Martin is already on the boards of Iowa-based HNI Corp., an office furniture manufacturer, and Waukegan-based Coleman Cable Corp., a producer of office electronic wire and cable products. Before joining General Binding Corp., Martin was a president of Glenview-based Illinois Tool Works Inc.
Under the agreement, RCG won't put forth nominations or stockholder proposals at Federal Signal's annual meeting.
Federal Signal will reimburse RGC up to $20,000 for expenses incurred in the execution of the agreement or in attending the annual meeting.
Federal Signal has suffered recently as municipalities reduced their purchases of products the company produces, like fire trucks and sewer cleaners. Earnings dropped nearly 44 percent in the quarter ended Dec. 31 but beat analysts' estimates of 14 cents per share on revenue of $343.8 million.
Net income totaled $8.6 million, or 18 cents per diluted share, a decrease from the $15.3 million, or 32 cents per diluted share, recorded in the year-earlier period. Earnings were down despite a 3.6 increase in revenue, to $351.4 million.