A second independent advisory firm has weighed in on pending board elections at HF Financial Corp. and this one is urging shareholders to cast their ballots for candidates supported by management.
In a report Monday, Egan-Jones Ratings Co. recommended that shareholders vote for two nominees, Christine E. Hamilton and Thomas L. Van Wyhe, backed by HF Financial's management and reject the nomination of activist investor John Palmer. Palmer's candidacy was endorsed last week by the advisory firm Glass, Lewis & Co.
HF Financial, of Sioux Falls, S.D., is the parent of the $1.2 billion-asset Home Federal Bank. Board elections are scheduled be held at the company's annual meeting on Dec. 13.
In its recommendation, Egan-Jones said it believes the company's new management team should be given time to execute its strategic plan and that Palmer's presence on the board could distract from that effort. In October, HF Financial's longtime chairman and chief executive Curtis L. Hage stepped down two months ahead of his planned retirement. Vice Chairman Michael M. Vekich replaced Hage as chairman and regional president Stephen M. Bianchi was named interim CEO.
Egan-Jones also noted that Palmer had already rejected the HF Financial's offer to create an additional board seat for him, raising concern about Palmer's motives,
"The company made significant good faith efforts to avoid the current proxy contest, which is imposing substantial and unnecessary costs" on HF Financial, Egan-Jones wrote. "We believe that voting the management ballot is in the best interest of the company and its shareholders."
Palmer is a principal at PL Capital Group, a Naperville, Ill., investment firm that is one of HF Financial's largest outside shareholders. In an open letter to shareholders in September, Palmer said he was seeking a board seat on behalf of disgruntled investors who have been frustrated with the company's earnings and stock performance since it raised $20 million of capital in 2009.
HF Financial's management said in a separate letter to shareholders last month that it believes Palmer's sole aim in gaining a board seat is to force the company's sale. It said that its nominees, Hamilton and Van Wyhe, have "first-hand knowledge" of the company's markets and support its strategy of expanding in stable and growing markets - it recently opened an office in the Minneapolis area - and diversifying into new areas of lending.
"We do not believe PL Capital is acting in the best interests of all shareholders, and therefore we urge you to vote for our dedicated, independent nominees," HF Financial wrote.
HF Financial's shares were trading at $10.40 midday Tuesday, up roughly 1% from Monday's closing price.