Flow International reacts to shareholder's criticism, remains committed to increasing shareholder value

By Lisa Kerner

Charlotte, N.C., April 9 - Flow International Corp.'s board of directors responded to questions from "a large shareholder" about the company's future direction.

In an open letter to shareholders, board chairman Kathy L. Munro said the board was disappointed by the unnamed shareholder's tone but is "committed to listening to constructive suggestions and ideas from all of our shareholders," according to a company news release.

On April 4, investor Third Point LLC asked Flow International to explore strategic alternatives including a sale of the company. Third Point, led by Daniel S. Loeb, is Flow's largest shareholder with a 13.6% controlling stake in the company, a schedule 13D filing with the Securities and Exchange Commission stated.

"I must also insist that the company comply with best practices in corporate governance by repealing its poison pill and de-staggering the election of its board. Do not make the mistake others have made by underestimating my resolve in this matter. If you continue to disregard the will of the company's owners, I will seek to replace members of the board at the next annual meeting," Loeb said in a letter included with the 13D filing.

Third Point, a New York investment adviser, has been pushing for the company to retain an investment bank since February. In addition, Loeb has been critical of the board and the qualifications of its members.

Munro said the board is devoted to optimizing shareholder value and that Flow International conducted numerous third-party investment bank reviews of its operations, capital structure and ownership status.

"Following the latest independent review in January, the company engaged a different, nationally known and respected investment bank to perform a full, independent review not only of the January findings, but to undertake a full capital markets analysis," Munro's letter stated.

The board plans to study the investment banker's analysis, as well as other factors, before formulating a plan to optimize shareholder value.

Munro noted that in the meantime, the board is committed to its search for an incoming chief executive officer "to lead the company in its next stage of growth while ensuring that Flow continues in its role as world leader in industrial water jet machines."

Based in Kent, Wash., Flow develops and manufactures high-pressure water jet technology equipment used for cutting, cleaning and food-safety applications.

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