GrafTech Files Definitive Proxy Materials for
2024 Annual Meetings of Stockholders
GrafTech Stockholders Urged to Vote “FOR” the
Board-Recommended Nominees Using WHITE Proxy Card
GrafTech International Ltd. (NYSE: EAF) (“GrafTech,” the
“Company,” “we,” or “our”) today announced that it has filed its
definitive proxy statement and WHITE proxy card with the Securities
and Exchange Commission (the “SEC”) with respect to its 2024 Annual
Meeting of Stockholders (the “Annual Meeting”) to be held on May 9,
2024. Stockholders of record as of the close of business on March
13, 2024 will be entitled to vote at the Annual Meeting. GrafTech’s
Board of Directors (the “Board”) also issued a letter to the
Company’s stockholders in connection with the filing. The full text
of the letter follows.
April 2, 2024
Dear Fellow GrafTech Stockholders,
In advance of the upcoming Annual Meeting, you have an important
decision to make regarding the composition of the Company’s Board
that could impact the future of the Company and the value of your
investment. Nilesh Undavia, a private investor, has nominated
himself for election to the Board. The Board does not endorse his
candidacy and urges you to vote “FOR” the nominees recommended by
the Board (Ms. Debra Fine and Mr. Anthony R. Taccone) using the
WHITE proxy card. The Board further urges you to DISCARD all blue
proxy cards and materials sent to you by Mr. Undavia.
Your Board and the management team have taken decisive action
in response to the cyclical downturn that pressured the price of
your shares.
We operate in a highly cyclical industry and find ourselves in
the challenging part of the cycle, both for our industry and for
our business. The Company has been transparent in acknowledging
that results have fallen short of expectations, as well as the
underlying drivers and the actions we are taking in response. Under
the Board’s direction following its careful strategic review of
potential footprint rationalization and capital spending
alternatives, the management team is executing a set of initiatives
that will enable GrafTech to navigate the current headwinds and
preserve our ability to capitalize on long-term growth
opportunities when the inevitable market recovery occurs.
Notably, in 2023, we took actions to:
- Actively manage production levels, commensurate with customer
demand.
- Reduce costs, resulting in a 10% decline in our period
costs.
- Manage working capital levels, resulting in a more than $100
million reduction in inventory levels and positive free cash flow
for the year.
- Proactively refinance our term loan due in February 2025,
thereby extending our remaining debt maturities to December
2028.
As market weakness continued, in February 2024, we announced
further measures to optimize our manufacturing footprint and reduce
costs that include:
- Indefinitely suspending most production activities at our St.
Marys facility, expecting to generate $15 million in annualized
fixed cost savings.
- Reducing our overhead structure, expecting to generate $10
million in selling and administrative expense savings.
- Indefinitely idling certain other production assets, resulting
in a proactive 12% reduction in our production capacity in response
to weak market conditions.
- Operating our remaining facilities at reduced levels to further
manage working capital levels.
- Reducing our anticipated 2024 capital expenditures by more than
25% compared to 2023.
The management team, with Board oversight, has been swift and
effective in implementing these plans. While our competitors in the
graphite electrode industry have also acknowledged near-term
industry-wide headwinds, we were the first and, thus far, only
industry participant to announce such definitive actions. This
demonstrates our leadership position in the graphite electrode
industry and the Board’s commitment to taking decisive actions in
response to a challenging demand environment.
We recently announced that we have appointed Timothy Flanagan as
our CEO. Since joining the Company, Mr. Flanagan has demonstrated
strong leadership, helping to guide GrafTech throughout this
pivotal period in the Company’s history. Notably, this includes
leading the recent actions being taken in response to the cyclical
downturn. Further, Mr. Flanagan brings over a decade of steel
industry experience to the GrafTech CEO role. Prior to GrafTech, he
held numerous leadership positions at Cleveland-Cliffs Inc., a
flat-rolled steel producer and supplier of iron ore pellets,
including serving as their Executive Vice President, Chief
Financial Officer. Given Mr. Flanagan’s broad industry experience,
leadership qualities and customer relationships, we are confident
he is the right person to lead GrafTech in the execution of the
Company’s plans to deliver long-term growth.
We are confident in our ability to restore revenue growth
based on our compelling customer value proposition and competitive
advantages.
From 2018 to 2023, GrafTech sold the majority of its graphite
electrode volume under long term agreements (“LTAs”) with many of
its largest customers. These contracts were structured by
Brookfield, a private equity firm, when they owned GrafTech. Most
of these LTAs will expire by the close of 2024. As our business
continues to shift to a more spot-oriented commercial approach, we
have embarked on a deliberate campaign to reinforce the importance
of the partnership we have with our valued customers. Our executive
management team, alongside our commercial team, has been investing
significant time meeting with current and potential customers to
demonstrate the importance of these relationships. Since the
beginning of 2024 there have been a dozen meetings, representing
more than 75% of our electrode sales volume in the Americas.
We are confident in our ability to meet the needs of our
existing and prospective customers, now and in the future. To that
end, we continue to take actions to enhance our customer value
proposition and to further differentiate ourselves from our
competition by:
- Introducing new product offerings, as evidenced by our
significant progress toward adding 800-millimeter super-sized
graphite electrodes to our portfolio.
- Expanding the breadth of our ArchiTech® Furnace Productivity
System, building upon our best-in-class customer technical service
and support, where our personnel work side-by-side with furnace
operators.
- Broadening our range of contract terms that can be tailored to
provide win-win solutions for our customers and our business.
Although our industry is cyclical, it has significant long-term
tailwinds. Decarbonization is driving a transition in the global
steel industry. Electric arc furnace (“EAF”) steelmaking generates
substantially less carbon emissions than traditional methods and is
increasing its share of total steel production. In addition, we
anticipate the demand for petroleum needle coke and synthetic
graphite, key raw materials used to produce lithium-ion batteries
for the growing electric vehicle (“EV”) market, to expand
significantly over the next decade.
Our focus on producing the highest quality graphite electrodes
and meeting the needs of our customers, combined with our distinct
competitive advantages, positions us well to capitalize on these
trends.
At the same time, to further support revenue and profit growth,
under the Board’s guidance, the management team is pursuing
value-creating opportunities to participate in the development of a
Western EV battery supply chain. GrafTech is uniquely positioned to
participate in this space given our existing petroleum needle coke
and synthetic graphite production capacity. Specific actions being
taken include:
- Filing a permit application to significantly expand production
capacity at Seadrift, our petroleum needle coke manufacturing
facility.
- Testing needle coke with battery anode material producers.
- Conducting pilot tests on graphitization capabilities in
multiple locations.
Your Board is highly experienced, with members that
collectively possess a diverse background of relevant and necessary
skills needed to guide GrafTech into the future.
The Board is composed of experienced independent directors who
bring track records of value creation. They have expertise in the
steel industry, executive management, finance and accounting,
commercial operations, strategic planning, mergers and
acquisitions, and regulatory matters – all relevant to our
strategy. Your Board is highly engaged. During 2023, the Board held
11 meetings, along with 20 meetings of its standing committees.
The Board unanimously recommends Ms. Fine and Mr. Taccone for
election at the Annual Meeting.
Ms. Fine has over 30 years of experience as an institutional
investor and a deep knowledge of capital markets, as the Chair and
former CEO of Fine Capital Partners. Her experience includes over
two decades of successfully leading multiple investments in the
steel industry. Mr. Taccone has over 35 years of experience
consulting to companies in the global steel industry and companies
with interests in the steel industry, including suppliers,
customers and investors.
In contrast, Mr. Undavia has no direct sector experience, no
executive level management experience and no public board
experience. He cites as his relevant board experience his tenure on
the board of his children’s school and his condominium association.
He did not provide any new or differentiated views with respect to
GrafTech’s strategy. In fact, Mr. Undavia’s principal suggestion
for how he could create value at GrafTech was to involve himself in
the selection process of the next CEO, which has since been
concluded.
Mr. Undavia’s unfounded statements about our recent Board
changes are also reasons for concern. The reduction in the number
of directors aligned with the Board’s desire to downsize the Board,
commensurate with the size of the business, and to reduce expense.
Moreover, the current Board reflects substantial board refreshment,
consistent with its strategy, as 75% of the Board’s current
directors have been added since October 2021.
Mr. Undavia’s criticism of board compensation is also misplaced.
The aggregate compensation paid to non-employee directors in 2023
declined from the amount paid in 2022 and is expected to decline
further in 2024. In addition, the Board maintains a stock ownership
policy, with all non-employee directors expected to be in
compliance with the policy’s stated requirements.
Mr. Undavia has shown poor attention to detail and lack of
thoroughness and judgment throughout his nomination process, which
raises concerns about his suitability for the Board.
Mr. Undavia’s entire board selection process demonstrated a lack
of concern and diligence about the importance of the selection
process. He was not forthright in his submissions to the Board,
which raised concerns about his credibility and trustworthiness. He
also submitted multiple incorrect filings as part of his review
process. Further, Mr. Undavia initially nominated five candidates
to the Board when only two can stand for election. We had to inform
him of this fact, after which he withdrew three of his candidates,
settling on nominating himself and one other candidate. Moreover,
his other candidate had significant issues in terms of her personal
finances and being named as a defendant in numerous lawsuits. When
Mr. Undavia was informed of these facts, he quickly withdrew her
candidacy.
In contrast, your Board has demonstrated due care throughout the
nomination process. Your Board values and welcomes the input of all
stockholders and has engaged in many conversations with Mr. Undavia
over the last several months. In fact, five members of the Board
engaged in discussions with Mr. Undavia over the course of numerous
hours, collectively, to attempt to understand his perspectives and
to explore his candidacy.
Mr. Undavia’s skills are deficient relative to the
Board-recommended candidates.
Mr. Undavia’s professional background is as a portfolio manager,
with a focus on investments within the energy sector, and he now
runs a small family office. In contrast, Ms. Fine, in addition to
being a portfolio manager, has over 30 years of experience as an
equity analyst, CEO and founder of an investment management firm.
Her specific expertise is in cyclical industries and working with
companies to provide the perspective of a shareholder in order to
maximize shareholder value. She possesses deep knowledge of capital
markets, financial statement analysis and shareholder
communications.
Mr. Undavia contends to have familiarity with the steel
industry. However, in contrast, Mr. Taccone has spent nearly his
entire career in the global steel industry. Mr. Taccone’s
experience encompasses over 35 years of helping steel and related
companies develop and implement effective strategies and is widely
considered by those inside and outside the industry to be a subject
matter expert. In fact, in the open letter Mr. Undavia issued to
GrafTech stockholders on March 12, 2024, he all but acknowledged
Mr. Taccone’s deep knowledge of the global steel industry.
The Board urges you to vote “FOR” the highly qualified and
experienced Board-recommended nominees of Ms. Fine and Mr. Taccone,
using the WHITE proxy card.
In summary, the Board has determined not to endorse Mr. Undavia
for election as a director of the Company for numerous compelling
reasons. Notably:
- Mr. Undavia has no prior experience on a public company
board.
- Mr. Undavia lacks direct industry experience.
- Mr. Undavia did not provide any new or differentiated views
with respect to GrafTech’s strategy.
- Mr. Undavia’s claim that he would be helpful in identifying CEO
candidates was undermined by his abject failure to perform basic
due diligence on his proposed co-nominee.
- Mr. Undavia has shown poor attention to detail and lack of
thoroughness and sound judgment.
- Mr. Undavia was not forthright in his dealings with the
Board.
- Mr. Undavia’s skills are deficient relative to the
Board-recommended candidates.
In contrast, your Board is highly experienced, with members that
collectively possess a diverse background of relevant and necessary
skills needed to guide GrafTech into the future. Further, your
Board and management team are taking thoughtful, yet decisive
actions to navigate the near-term environment while leaving the
Company well-positioned to capitalize on long-term growth
opportunities and deliver shareholder value.
For these reasons, the Board urges you to vote “FOR” the highly
qualified and experienced Board-recommended nominees, Ms. Fine and
Mr. Taccone, using the WHITE proxy card.
The Board also urges you to DISCARD all blue proxy cards and
materials sent to you by Mr. Undavia. Further, stockholders should
NOT sign, return or vote any blue proxy card sent to you by Mr.
Undavia. Only the latest validly executed proxy card will count at
the Annual Meeting.
Stockholders who have any questions or need assistance voting
may contact GrafTech’s proxy solicitation firm, Mackenzie Partners,
Inc. They can be reached toll-free at 800-322-2885 from the U.S. or
Canada or +1-212-929-5500 from other countries.
Once again, we are grateful for your investment in GrafTech and
ask for your continued support at the Annual Meeting.
Sincerely,
The GrafTech Board of Directors
About GrafTech
GrafTech International Ltd. is a leading manufacturer of
high-quality graphite electrode products essential to the
production of electric arc furnace steel and other ferrous and
non-ferrous metals. The Company has a competitive portfolio of
low-cost, ultra-high power graphite electrode manufacturing
facilities, with some of the highest capacity facilities in the
world. We are the only large-scale graphite electrode producer that
is substantially vertically integrated into petroleum needle coke,
our key raw material for graphite electrode manufacturing. This
unique position provides us with competitive advantages in product
quality and cost.
Cautionary Note Regarding Forward‑Looking Statements
This may contain forward-looking statements within the meaning
of the safe harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995. Forward-looking statements reflect
our current views with respect to, among other things, financial
projections, plans and objectives of management for future
operations, and future economic performance. Examples of
forward-looking statements include, among others, statements we
make regarding future estimated volume, pricing and revenue,
anticipated levels of capital expenditures and cost of goods sold,
and guidance relating to adjusted EBITDA and free cash flow. You
can identify these forward-looking statements by the use of
forward-looking words such as “will,” “may,” “plan,” “estimate,”
“project,” “believe,” “anticipate,” “expect,” “foresee,” “intend,”
“should,” “would,” “could,” “target,” “goal,” “continue to,”
“positioned to,” “are confident,” or the negative versions of those
words or other comparable words. Any forward-looking statements
contained in this press release are based upon our historical
performance and on our current plans, estimates and expectations
considering information currently available to us. The inclusion of
this forward-looking information should not be regarded as a
representation by us that the future plans, estimates, or
expectations contemplated by us will be achieved. Our expectations
and targets are not predictions of actual performance and
historically our performance has deviated, often significantly,
from our expectations and targets. These forward-looking statements
are subject to various risks and uncertainties and assumptions
relating to our operations, financial results, financial condition,
business, prospects, growth strategy and liquidity. Accordingly,
there are or will be important factors that could cause our actual
results to differ materially from those indicated in these
statements. We believe that these factors include, but are not
limited to, the proxy contest by Mr. Undavia and its outcome.
Additional factors are described in the “Cautionary Note
Regarding Forward-Looking Statements” and “Risk Factors” sections
in reports and statements filed by the Company with the SEC. The
forward-looking statements made in this press release relate only
to events as of the date on which the statements are made. Except
as required by law, we do not undertake any obligation to publicly
update or review any forward-looking statement, whether as a result
of new information, future developments or otherwise.
Additional Information and Where to Find It
The Company has filed with the SEC a definitive proxy statement
on Schedule 14A (the “Proxy Statement”), containing a form of WHITE
proxy card, with respect to its solicitation of proxies for the
Annual Meeting. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ
THE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS
THERETO) FILED BY THE COMPANY AND ANY OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC WHEN THEY BECOME AVAILABLE CAREFULLY AND
IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT ANY SOLICITATION. Investors and security holders may
obtain copies of these documents and other documents filed with the
SEC by the Company free of charge through the website maintained by
the SEC at www.sec.gov. Copies of the documents filed by the
Company are also available free of charge by accessing the
Company’s website at http://ir.graftech.com.
Participants
GrafTech, its directors, including its director nominees, and
certain of its executive officers and employees are participants in
the solicitation of proxies with respect to the solicitation by the
Company in connection with the Annual Meeting. The identity, their
direct or indirect interests (by security holdings or otherwise),
and other information relating to the participants is available in
the Proxy Statement filed with the SEC on April 2, 2024, in the
section entitled “Security Ownership of Certain Beneficial Owners
and Management” (on page 28 and available here) and Appendix B (on page B-1 and available
here). These documents are or will be
available free of charge at the SEC’s website at www.sec.gov.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240401644240/en/
Stockholders: MacKenzie Partners, Inc. 800-322-2885
(toll-free from the U.S. or Canada) +1-212-929-5500 (from other
countries) proxy@mackenziepartners.com
Investor Relations and Media: Michael Dillon GrafTech
216-676-2000 investor.relations@graftech.com
GrafTech (NYSE:EAF)
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