Hexcel investor pushes need for margin improvement, election of its nominees to board

By Lisa Kerner

Charlotte, N.C., April 15 - Hexcel Corp. investor OSS Capital Management LP urged the company's shareholders to elect its three "independent business executives" to provide Hexcel with "a more qualified" board of directors.

OSS, a 5.5% shareholder, said the company's low margins are "impeding Hexcel's business competitiveness and the creation of enhanced shareholder value." The investor made its statement in an April 15 letter to Hexcel, which was included in an OSS news release.

As previously reported, OSS' nominees are Edward A. Blechschmidt, former chief executive officer of Novelis, Inc. and of Gentiva Health Services; Joachim V. Hirsch, vice president of special projects for Magna International; and Timothy D. Leuliette, former co-chairman and co-CEO of Asahi Tec Corp.

OSS asked shareholders to withhold their votes for the re-election of current Hexcel directors Joel S. Beckman, Lynn Brubaker and David C. Hurley, a prior news release said.

In February, OSS said it would initiate a proxy contest after Hexcel agreed to nominate only one of OSS' three nominees to the board.

OSS, in the letter, said Hexcel has failed to explain its inferior margin performance in an "apples-to-apples" comparison to competitors Toray Industries Inc. and Cytec Industries Inc.

The investor also questioned statements made by Hexcel about the company's track record in its April 1 filing with the Securities and Exchange Commission, saying its nominees, if elected, will ask:

• How did Hexcel select the companies it claims to be its peers for comparison of performance?

• Why did Hexcel include low-margin composite "peers" Gurit and SGL Carbon AG in its analysis but then exclude Mitsubishi Rayon Co., which has composite margins above 25%?

• How can any investor accept Hexcel's argument that its margin underperformance is a result of macro-economic "headwinds" given its competitors faced the same "headwinds?"

• Does Hexcel believe that U.S. health care costs, foreign exchange pressures, the need to invest for growth, wage inflation and raw material costs are factors unique to Hexcel?

Hexcel is a structural materials company based in Stamford, Conn.

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