DEFN14A: Activist Investor Nilesh Undavia Seeks Board Seat at GrafTech International, Citing Shareholder Value Destruction

Nilesh Undavia, a significant GrafTech shareholder, is soliciting proxies to elect himself to the Board of Directors, aiming to address what he perceives as the Board's failure to oversee management effectively and create shareholder value.

Summary

• Nilesh Undavia, owning approximately 5.9% of GrafTech's outstanding shares, is seeking election to the Board of Directors at the upcoming Annual Meeting on May 9, 2024.
• Undavia believes the current Board has failed to provide necessary management oversight, leading to significant shareholder value destruction.
• He points to a nearly 90% destruction of shareholder value since GrafTech's IPO in 2018, a 65% decline in revenue, and a 98% collapse in Adjusted EBITDA since 2019.
• Undavia criticizes the Board's composition, lack of relevant industry expertise, and rising director compensation despite poor performance.
• He also raises concerns about the ongoing CEO search process and the lack of a CEO succession plan.
• Undavia intends to solicit at least 67% of the voting power of Common Stock in support of his nomination.
• If elected, Undavia aims to work with the Board to enhance shareholder value, but acknowledges he would be in the minority and cannot guarantee the implementation of his proposed actions.

Sentiment

Score: 3

Explanation: The document expresses significant dissatisfaction with the company's performance and governance, indicating a negative sentiment. While there's optimism about the company's potential, the overall tone is critical of the current situation.

Positives

• Nilesh Undavia has significant investment experience, including nearly 25 years at Wellington Management Co, LLP.
• Undavia's experience includes analyzing global raw materials industries, which could benefit GrafTech.
• Undavia's election could bring a fresh perspective to the Board and potentially improve corporate governance.
• Undavia's interests are aligned with those of other shareholders, as he is a significant investor in the company.

Negatives

• GrafTech has experienced significant shareholder value destruction since its IPO.
• The company's financial performance has deteriorated, with declining revenue and adjusted EBITDA.
• The Board's composition and oversight have been criticized.
• There has been significant turnover on the Board of Directors.
• The CEO search process has been lengthy and lacks transparency.
• Board compensation has increased despite the company's poor performance.
• None of the current directors have any significant ownership interest in the Company.

Risks

• If elected, Mr. Undavia would be in the minority on the Board and may not be able to implement his proposed changes.
• There is no guarantee that any of the Company's nominees will serve as directors if Mr. Undavia is elected.
• The company faces ongoing class action lawsuits.
• The company's deteriorating financial performance could continue.
• The CEO search process may not result in a suitable candidate.
• The company's classified board structure limits shareholders' ability to hold the entire Board accountable annually.

Future Outlook

The document expresses a belief that GrafTech can have a bright future, but that will not happen unless it has the right Board and leadership to move GrafTech in the right direction.

Management Comments

• The Undavia Group believes that the Board of Directors of this Company (the Board) needs significant change to ensure that the Company is being run in the best interest of all shareholders.
• As a significant shareholder, our interests are fully aligned with yours.
• We look forward to continuing to engage with you around improving GrafTechs Board composition and positioning the Company for success.

Industry Context

The document highlights the importance of industry expertise on the Board, suggesting that the current Board lacks sufficient knowledge of the steel industry that GrafTech serves. This implies a need for directors with relevant experience to guide the company effectively.

Comparison to Industry Standards

• The document compares GrafTech's Total Shareholder Return (TSR) to proxy peer medians, pure play peer medians, and the Russell 3000.
• Proxy Peers are based on Compensation peers listed in the 2023 Proxy Statement.
• Pure Play Peers include: Tokai Carbon, Resonac Holdings, HEG Limited and Graphite India Ltd.
• GrafTech's TSR significantly underperforms these benchmarks across 1-year, 3-year, 5-year, and since EAF IPO periods.

Legal Proceedings

• The document mentions ongoing class action lawsuits, indicating potential legal risks for the company.

Stakeholder Impact

• The document focuses on the impact on shareholders, highlighting the destruction of shareholder value.
• The proposed changes could also impact employees, customers, and other stakeholders depending on the direction the company takes under new board leadership.

Next Steps

• Shareholders are urged to sign, date, and return the enclosed BLUE universal proxy card to vote for the election of Mr. Undavia to the Board of Directors.
• Shareholders are encouraged to contact InvestorCom with any questions or for assistance in voting.

Key Dates

Keywords

GrafTech, Board of Directors, Nilesh Undavia, Proxy Solicitation, Shareholder Value, Corporate Governance, Annual Meeting, Director Nomination, InvestorCom, EAF