Fallen Angel: Sparton Corp.
Recent pressure from an experienced activist investor may kick shares of underperforming Sparton Corp. (NYSE:SPA) into gear.
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Jackson, Mich.-based Sparton Corp., a niche electronic design and manufacturing services provider, has lately been feeling the heat. Last month, Lawndale Capital Management, Sparton’s largest independent shareholder, publicly disclosed that it had sent a series of recommendations to the company’s board of directors. These requests included that Sparton appoint four new independent directors, hire a turnaround management team and engage an advisor to explore a potential sale. Lawndale also provided notice of intent to directly nominate these new directors via a proxy contest if its requests were not met. Lawndale has subsequently disclosed that it is having constructive discussions with Sparton’s board over reaching an amicable settlement. The last few years have not been pretty for Sparton shareholders and clearly the company is in need of changes at the board and management levels. At Monday’s closing price of $3.69 a share, Sparton shares are near their 52-week low of $3.50, set in June, and well off the 52-week high of $6.05 from last October. Going back two years, the stock has declined approximately 50%, during which Sparton has racked up an unenviable track record of eight quarters in a row of operating losses. Historically, Sparton’s main business was designing and manufacturing sonobuoys, an anti-submarine warfare device, for the U.S. military. While perhaps best known for sonobuoys, Sparton manufacturers a host of niche electronics products for corporate and government markets. In 2005, Sparton opened a manufacturing facility in Vietnam, while in 2006 it further diversified by acquiring Astro Instrumentation, . . .
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