St. Joe Chair: No Plans to Take Company Private

Monday, 07 Mar 2011 12:54 PM

 

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St Joe Co.'s new chairman said he is not interested in taking the company private, but plans to install a new chief executive to put northwest Florida's largest land owner on a growth track and reverse its nearly three years of losses.

Many analysts have speculated that the chairman, Bruce Berkowitz, could try to privatize the company. His Fairholme Capital Management LLC fund firm holds a 28.9 percent stake in St. Joe, which operates in one of the states hardest hit by the collapse of the U.S. housing market.

"I don't think anyone is going to take St. Joe private," Berkowitz told Reuters in a telephone interview on Sunday.

Berkowitz became chairman on Friday, after a battle with its board and a threat of a proxy fight. Fairholme President Charles Fernandez was named St. Joe's vice chairman, and two other Fairholme picks were named to the board. Four board members left, including Chief Executive Britt Greene.

Top on Berkowitz's to-do list will be to appoint a new CEO before St. Joe's annual shareholder meeting on May 17. He said he had several people in mind for the job, from inside and outside the company.

"Charlie (Fernandez) and I are going to set the foundation in place with a new management team, with the new board to oversee it," Berkowitz said.

NATIONAL TREASURE OR CARDBOARD?

St. Joe is a relatively small company with a stock market value of about $2.5 billion, but it has made headlines recently for competing investor views on its prospects. Whether St. Joe can turn itself around could settle who is right: Berkowitz or hedge fund manager David Einhorn of Greenlight Capital LLC.

Einhorn, one of the first investors to bet against investment bank Lehman Brothers Holdings Inc, has been shorting St. Joe stock, betting it will fall. He views the company as little more than a mediocre timber producer.

On the other side is Berkowitz, whose Fairholme Capital Management LLC manages Fairholme Funds' $24 billion in assets.

"There's a large group of people who believe we have lousy timberland, and another group of people who believe we have something that's a lot more special," said Berkowitz, a Miami resident with a thick Boston accent.

In morning trading, St Joe shares were down 3.3 percent at $26.51 on the New York Stock Exchange.

Berkowitz said St. Joe should stop using high-priced professionals and instead employ lower-cost outside managers to oversee some assets.

The company could also pare legal costs. It has spent $4.2 million on lawsuits against Halliburton Co. and two other companies for damages tied to the April explosion of the Deepwater Horizon oil platform in the Gulf of Mexico. About 70 percent of its land is within 15 miles of the Gulf coast.

"We're going to take a look at every piece of litigation," Berkowitz said.

Berkowitz sees St. Joe's 574,000 acres as a "national treasure" with the potential to become one of Florida's largest residential, commercial and tourist centers.

St. Joe is focused on planning and getting necessary permits to build communities and homes for businesses. It sold only 81 home sites last year, when it also sold $3 million in rural land to raise cash.

PERUSING THE REVIEW

More than a month ago, the WaterSound, Florida-based company hired Morgan Stanley to help it evaluate strategic options, including selling the company.

Berkowitz said he is "willing to look at every alternative."

The key to igniting the growth is jobs, Berkowitz said. "The future of this company is going to be based on bringing industry into the area," he said.

Berkowitz recently traveled to Singapore and Hong Kong to meet with companies that potentially may become a "game changer" by bringing in a business or building a hotel, he said. St. Joe also may look for a joint venture, partners or bolt-on acquisitions, he said.

Fairholme has owned St. Joe shares for three years, and Berkowitz said he would buy more "at the right price." He said the stock trades at about the average price he has paid.

Berkowitz also said St. Joe would not take his attention off Fairholme. "It won't take that much time to get the company moving in a forward progression," he said.

© 2014 Thomson/Reuters. All rights reserved.

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