Maxxam criticizes minority shareholder group

By Brian Kelleher

NEW YORK, April 13 (Reuters) - Maxxam Inc. (AMEX:MXM - news),, whose share price has slumped since last summer, on Thursday attacked the efforts of a minority shareholder group that has nominated two candidates to the aluminum producer's board of directors, saying the group's agenda was ``self-interested.''

A group led by environmentalist group the Rose Foundation and the United Steelworkers of America (USWA) has elected Paul Simon, the former U.S. senator from Illinois, and Abner Mikva, a former White House counsel under President Clinton, as candidates for the Maxxam board.

Houston-based Maxxam, in letter to stockholders, contends that the group is pursuing an agenda that it believes is harmful for the company and its shareholders alike, saying part of the plan is without merit because it deals with disputed debt that the company says does not exist. The company revealed the contents of the letter in a statement issued on Thursday.

The dispute stems from an investment made by a unit of Maxxam and its chief executive, Charles Hurwitz, in a Texas savings and loan in the 1980s. The venture, of which the Maxxam unit and Hurwitz owned a combined 24.9 percent, ultimately failed, resulting in a government-funded bailout.

A Maxxam spokesman said Jill Ratner, president of the Rose Foundation, began lobbying the Federal Deposit Insurance Corp. and members of Congress to sue Maxxam to recover some of the losses from the bailout, which the group characterises as a debt owed by Maxxam.

Ratner proposed a ``debt for nature'' plan under which the company could retire the alleged debt by giving away some of its assets, in this case timberland held by its wholly owned Pacific Lumber Co. unit.

``Our position is ... there is no debt,'' a Maxxam spokesman said, citing a net-worth maintenance clause that is only triggered when an entity takes a stake of 25 percent in a company. The stake held by Maxxam and Hurwitz fell slightly below that threshold.

Maxxam believes the debt does not exist because its holdings were too small for the clause to apply. That rules out any assumption of fiscal responsibility by Maxxam for the defunct savings and loan.

``Clearly, management has a somewhat different assessment of the likelihood that a judgment will come down against the company,'' Ratner said. She described her organisation's idea as ``a proposal that will allow the company to put the whole (savings and loan) problem behind them.''

Citing the slide in the shares of Maxxam stock, Ratner defended the group's position as one that is intended to increase shareholder value.

``This is a company that clearly needs some outside perspective.''

Maxxam shares closed off 3/4 to 27-3/4 in trading on the American Stock Exchange, well below their 52-week high of 64-1/2, set in June. The Rose Foundation owns 140 shares of Maxxam while the USWA holds more than 1,000 shares, Ratner said. As of March 7, Maxxam had more than 7 million shares outstanding, excluding any unexercised options and warrants.

In its letter, Maxxam, which directly and indirectly owns about 63 percent of Kaiser Aluminum Corp. (NYSE) also alleges that recent actions by the USWA aimed at disrupting Kaiser's business is the result of a labour dispute between the two parties and should not become a Maxxam issue.

The company cited writings from Institutional Shareholder Services saying that the union's actions demonstrate that ``the interests of the USWA are not necessarily aligned with those of shareholders.''

Representatives for the USWA could not be reached for comment.

``The company believes that both groups have displayed extraordinary concern for themselves and very little concern for shareholder like you,'' Hurwitz wrote in the letter.

On March 30, Maxxam nominated J. Kent Friedman and Michael Rosenthal as candidates for its board of directors.