David Sokol, who is the largest shareholder of MiddleburgFinancial Corp., wants the Middleburg, Va.-based company to look intostrategic alternatives, according to his March 31 letter to the company's board.On March 30, the CEO of Teton Capital LLC met with Middleburg President and CEOGary Shook, Chairman Joseph Boling, and director John Lee IV to talk about the company'sfuture.
The investor is asking the Middleburg board to establish a specialcommittee of independent directors to initiate a process to explore strategic alternativesto enable Middleburg shareholders to realize the full value of their investmentin the company. That recommendation comes in light of the company's financial performanceand prevailing market conditions impacting community banks, including increasedcompetition for customers, costly regulatory compliance and general economic uncertainties,according to the letter.
Sokol wrote in the missive that the company has not shown theability to earn a return on average equity adequate to cover its cost of capital."I believe the time has come for the Board to take advantage of current M&Amarket conditions to enable its shareholders to realize the intrinsic value of [Middleburg],"Sokol stated in the letter, included in a Schedule 13D filed March 31. He endedthe letter by saying, "Maintaining the status quo is unacceptable."
Sokol reported beneficial ownership of 2,103,008 common sharesof Middleburg Financial, representing a 30.46% stake, based on 6,905,017 sharesoutstanding reported March 14.
Sokol is the formerchairman of several BerkshireHathaway Inc. subsidiaries. He was once thought to be a to Berkshire Chairmanand CEO Warren Buffett. He resignedfrom Berkshire in March 2011 after he was involvedin trades of Lubrizol Corp.shares that violated Berkshire'sinternal ethics code. Sokol has been a private investor since his departure fromBerkshire.