Ewing Morris Calls for Strategic Alternatives Review to Unlock Value at Stoneridge
Ewing Morris issues this letter to fellow shareholders, calling for a comprehensive strategic review of Stoneridge following years of chronic underperformance.
Stoneridge's subscale business and market capitalization have orphaned Stoneridge at the expense of shareholders.
MirrorEye is a highly strategic asset, worth more than Stoneridge's current enterprise value.
Over $20 million of synergies are estimated to be available to a strategic buyer.
Excuses to "wait" – such as tariffs and other external factors - do not justify maintaining the status quo.
Fellow Stoneridge Shareholders,
Ewing Morris & Co. Investment Partners Ltd. ("Ewing Morris"), a top-five shareholder of Stoneridge Inc. (NYSE: SRI), today issues an open letter urging the Board to initiate a comprehensive review of strategic alternatives. We believe Stoneridge's continued underperformance, coupled with the strategic value of its MirrorEye technology, makes the case for change urgent and compelling. A sale to a strategic buyer could unlock over $30 million in cost synergies, scale MirrorEye more rapidly, and deliver superior outcomes for all stakeholders.
Funds managed by Ewing Morris have been shareholders of Stoneridge since early 2021. Like you, we have grown increasingly frustrated with our company's underperformance. Consider that Stoneridge:
Missed EBITDA guidance in three of its last five quarters.
Consistently reduced guidance throughout each of the last three completed years.
Underperformed its peer group by 87% 1 over the last five years.
A sale of Stoneridge to a strategic buyer would benefit all stakeholders:
Customers would enjoy improved quality and efficiency.
Employees would prefer a larger, more financially stable employer.
Society would benefit from the accelerated adoption of MirrorEye, which would improve highway safety for everyone.
Shareholders would realize value for their investment.
We believe that a strategic acquirer could achieve at least $10 million of synergies from corporate overhead alone 2.
We further believe that a strategic acquirer could leverage its existing buying power to realize synergies of at least $10-20 million 3 from lower input costs.
Combined, we believe that a strategic acquirer could realize $20-30 million of synergies.
In addition to cost synergies, we believe that a strategic acquirer could accelerate growth in Stoneridge's Electronics business, specifically its MirrorEye product. MirrorEye delivers significant cost and safety benefits to fleet owners. Stoneridge has secured line-fit with most truck OEMs in North America and Europe. Annual revenue from MirrorEye is expected to double in 2025 to ~$120 million 4. Over time, as customer take-rates rise, MirrorEye could drive more than $55 million of incremental EBITDA:
In addition, we believe that a larger company could increase investments to accelerate MirrorEye adoption in adjacent markets (transit buses, school buses, delivery vehicles, etc.).
At today's stock price, the enterprise value of Stoneridge is approximately $325 million 6. The table below shows that Stoneridge trades at a low multiple of its potential earnings power:
Having recently been removed from an important small cap index, the company faces further illiquidity and a shrinking universe of potential shareholders.
We have concluded that the best way for Stoneridge's Board to unlock value for shareholders is to immediately begin a review of strategic alternatives with the goal of maximizing shareholder value, which may include a sale of the business or its key assets.
It has become clear that Stoneridge's lack of size and standalone strategy are no longer viable. The path forward is clear: initiate a comprehensive, professionally managed sale process. We are confident that the value realized by shareholders from this process will far exceed the status quo.
We encourage supportive shareholders to share their views directly with Stoneridge's Board.
Sincerely,
John Ewing Darcy Morris
Co-Founder and CIO Co-Founder and CEO
Additional Information:
The information contained in this public letter does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable corporate and securities laws. While Ewing Morris may take additional steps in the future, which may include requisitioning a meeting of unitholders of Stoneridge, soliciting proxies of unitholders, filing a dissident information circular and/or other actions or steps, no such decision has yet been made, nor has any requisition of a meeting been submitted to Stoneridge. There is currently no record date or meeting that has been called and unitholders are not being asked to execute or not execute a proxy with respect to any matter (including any potential nominees of Ewing Morris).
About Ewing Morris:
Ewing Morris & Co. Investment Partners Ltd. is a value driven Canadian investment firm established in September 2011 by John Ewing and Darcy Morris. Our aim is to achieve preservation and growth of capital for our Limited Partners by focusing on inefficient markets. We do this by relying on fundamental analysis, high conviction and the use of flexible capital. We manage strategies with a focus on small and mid-cap companies. We manage investments for individuals as well as charitable organizations, institutions and corporations.
_____________________________
SOURCE Ewing Morris & Co. Investment Partners Ltd.
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