Fairholme Responds to St. Joe

In a SEC Filing tonight Fairholme responds to today statements by St. Joe.

Earlier JOE said:

WaterSound, FL — February 16, 2011 — The St. Joe Company (NYSE: JOE) today issued the following statement in response to Fairholme Funds, Inc.’s (NASDAQ: FAIRX) announcement that it is seeking to remove all of the members of the Company’s Board of Directors and to replace them with Fairholme nominees:

“St. Joe adamantly opposes Fairholme’s efforts to obtain control of the Company without paying a control premium to all other shareholders. If Fairholme and its President, Bruce Berkowitz, want to take control of St. Joe, they should make an offer to all shareholders to buy it.

Since the Fairholme representatives on the St. Joe Board voted to approve the decision to explore financial and strategic alternatives, we believe that Fairholme should support that process by participating in it, rather than seeking to obtain control of the Company through a costly and disruptive proxy contest.

To date, Fairholme has not submitted for consideration any alternative business plan to enhance value for all St. Joe shareholders. If Fairholme and Mr. Berkowitz have an alternative business plan or strategic initiative that they believe to be in the best interests of all of St. Joe shareholders, they should propose it for consideration as part of the Company’s process for reviewing all strategic alternatives.”

Fairholme responded:

  • Item 1: On February 16, 2011, Fairholme Funds, Inc., on behalf of its series The Fairholme Fund, issued the following material to members of the media:
  • Andy Dietderich, principal outside counsel to Fairholme Funds, said “The Company did not read Fairholme’s release. A take-over? How can you take over a company by asking the other shareholders to choose directors? That’s the opposite of a take-over. Fairholme Funds has absolutely no intention of taking over anything. We are giving the company back to all its shareholders. It’s a dividend of governance.”
  • Charlie Fernandez said through a representative: “The St. Joe board is picking and choosing from what Bruce and I said on the board. If the board really wants to lift confidentiality restrictions relating to their board meetings, Bruce and I would be delighted and will give the public a full report of what we learned.”
  • “In the meantime, Bruce and I can’t talk about what happened at the St. Joe board. We are bound by confidentiality. All I can say is that it does not take six weeks to know a board is so entrenched it can’t do the right thing.”
  • Bruce Berkowitz said through a representative: “I met Charlie Crist for the first time two weeks ago. He is completely independent of Fairholme and has not provided any services to Fairholme or St. Joe. He is simply a great director. We are looking to our shareholders to propose five more. We want St. Joe to have a fantastic Board, with a full majority independent of management or Fairholme.”
  • “This is not about strategic alternatives. This is about who is running the company. The board is hiding behind a false sale process. The business plan is broke. No one will buy it until it is fixed. I’m surprised Morgan Stanley is playing along. The only purpose of this exercise is to entrench the board. Is Morgan Stanley not collecting fees for that? No counterparty will take this board or management seriously. They have no mandate and must go.”
  • “What really concerns me is that the desperate board might do something stupid with the shareholders’ company. There are actions that they could take to harm the business that do not require shareholder approval.”
  • “We support the analysis of strategic alternatives, but only after the business plan is fixed and the company is in the hands of its shareholders.”
  • “The worst thing is that the board is spending shareholder money to protect itself from shareholders. It’s unconscionable. Directors should think for shareholders, not themselves.”

I’m not sure there is any way that the current Board can honestly think they are going to win this one. I just can’t believe Blackrock, T Rowe and Janus are going to side with them. If Berkowitz gets only two of the three he will have enough votes to elect his slate.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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