Shareholders Fighting for Control of St. Paul Co. Aetrium

A group of Aetrium investors seeks to join the board of directors, study the company, and ultimately improve shareholder value; Aetrium CEO Joseph Levesque says the board nominees lack industry experience and that the current board opposes the group’s actions.

A group of shareholders is fighting for control of North St. Paul-based Aetrium, Inc., which makes equipment used by the semiconductor industry-and the company has called for a special shareholders meeting on November 26 at the group's request.

The group, formed August 9, is calling itself “Concerned Aetrium Shareholders”(CAS), according to a filing with the U.S. Securities and Exchange Commission (SEC). Members of it collectively own 17 percent of Aetrium's shares.

The group's intention is “to seek to join the board of directors, study the business, and take other, yet-to-be-determined, actions to maximize shareholder value,” according to the SEC filing.

In a prepared statement issued Wednesday, Aetrium President and CEO Joseph Levesque said, “This shareholder group proposes to remove all current members of our board and replace them with its own slate of directors,” adding that “the nominees named by the group have no operational experience in the semiconductor industry or the semiconductor equipment industry.”

Levesque said that CAS representatives have advised Aetrium's current board that their intent is for the group's nominee directors to study the company and, within a year, develop a plan to improve shareholder value.

Aetrium's board now consists of six members, two of whom are company executives—Levesque and Chief Administration Officer and Secretary Douglas Hemer. The shareholder group did not accept Aetrium's offer to provide it one seat on the company's board, according to Levesque.

Jeffrey Eberwein, who used to be a portfolio manager with Soros Fund Management and is a spokesman for the shareholder group, told the Star Tribune: “Our group brings a wealth of experience to Aetrium's board, including proven money makers and turnaround specialists.” He reportedly added that his group includes three former CEOs of public companies.

A recent SEC filing outlined several discussions between Levesque and representatives of CAS, which, in addition to Eberwein, includes Galen Vetter and Richard Coleman, Jr. On August 21, several members of the group had a phone conversation with Levesque, Hemer, and one other Aetrium executive. After failing to reach an agreement regarding Aetrium's board through subsequent e-mail exchanges in late August, CAS requested a special shareholders meeting.

In 2011, Aetrium recorded a $4.7 million net loss on revenue totaling $9 million—down 45 percent from the previous year. Net sales for the first six months of 2012, meanwhile, totaled $3.9 million, down 25 percent from the same period last year; the company recorded a $1.1 million net loss for the period.

In Aetrium's most recent quarterly financial report, the company said that demand for many of its products is driven largely by end-user demand for electronic products. The worldwide financial crisis and global economic uncertainty over the past few years have led to a decrease in electronic products, and the semiconductor industry is still in the midst of a “slow and uneven” recovery.

Levesque said Wednesday that Atrium executives anticipate production levels to remain below peak levels achieved in 2010 through the first half of next year, but he added that industry analysts expect improved conditions by the end of 2013.

Levesque concluded his Wednesday announcement by saying: “Our board believes that deep experience and expertise in the semiconductor and semiconductor equipment industries is imperative to enable the company to successfully navigate these difficult times and to be able to nimbly and quickly identify and take advantage of opportunities these times offer. This shareholder group has no experience in our industry or the industry we serve and no plan of action.”

He said the board has determined that it would be “imprudent to accede to the demands of this shareholder group to be given control of the company,” and the board opposes the actions that the group is proposing.

Aetrium, founded in 1983, is one of Minnesota's smallest public companies; it would not rank among the 100 largest based on its 2011 revenue.