Selling off non-core assets to reduce debt and installing long-time Magna International Inc. executive Fred Gingl as chief executive officer are among the plans of dissident shareholders seeking to turf the board of Martinrea International Inc.
"The current state of Martinrea's balance sheet has become a long-term competitive disadvantage and must be repaired to restore strategic flexibility," says a dissident group led by Nat Rea, a former vice-chairman of Martinrea and one of the founders of the company.
"Repairing Martinrea's balance sheet will create additional flexibility and allow the company to invest in research and development, a critical component to ensuring future growth," the group said in a online presentation to investors.
The battle for control of Martinrea, Canada's third-largest auto parts company by revenue, follows a lawsuit launched last fall by Mr. Rea, a former vice-chairman of the company, who left it in 2012. The lawsuit accused company officers and directors of breaching their fiduciary duties and engaging in corrupt practices.
Martinrea has denied the allegations, filed a countersuit against Mr. Rea and said last month that a forensic investigation by PricewaterhouseCoopers found only minor issues.
He now leads the dissident group seeking to throw out the existing board of directors. Mr. Rea – the rea in Martinrea – founded the company with another group of ex-Magna executives in 2002.
The group of ex-Magna executives included current Martinrea chairman Rob Wildeboer and former CEOs Nick Orlando and Fred Jaekel. Mr. Orlando and Mr. Jaekel left Magna's metal-bashing division, Cosma International Inc., to join Royal Laser Tech Corp., which they merged with Mr. Rea's company to create Martinrea.
The slate of directors nominated to replace the current board includes Mr. Gingl, who is a former CEO of Magna and now heads BionX International, a maker of electric bicycles and boats. If the group is successful and Mr. Gingl becomes CEO, it will continue the run of former Magna executives at the top of Martinrea, which is based in Vaughan, Ont.
Mr. Gingl and Mr. Jaekel worked together as senior executives at Magna for much of the 1990s. Mr. Jaekel resigned as Martinrea's CEO in March, 2011, and was replaced by Mr. Orlando. Mr. Orlando resigned last month and the company is searching for a new CEO.
Martinrea grew to its current size – revenue of $3.2-billion in 2013 – through a series of acquisitions during the 2000s that broadened its customer base and its capabilities as a manufacturer of metal components for the auto industry.
Profit growth, however, has lagged. While revenue grew last year from $2.9-billion in 2012, Martinrea reported a final profit of $16.9-million, compared with a final profit of $37.1-million in 2012. Debt has risen to $434.5-million from $62.4-million in 2003.
The dissident shareholders said problems at several Martinrea plants in recent years demonstrate that new management is needed at the company.
"The technical competence of our nominees will strengthen management oversight, provide strategic guidance and assist in identifying, attracting and retaining the technical skills required to effectively oversee the company's operations," they said in their online presentation.
Mr. Wildeboer did not reply to an e-mail seeking comment on the dissident shareholders' statements.
The other nominees for the board are Mr. Rea; Sandra Levy, senior vice-president of human resources of Ply Gem Canada and another former Magna executive; Roland Nimmo, president of Nimmo Financial Corp.; and Paul Smith, chairman of Via Rail Canada.
Editor's Note: An earlier online version of this article incorrectly said Martinrea lost $51.4-million in 2013. This version has been corrected.