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Wolverine gets new investors; CEO gets the ax

By Eric Fleischauer 340-2435

It was a good day for shareholders but not so good for Wolverine Tube Chief Executive Officer Chip Manning.

And how Wolverine's 525 employees will fare is unknown.

Alpine Group Inc., along with Plainfield Asset Management LLC, agreed to invest between $75 million and $135 million in Wolverine, but did so with conditions.

One of those conditions: CEO Manning must go. Another: Wolverine must issue 50,000 shares of convertible stock with an 8 percent annual dividend, all of which will go to the investors. The investors can convert those shares into common stock at $1.10 per share, 72 cents per share less than the stock's price — elevated by news of the investment — at close Thursday.

Effectively, Alpine and Plainfield bought the company.

Manning said the news was bittersweet. He will miss the company, he said, but he believes the transaction will help it survive.

"My message to the folks on the floor is that this is great news for Wolverine," Manning said. "Wolverine is bigger than any one individual. I'm only one of 2,600 employees that need to get the job done. This business is a lot bigger than I am, and it is going to be well positioned for success."

Manning, 46, who has two teenage children and lives in Huntsville, has been at Wolverine for nine years. He has been CEO for a tumultuous 15 months.

"I will be back in the marketplace for employment at some point in time, but it's been a quite challenging 15 months as CEO," Manning said. "I'll probably take a little time off to repay my family some time. I've spent less time with them this last year than I would have liked. It will be a good chance to make that even."

Manning leaves behind a struggling company desperate for the cash his departure facilitates.

Decatur is home to 525 Wolverine employees, 20 percent of the company's worldwide workforce.

Jed Deason, vice president of investment relations, will retain a position at Wolverine. Manning, he said, would be missed.

"Chip has great respect within the organization," Deason said. "I hope the employees will be sad to see him go. I certainly am. He's a good friend of mine."

Deason was careful not to fault the investors for booting Manning, though.

"Anytime you have a group investing substantial amounts of its own money into an organization, they like to have their own people running that organization," Deason said. "That's what's happened here."

Manning's replacement will be Harold Karp, president of Alpine subsidiaries. Deason has known him for three years because Wolverine buys copper scrap from the Alpine-owned Essex Electric facility in Florence.

"Harold and Chip have a lot of attributes alike. They're both high in integrity. They're both outgoing," Deason said. "After the people get to know Harold, they will be quite comfortable with him and understand the attributes he brings to the table."

Manning said he helped position the company for growth.

CEOs like coaches

"CEOs today are a lot like head football coaches," Manning said. "When you go through a restructuring like we've been through, knowing we need to get refinancing, there is high risk. I knew that coming in. With new ownership, in many cases, comes new leadership."

The company has had many problems in recent years, most significantly skyrocketing copper prices. At its initial offering in 1993, Wolverine shares sold at over $16. They broke $40 in 1996 and again in 1999, but since then it's been an erratic slide. The slope turned into a cliff in 2005. Wolverine was trading under $1 before the Alpine announcement.

Deason said the new owners will scrutinize all products and the facilities that produce them, but he said he did not see the Decatur facility as being in jeopardy.

"There is nothing that would indicate that our employees should be concerned about their pay, their benefits, their jobs," Deason said.

"We'll continue to operate the Decatur plant," Deason continued. "We constantly evaluate the products we are making and where we are making them, but as long as Decatur continues to do what it needs to do, and the people continue to deliver as they have delivered over the years, I think they will continue to be a part of the Wolverine family."

Deason said the cash infusion was important, but he stressed the significance of the investors believing in Wolverine's long-term viability.

"We have two very sophisticated investors saying, 'We believe in the company. We're putting our money where our mouth is.' It's given equity holders hope that things are getting better and (that the investors) have the money they need to get through the rough times," Deason said. "Things will get better going forward."

$1.10 price

Existing equity holders will have the right to participate at the $1.10 price, thereby protecting themselves from the dilution that comes with the stock issuance. Thursday's jump in stock price suggests many will exercise that right.

Manning, who expects the cash infusion to be closer to $135 million than the minimum $75 million, said the money will do much to help Wolverine's balance sheet.

"It will be unrestricted funds, other than our normal covenant (to creditors), and that money can be used for capital infusion, to ensure liquidity and could be used at appropriate times to reduce debt," Manning said. "It's there for the company's use as it deems fit."

Wolverine's delisting from the New York Stock Exchange last month simplified the transaction. The NYSE imposes several hurdles to the issuance of new stock that Wolverine has managed to bypass by virtue of its delisted status.

"It's not as restrictive now that we're not with the NYSE," Deason said.

Manning would not say whether he could have stayed with the company under the new ownership.

"Let me just say that the solution that's been worked out is the best solution," Manning said. "Regrettably, there's only so many seats at the top of the table, and in order for them to accomplish what they want and me to accomplish what I want personally, it made good sense for the transition to take place and for me to move on."

Deason said employees should take heart from the deal.

"I think our message to them is that, 'Look, because of your hard work and dedication, we've been able to attract these sophisticated investors that are going to put millions of their money into the business to help us continue on.' We're going to have to continue doing what we know how to do, which is make tube and sell tube."

"We've got to service our customers," Deason continued. "We've got to make a quality product. I believe this investment should validate to employees that we're doing what we need to do. We have somebody who's standing behind us and saying, 'We believe in you.' "

With unemployment looming, Manning — who owns a good chunk of Wolverine shares — said employees should not be discouraged by his departure.

"I have a lot of love for this company, a lot of love for the people in the company," Manning said. "I can assure you if I did not believe this was in the best interest of the company and the employees and the shareholders, I wouldn't be doing this."

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