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HARNISCHFEGER INDUSTRIES, INC.
(Name of Registrant as Specified in Its Charter)
PORTFOLIO FF INVESTORS, L.P., PORTFOLIO GENPAR, L.L.C., TRINITY I
FUND, L.P., TF INVESTORS, INC., TRINITY CAPITAL MANAGEMENT, INC.
AND THOMAS M. TAYLOR
(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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TRINITY I FUND, L.P.
201 Main Street, Suite 3200
Fort Worth, Texas 76102
May 5, 1999
Dear Harnischfeger Stockholder:
Enclosed is a Consent Statement asking stockholders of Harnischfeger
Industries to support the following three proposals which we believe will
enhance long-term shareholder value:
- - Amend the Bylaws to require the Board to submit all significant
(generally transactions with a value of over $100 million) merger,
restructuring, joint venture, or similar transactions to a vote of
stockholders for their prior approval;
- - Amend the Bylaws to separate the offices of Chairman and Chief
Executive Officer and provide that the Chairman be a non-management
(i.e. not a current or former employee) director; and
- - Amend the Bylaws to permit stockholders holding not less than 25% of
the Company's voting stock to call a meeting in a timely and
straightforward manner between all shareholders of the Company and
the non-management directors.
We have not, however, made any analysis or commissioned any report
that would indicate that these specific proposals or similar proposals
would have any effect on stockholder value. There can be no assurance,
therefore, that the Company's performance will improve or that
stockholder value will be enhanced as a result of this solicitation.
You are most likely aware that the Company, in response to the
filing of our preliminary Consent Statement, has adopted three Bylaw
amendments that the Company claims differ only slightly from our own.
Although these amendments are loosely based on the three proposals
contained in the preliminary version of our Consent Solicitation that was
submitted to the Securities and Exchange Commission last month, they have
been diluted to a degree that renders them, in our opinion, entirely
inadequate.
Our first proposal would subject transactions in excess of $100
million to a shareholder vote. In contrast, the Company's asset-driven
approach would permit the Company to pursue, without a shareholder vote,
transactions in excess of $700 million, based upon the Company's most
recent financial statements. This equates to over 150% of
Harnischfeger's equity market capitalization based on yesterday's closing
stock price. With respect to our proposal to separate the offices of CEO
and Chairman, the Company's proposal to review such a separation on an
annual basis and to recognize the Chairman of the Corporate Governance
Committee as the lead member of the non-management directors ignores the
fact that the purpose of our proposal is to provide an immediate and
independent check on a management team that has failed to create value
for shareholders. On its face, the Company's Bylaw amendment allowing
25% of shareholders to call a meeting with non-management directors is
similar to our third proposal. However, the Company's amendment contains
procedural requirements, including a waiting period of as much as 45 days
or more, that could greatly reduce the effectiveness of the proposal.
Since shareholders are most likely to request access to the board when
they feel the value of their investment is seriously threatened, the
waiting period could render the proposal useless precisely under those
circumstances in which it is most crucial. The goal of the Consent
process and the proposals we are asking you to support is to transform
the Company's newly-adopted Bylaw amendments into meaningful measures
that will protect and enhance shareholder value.
Our decision to put forward the three proposals described above
comes after a nearly year-long effort to engage in a constructive
dialogue with Harnischfeger management and the Board of Directors
regarding the Company's operations and stock performance. Troubled by
the approximately 65% decline in the Company's stock price during this
period, members of my organization and I attempted on numerous occasions
to understand the Company's long-term plans and to urge the Company to
adopt reforms that we believed would help restore confidence among the
shareholder base. Our written exchanges with the Company on these topics
are detailed in the enclosed Consent Statement. Unfortunately, these
efforts can be characterized as non-productive, at best.
It was one of the more recent exchanges with management that
motivated the current Consent Solicitation. After learning that the
Company was in receipt of a premium-based acquisition proposal, we
requested a meeting with all the non-management directors to discuss how
they intended to evaluate this proposal. During this exchange I made it
clear to the Company's CEO, Mr. Jeffery Grade, that unless such a meeting
were arranged, we intended to proceed with a consent solicitation. A few
days later, we received a letter from Mr. Grade rejecting our request for
a meeting and explaining that the hiring of an outside financial advisor
to help evaluate alternatives to enhance shareholder value "addresses the
issues discussed" in our letter of April 6, 1999. We wholeheartedly
disagree. We believe that now more than ever the non-management
directors could benefit from the perspective brought by one of the
Company's largest shareholders.
The Company's poor performance record we believe calls for immediate
and direct action by shareholders. We encourage you to send the
Company's management a strong signal that it is time for the Company to
assess the full breadth of its strategic options and to do so in a way
that builds confidence and support among Harnischfeger shareholders.
Supporting the proposals described above is an important step in this
process. Please do so by signing and returning the enclosed WHITE card
before May 28, 1999. For assistance or further information, call D.F.
King & Co., Inc., which is assisting us in this matter, toll free at 1-
800-758-5378.
Sincerely,
/s/ Thomas M. Taylor
Thomas M. Taylor
