Wynnefield Urges Motorcar Parts of America Board to Explore Strategic Alternatives
NEW YORK--Wynnefield Capital, a long-term investor in Motorcar Parts of America, Inc. (“the Company”), today released a letter urging the Board of Directors to commence a “process to explore strategic alternatives in order to enhance shareholder value including, but not limited to, a potential sale of the Company”. Full text of Wynnefield’s letter follows:
“process to explore strategic alternatives in order to enhance shareholder value including, but not limited to, a potential sale of the Company”
March 22, 2010
| The Board of Directors |
| Motorcar Parts of America, Inc. |
| 2929 California Street |
| Torrance, CA 90503 |
| Attention: Selwyn Joffe, Chairman/President/CEO |
Dear Members of the Board of Directors:
We are writing to you on behalf of Wynnefield Partners Small Cap Value, L.P., Wynnefield Partners Small Cap Value, L.P. I and Wynnefield Small Cap Value Offshore Fund, which collectively own, or have an economic interest equivalent to 3.5% of the common stock of Motorcar Parts of America.
We applaud the recent $5 million stock buyback program announced on March 16th and management’s successful repayment of the company’s line of credit. Management has successfully built an efficient low-cost remanufacturing platform in Mexico and Malaysia, and counts all major US aftermarket retailers as their end customers. The company now enjoys 50% capacity availability on their remanufacturing platform, a complete US-based distribution network of aftermarket retailers, a reduced debt-load, and positive free cash flow generation.
However, the company’s revenues have stalled over the past 4 years and the company’s stock price has not recovered from the mid-to-low teen dollar per share stock level reached when the company closed on a private placement on May 24th, 2007. All this time, Mr. Selwyn Joffe, Chairman and CEO, received an average total compensation of $1,685,000, Mr. David Lee, CFO, received an average total compensation of $375,000, Mr. Michael Umansky, Secretary and General Council, received an average total compensation of $551,000, and Mr. Mel Marks, a Director, continued to receive a $350,000 per year consulting fee. These four salaries accounted for over 11% of total operating expenses in fiscal year 2009.
We ask the Board of Directors to begin the process to explore strategic alternatives in order to enhance shareholder value including, but not limited to, a potential sale of the Company. A successful strategic acquirer of the company would receive an efficient low-cost remanufacturing platform with available capacity, a distribution network of all major aftermarket retailers, and a company that enjoys EBITDA margins in the low teens. The successful strategic acquirer could also enjoy immediate operating expense synergies of over 11%, or about $3,000,000 per year.
| Very truly yours, |
| Dwight Mamanteo |
| Portfolio Manager |
| Nelson Obus |
| President |
ABOUT WYNNEFIELD CAPITAL
Wynnefield Capital, Inc., with its affiliates, is a long-term shareholder of Motorcar Parts of America, Inc., holding or having an economic interest in approximately 3.5% of the Company’s outstanding common stock. Established in 1992, Wynnefield Capital is a value investor specializing in U.S. small cap situations that have company- or industry-specific catalysts.