A shareholder of Capital Southwest Corp. on Wednesday called for the venture capital company to hire an investment bank to explore strategic options for its portfolio, according to a regulatory filing.
In a letter sent to the board and filed with the Securities and Exchange Commission, ZS Crossover II LP expressed concern over the significant deterioration of shareholder value and the company's poor track record as a major investor in Encore Wire Corp., Alamo Group Inc., Palm Harbor Homes Inc. and Heelys Inc.
According to the filing, ZS Crossover beneficially owns 106,342 shares, or a 2.7 percent stake in the Dallas-based company. Ned L. Sherwood, a member of Crossover's management committee, beneficially owns 272,857 shares, or a 7 percent stake.
ZS Crossover also called for the company to liquidate the $55 million of non-control interests in public securities it owns and distribute the proceeds to shareholders in the form of a one-time dividend.
Additionally, ZS Crossover asked for Capital Southwest to hire a firm to assess the valuation of some of its larger private company investments.
"During the past decade, we believe that the board and management have poorly managed Capital Southwest's portfolio, which has resulted in substantial deterioration of shareholder value," the letter said. "We believe the sale and distribution of the proceeds of Capital Southwest's non-control public securities and the exploration of strategic alternatives for maximizing the value of its control securities will allow the company to focus on building the value of its private company investments."
ZS Crossover first sent a letter to the board in August and has since engaged in private communications with President and Chief Executive Gary Martin, but its requests to meet with the board in person to discuss ways to boost shareholder value have been repeatedly denied.
Capital Southwest's shares fell 59 cents to close at $111.25.
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