UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Preliminary Proxy Statement
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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GRAFTECH
INTERNATIONAL LTD.
(Name of Registrant as Specified In Its Charter)
NATHAN
MILIKOWSKY
DANIEL MILIKOWSKY
NM GTI INVESTMENTS LLC
DANIEL MILIKOWSKY FAMILY HOLDINGS, LLC
THE DANIEL AND SHARON MILIKOWSKY FAMILY FOUNDATION, INC.
THE REBECCA AND NATHAN MILIKOWSKY FAMILY FOUNDATION
KAREN FINERMAN
DAVID R. JARDINI
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
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NATHAN
MILIKOWSKY
DANIEL MILIKOWSKY
NM GTI INVESTMENTS LLC
DANIEL MILIKOWSKY FAMILY HOLDINGS, LLC
THE DANIEL AND SHARON MILIKOWSKY FAMILY FOUNDATION, INC.
THE REBECCA AND NATHAN MILIKOWSKY FAMILY FOUNDATION
KAREN FINERMAN
DAVID R. JARDINI
“SAVE
GRAFTECH” SENDS LETTER TO GRAFTECH INTERNATIONAL SHAREHOLDERS
Files
Definitive Proxy Materials with Securities and Exchange Commission
NEW
YORK, April 16, 2014 –
Save GrafTech, an investor group led by Nathan Milikowsky, a holder of over 15 million shares
of GrafTech International Ltd., or over 11.2% of the common stock, announced today that it sent a letter to GrafTech’s shareholders
outlining the experience and qualifications of Save GrafTech’s three highly qualified, independent director nominees: Karen
Finerman, David Jardini and Nathan Milikowsky. The letter urges shareholders to support Save GrafTech’s nominees, who have
the skills and experience to fix GrafTech’s problems, and reject GrafTech’s long-serving incumbent directors: Mary
Cranston (14 years on Board), Ferrell McClean (12 years on Board) and Steven Shawley (4 years on Board).
On April
15, 2014, Save GrafTech filed definitive proxy materials with the Securities and Exchange Commission in connection with GrafTech’s
2014 Annual Meeting of Shareholders.
Included
below is the full text of the letter to GrafTech’s shareholders:
April
16, 2014
Dear
Fellow GrafTech Shareholder:
I am
writing today on behalf of an investor group called “Save GrafTech” that has nominated three highly qualified independent
candidates for election to the GrafTech International Ltd. Board of Directors at the Annual Meeting on May 15, 2014. I own over
15 million GrafTech shares, or over 11.2%, of the common stock
1
, and am a former GrafTech Director with over 30 years
of experience in the steel industry.
In 2010,
GrafTech acquired two businesses from me – C/G Electrodes and Seadrift Coke – and I joined GrafTech’s Board.
After serving on the Board for approximately a year and watching the Company’s value steadily decline, I began to ask tough
questions of management and, after making a concerted effort to replace the CEO, I was not nominated to stand for re-election
at the 2013 Annual Meeting.
2
GrafTech’s
proxy materials include numerous false allegations about my conduct as a director. To be clear, I unconditionally deny the false
allegations made by the Company, which has yet to provide me or shareholders with any evidence to substantiate any of their claims.
While the current Board is wasting shareholder funds to make personal attacks against me and members of my family, my motivation
for seeking Board representation for our nominees is not personal. As GrafTech’s largest non-institutional shareholder,
I want to see the Company succeed over the long term, and my focus remains on reconstituting the Board with directors who have
the industry experience and skills necessary to fix GrafTech’s significant problems and create meaningful shareholder value.
GrafTech’s
chronic underperformance has, in my opinion, resulted primarily from poor management and lack of Board oversight. The nominees
put forward by Save GrafTech have a unique understanding of GrafTech’s operations and challenges as well as its extraordinary
potential. Because we believe in this potential, we are asking for your support at this year’s Annual Meeting. Save GrafTech
is committed to working with GrafTech’s newly appointed CEO to implement strategies and organizational changes to
unlock
and protect value for all shareholders
.
|
1
|
Together
with
my
family,
I
own
approximately
11.2%
of
GrafTech’s
common
stock.
Together
with
other
former
shareholders
of
C/G
Electrodes
and
Seadrift,
I
also
hold
$200
million
of
GrafTech’s
$536
million
debt
as
a
subordinated
note.
|
|
2
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The
circumstances
surrounding
the
end
of
my
Board
service
are
detailed
in
the
Save
GrafTech
proxy
statement
available
at
www.sec.gov
and
in
a
New
York
Times
article
entitled,
“Behind
Staid
Steel,
a
Percolating
Boardroom
Drama”
that
was
published
on
January
23,
2014.
|
Why
is Save GrafTech Seeking Board Change?
Under
its current Board of Directors, GrafTech has suffered from continuing strategic, operational and governance issues that we believe
have significantly impacted performance and led to prolonged shareholder value destruction.
Ø
|
GrafTech
is
the
world’s
oldest
high-quality
graphite
electrode
producer,
and
while
demand
for
its
core
product
steadily
grows,
GrafTech’s
graphite
electrode
sales
volume
continues
to
decline.
Over
the
past
10
years,
GrafTech
has
produced
a
total
shareholder
return
(“TSR”)
of
negative
15%,
underperforming
its
peers
by
over
200%.
|
In January,
after Save GrafTech threatened to launch a proxy contest, GrafTech suddenly announced CEO Craig Shular’s immediate retirement
– a change I had advocated while serving as a Director and one that GrafTech’s Board vigorously resisted. In fact,
in an effort to protect Mr. Shular as CEO, in 2012 GrafTech’s Board formed a Special Committee to investigate an alleged
leak of confidential information and, in doing so, labeled Mr. Shular and certain other executives “whistleblowers”
who could not be terminated for any reason for a period of time. While we are pleased that Joel Hawthorne finally did replace
Mr. Shular after a decade of chronic underperformance and enormous destruction of shareholder value, a management change is only
the first step in the fundamental turnaround necessary to revitalize GrafTech.
The
Company is asking you to re-elect several long-serving incumbent directors who, in my view, do not understand the electrode business,
have failed to adapt to the realities of modern manufacturing and are deeply entrenched and close-minded. I believe the only way
to effect real change at GrafTech is to reconstitute the Board with highly qualified, independent directors who will bring relevant
experience and fresh ideas to the table and hold management truly accountable to shareholders.
GrafTech’s
Chronic Underperformance
GrafTech
has great people, great plants, and a heritage in the carbon and graphite industries unmatched by competitors. Further, GrafTech
is the only maker of graphite electrodes that is backward-integrated into needle coke, the key raw material for high-quality graphite
electrode production. This allows GrafTech to internalize raw material profit margins that all of its competitors must surrender
to GrafTech or other needle coke suppliers.
Despite
these competitive advantages, GrafTech has dramatically underperformed its peers over the past decade, has watched its market
share erode, and suffers from a severely depressed market capitalization. Over the past 10 years, on a total return basis, indices
of GrafTech’s peer group and steel mini-mills have risen 197% and 343%, respectively. GrafTech’s TSR has been
negative
15% over the same period under the current Board’s oversight.
This
significant decline in TSR is even more pronounced in contrast to the concurrent
increase
in electric arc furnace (“EAF”)
steel production globally over the same period. As shown in the chart below, while GrafTech’s shipments have steadily declined,
steel production worldwide has continued to increase. Moreover, leading indicators for steel production are continuing to improve
as the recovery of U.S. non-residential construction accelerates and demand in Europe begins to stabilize. Despite these positive
macro trends, GrafTech’s TSR and market share have consistently moved in the wrong direction.
The
trend in GrafTech’s market capitalization has been similarly alarming, dropping from $2.9 billion in November 2010, when
it acquired C/G Electrodes and Seadrift from me for approximately $850 million, to only $1.5 billion today.
The
Current Board of GrafTech Has Failed Shareholders
Poor
leadership is at the heart of GrafTech’s disappointing performance. The Board and management failed to take timely steps
needed to alter GrafTech’s downward trajectory as sales declined, operations suffered, and customer relationships eroded.
We believe the primary causes of GrafTech’s chronic underperformance are deficiencies in strategy and operations and a failed
Board culture that has tolerated severe and prolonged underperformance.
Ø
|
Improper
Commercial
Strategy.
GrafTech’s
Board
and
senior
management
have
failed
to
grasp
the
essential
commodity
nature
of
the
high-quality
graphite
electrode
market
and
have
gone
to
market
with
a
disastrous
“price
leadership”
strategy.
|
Ø
|
Inefficient
Overhead.
GrafTech
maintains
a
bloated
and
inefficient
overhead
structure,
with
multiple
layers
of
redundant
authority
that
weigh
on
decision-making,
agility
and,
ultimately,
profitability.
|
Ø
|
Excessive
Inventory.
GrafTech’s
inventory
has
grown
dramatically
as
the
Company
has
lost
market
share
and
revenue
has
declined.
Not
only
does
this
excess
inventory
increase
interest
costs,
it
places
a
significant
drag
on
the
efficiency
of
the
Company.
|
Ø
|
Seadrift
Failures.
By
not
consistently
running
Seadrift
to
capacity,
GrafTech
has
failed
to
capitalize
on
the
unique
competitive
advantage
of
owning
the
second
largest
needle
coke
producer
in
the
world.
We
believe
this
under-utilization
represents
a
huge
missed
opportunity,
which
may
have
cost
the
Company
$15
million
per
year
in
EBITDA.
|
Ø
|
Broken
Company
Culture.
We
believe
employees
are
marginalized,
demoralized
and
improperly
incentivized
by
a
hierarchical
structure
that
has
raised
costs,
curbed
initiative
and
distanced
senior
management
from
core
business
operations
and
customers.
|
The
Company’s “Rationalization Plan” announced in October 2013 and Craig Shular’s sudden and unexpected “retirement”
in January 2014 – which was announced shortly after Save GrafTech began its public campaign – are reactive and inadequate
responses to prolonged, serious operational and strategic deficiencies. While the Company’s plan may produce limited short-term
savings, it does not address the fundamental flaw of GrafTech: the failure to adopt a modern manufacturing culture. GrafTech can
do better than shut down a few plants in emerging markets. Save GrafTech’s nominees will change GrafTech’s overall
approach and transform it into a streamlined manufacturer, mirroring GrafTech’s core customers, steel minimills.
The
Call to “Save GrafTech” Is Urgent – Visit www.SaveGrafTech.com
“Save
GrafTech” is not simply a slogan. We believe the numerous failures of GrafTech’s management and Board have hurt shareholder
value, placed the Company’s future at risk, and warrant dramatic and meaningful change.
We encourage
all GrafTech shareholders to visit www.SaveGrafTech.com and review the detailed presentation
we have developed that analyzes GrafTech’s track record of severe underperformance and outlines our recommendations to create
sustainable, long-term shareholder value.
Save
GrafTech’s Nominees Are Committed to Creating Shareholder Value
The
Save GrafTech nominees have industry and other relevant experience, a shareholder orientation, and a firm commitment to work with
CEO Joel Hawthorne to identify and implement value-creating initiatives for the benefit of all GrafTech shareholders. Our director
nominees are:
|
•
|
Karen
L.
Finerman:
Redefining
Corporate
Communication
.
Ms.
Finerman
is
CEO
of
Metropolitan
Capital
Advisors,
a
New
York-based
investment
management
firm
that
she
co-founded
in
1992.
Prior
to
this,
she
was
the
Lead
Research
Analyst
for
the
Risk
Arbitrage
department
at
DLJ
Securities
Corp.
Ms.
Finerman
is
also
a
permanent
panelist
on
CNBC’s
Fast
Money.
|
|
•
|
David
Jardini:
Instilling
Operational
Excellence
.
Mr.
Jardini
co-founded
C/G
Electrodes
with
Nathan
Milikowsky
in
2003
and
served
as
its
President
until
it
was
sold
to
GrafTech
in
November
2010.
He
played
a
key
role
in
the
enormous
value
creation
at
C/G
Electrodes
before
its
sale
to
GrafTech.
Mr.
Jardini
is
currently
the
chairman
of
Black
Diamond
Investments
LP.
He
is
also
President
of
American
Gas
Lamp
Works
LLC,
a
private
manufacturer
of
gas
lamps.
Mr.
Jardini
has
over
15
years
of
experience
in
the
steel
and
graphite
electrode
businesses
and
a
proven
track
record
of
creating
value.
|
|
•
|
Nathan
Milikowsky:
Reestablishing
Shareholder
Accountability
.
Mr.
Milikowsky
served
as
a
director
of
GrafTech
from
late
2010
until
May
2013
when
he
was
ousted
from
the
Board.
He
was
previously
President
of
Seadrift
Coke
and
Chairman
and
CEO
of
C/G
Electrodes,
which
he
formed
in
2003.
In
that
year,
he
led
a
group
that
purchased
the
closed
St.
Mary’s,
PA
plant
of
the
bankrupt
predecessor
and
restarted
the
production
of
UHP
graphite
electrodes.
Mr.
Milikowsky
had
been
involved
in
steel
trading
starting
in
1969.
In
1979,
he
acquired
ownership
of
three
manufacturing
businesses
which
produced
corrugated
metal
decking
for
the
construction
business,
55
gallon
steel
drums,
and
five
gallon
steel
pails.
After
achieving
significant
growth,
these
companies
were
sold
from
1991
to
1995.
|
Unlike
GrafTech’s current Board, which does not have any independent directors with experience in either the steel or graphite
industry, Save GrafTech’s nominees have the industry experience and skills necessary to help fix GrafTech’s problems
and create meaningful shareholder value.
We strongly
believe the action we are taking is essential to protect and grow value for all shareholders. Without a cultural change in the
Boardroom, we do not believe that GrafTech will be able to implement the strategic and organizational changes needed to create
value for shareholders.
Why
Is A Proxy Contest Necessary?
We have
tried in good faith to resolve our differences with GrafTech’s Board and reach a settlement that would enable the Company
to avoid the distraction of a proxy contest at this critical time. Despite many concessions on our part, GrafTech’s Board
would not accept any of the reasonable settlements we offered. In fact, their latest rejection clearly betrayed the Board’s
lack of confidence in the “findings” of its own Special Committee investigation, which was the pretext for excluding
me from continuing to serve as a director in 2013.
While
Save GrafTech proposed an objective assessment of the allegations of the GrafTech Board (as outlined in the Company’s proxy
statement) through a simple process that would take only approximately two weeks to complete, the current Board instead demanded
an elaborate litigation-like exercise that would take a minimum of two years to complete and would waste substantial shareholder
funds. Reinvestigating the same purported leak through an unnecessarily involved judicial or arbitration process, as GrafTech
now demands, is a transparent stall tactic designed to create a significant delay to my rejoining the Board. If the GrafTech Board
believed its personal attacks against me were true, why wouldn’t they allow an independent law firm to review the results
of the Special Committee’s investigation, as we suggested in our settlement proposal?
Is this
response consistent with a Board that is serious about working constructively to find common ground or is it the behavior of an
entrenched Board that puts its own interests before that of the Company and its shareholders? We believe it is the latter. Accordingly,
our only alternative is to put Board representation to a shareholder vote.
We urge
you to read Save GrafTech’s proxy statement and detailed presentation available at
www.sec.gov
and
www.SaveGrafTech.com
.
We also urge you to review our nominees’ credentials and compare them to those of the three directors we propose to replace,
who have served on GrafTech’s Board for a combined 30 years, have no relevant steel industry experience outside of their
tenure on GrafTech’s Board, and have overseen massive destruction of shareholder value.
|
x
|
Mary
Cranston
(14
years
on
Board),
a
retired
lawyer
with
no
relevant
industry
experience
and
a
history
of
launching
smear
campaigns
against
those
she
perceives
as
obstacles
or
threats
3
|
|
x
|
Ferrell
McClean
(12
years
on
Board),
a
retired
investment
banker
with
no
experience
in
the
steel
or
graphite
industries
|
|
x
|
Steven
Shawley
(4
years
on
Board),
a
retired
finance
executive
with
no
experience
in
the
steel
or
graphite
industries
|
Finally,
we urge you to ask: How would GrafTech
not
benefit from adding our three highly qualified nominees to provide minority
representation on GrafTech’s seven-member Board?
As directors,
our nominees would know the right questions to ask and would have the strength, independence and economic incentive to ask them.
As the largest non-institutional shareholder of GrafTech, I have far more “skin in the game” than any existing director.
In contrast, GrafTech’s proposed slate of seven nominees owns a total of only 583,432 shares, representing a nominal 0.43%
of total shares outstanding. More than half of these shares are owned by Joel Hawthorne.
We believe
many GrafTech shareholders share our frustrations with the Company’s poor business performance, failure to generate any
shareholder return over 10 years, lack of Board oversight and a failed
|
3
|
In
2002,
while
serving
as
Chair
of
the
law
firm
Pillsbury
Winthrop
Shaw
Pittman,
Mary
Cranston
issued
a
press
release
defaming
a
former
partner
of
the
firm,
a
move
that
was
detailed
in
numerous
articles
including:
www.theconglomerate.org/2006/01/mary_cranston_r.html
.
|
Board culture. If you agree, send that message to GrafTech
by completing, signing, dating and returning the enclosed BLUE proxy card.
VOTE
FOR THE NOMINEES WHO WILL SERVE YOUR INTERESTS
YOUR
VOTE IS IMPORTANT – VOTE THE
BLUE PROXY CARD
TODAY!
Save
GrafTech is committed to serving the interests of all shareholders. We believe that GrafTech has enormous potential, but is in
dire need of improved leadership and oversight on the Board. Save GrafTech’s director nominees are prepared to work collaboratively
with the incumbent directors and take the necessary steps to regain market share and generate sustainable shareholder value.
We
urge you to vote your
BLUE
proxy card FOR Save GrafTech’s director nominees today.
Sincerely,
|
|
/s/
Nathan Milikowsky
|
|
Nathan
Milikowsky
|
Your
Vote Is Important, No Matter How Many Shares You Own.
If you have questions about how to vote your shares on the
BLUE
proxy card,
|
or need additional assistance, please contact the firm assisting us in the proxy solicitation:
|
|
D.F. King & Co., Inc.
|
Shareholders Call Toll-Free: (800) 628-8532
|
Banks and Brokers Call Collect: (212) 269-5550
|
Email:
savegraftech@dfking.com
|
|
IMPORTANT
|
We urge you
NOT
to sign any WHITE proxy card sent to you by GRAFTECH
|
Media:
George
Sard/Renée Soto/Jared Levy
Sard
Verbinnen & Co
(212)
687-8080
Important
information
On
April 15, 2014 Nathan Milikowsky, Daniel Milikowsky, NM GTI Investments LLC, The Daniel Milikowsky Family Holdings, LLC, The Daniel
and Sharon Milikowsky Family Foundation, Inc., and The Rebecca and Nathan Milikowsky Family Foundation (collectively, “Save
GrafTech”) filed with the Securities and Exchange Commission (the “SEC”) and began distributing to the stockholders
of GrafTech International, Ltd. (the “Company”) a definitive proxy statement and form of proxy (the “Proxy Statement”)
in connection with the Company’s 2014 annual meeting of stockholders. SAVE GRAFTECH STRONGLY ADVISES ALL STOCKHOLDERS OF
THE COMPANY TO CAREFULLY REVIEW THE PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION, INCLUDING INFORMATION RELATING
TO THE SAVE GRAFTECH’S PARTICIPANTS IN SUCH PROXY SOLICITATION. SAVE GRAFTECH’S PROXY STATEMENT, AS FILED, AND ANY
FURTHER AMENDMENTS, SUPPLEMENTS OR OTHER RELEVANT PROXY SOLICITATION DOCUMENTS WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S
WEB SITE AT WWW.SEC.GOV
, or by CONTACTING D.F. KING & CO., INC. BY TELEPHONE AT THE
FOLLOWING NUMBERS: BANKS AND BROKERS CALL COLLECT: (212) 269-5550 AND ALL OTHERS, INCLUDING SHAREHOLDERS, CALL TOLL-FREE: (800)
628-8532.