Wilshire Enterprises: Sale Or Delay Tactics?

While Wilshire Enterprises (WOC) is undergoing wild price swings in anticipation of the upcoming proxy battle at the July annual meeting, the nitty-gritty details in a recent amendment to its 10-K filing have shareholders wondering whether the long ago announced sale is coming shortly, or whether management is digging in for a long battle with 14.9% owner Full Value Partners, an affiliate of Phillip Goldstein’s Bulldog Investors.

The reason for our ambivalence is the first paragraph in the amended 10-K:

The Company will not file its proxy statement for its annual meeting of stockholders within 120 days of its fiscal year ended December 31, 2007 and is therefore amending and restating […] the Annual Report.“

The cynic in us is reminded of a similar event little over a year ago when activist shareholder Harbinger tried to get on the board of Ryerson. Harbinger wanted to elect seven of its director nominees to the board, but Ryerson simply refused to hold an annual meeting. In June 2007, Harbinger sued Ryerson to hold the meeting. Less than six weeks later, Ryerson agreed to be acquired by private equity firm Platinum Equity.

If no annual meeting is held for 13 months, Delaware corporate law gives shareholders the possibility to sue the company to force it to hold the meeting. This means that after August 19, Full Value Partners would be able to file a suit against Wilshire. Litigation of this type typically takes 3-4 months, which the management has virtually no chance of winning. It has to hold the meeting within 45 days after the court’s ruling. The court would probably try to wrap up the case before the end of the year, so that the meeting would be held by the middle of February. Management would gain an extra six months of reprieve, albeit at significant expense to shareholders through legal fees. Considering their past record in the retention of consultants, we can expect the worst. We do not doubt that the meeting will be an unpleasant experience when angry hoards of impoverished shareholders descend on Newark, so management may well see value in putting it off for a while.

Another reason to be cynical is the recent no action letter that Wilshire obtained from the SEC. Full Value Partners had submitted a proposal for inclusion in the company’s proxy statement, but Wilshire convinced the SEC that it should be excluded. Since this is a paper filing, we will safe our readers a trip to the local SEC office and post a copy of the full correspondence here.

The optimist in us is indifferent about the filing. After all, Wilshire has often filed its SEC reports late, and with the CFO working part-time at a reduced salary, there is a good chance that they lack the resources to get it done in time.

Finally, the dreamer in us reads the 10-K amendment in a different light: it is a sign that a sale of the company is coming soon. If management, including the part-time CFO, is busy finalizing a deal, then there is no point in holding an annual meeting if another meeting is needed shortly thereafter to approve a sale.

The stock needs all but uncertainty, as the price action over the last two weeks has shown. We hope that management will clarify its intentions soon. Whether anybody will believe them, given last year’s “initial bids are in” gaffe (read our previous coverage here and here), is another question.

Thomas Kirchner manages the Pennsylvania Avenue Event-Driven Fund (PAEDX), which owns shares of Wilshire Enterprises.

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