LMS Lamson Sessions

Ramius Capital Group, L.L.C. (�Ramius�) today disclosed in a Schedule 13D filed with the Securities and Exchange Commission that it beneficially owns approximately 5.9% of the common stock of Lamson & Sessions Co. (�LMS� or the �Company�) (NYSE: LMS). Admiral Advisors, LLC, a subsidiary of Ramius, has also delivered a letter to Michael Merriman, LMS�s President and Chief Executive Officer, raising concerns that the Company�s stated business strategy of pursuing acquisitions to diversify away from the commodity PVC Pipe business is not in the best interest of shareholders. Ramius believes that the Company should repurchase its own stock and pursue a competitive sale process for the PVC Pipe business. Ramius is also alarmed by the apparent sense of urgency surrounding the special shareholder meeting scheduled for December 15, 2006 to authorize the issuance of up to an additional 20 million shares, doubling the Company�s current share authorization. Ramius believes that Lamson & Sessions has a terrific opportunity to build upon the strong brand names and value-added product portfolios of the Carlon and Lamson Home Products businesses, which represent approximately 70% of revenue. The PVC Pipe business, however, which represents the remaining 30% of revenue, is highly cyclical, volatile, and a distraction to the management team. Ramius notes that a share repurchase combined with a sale of the PVC Pipe business would be highly accretive for shareholders and could increase the Company�s current share valuation significantly. The Company would then be well positioned to pursue strategic acquisitions with a strong stock currency supported by a healthy balance sheet. In the letter, Ramius states that, ��the Company�s current strategy is somewhat backward. Lamson & Sessions should not be making any acquisitions at this time. More specifically, the Company should not be issuing stock for acquisitions as it would presumably be paying a significantly higher multiple than LMS stock trades for today, creating dilution for current shareholders. Nor should the Company be using cash for acquisitions as it would be meaningfully more accretive to current shareholders for LMS to repurchase its own stock given the wide discrepancy in valuation between LMS stock and comparable transaction multiples.� Ramius has chosen to come forward now because of its concern about the speed and direction with which the Company is moving toward the stated strategy of pursuing acquisitions. Ramius points out that the Company has scheduled a special shareholder meeting to authorize the issuance of up to an additional 20 million shares, which, if approved, would double the share authorization from 20 million shares to 40 million shares. While the Company has stated it has no specific plans to issue additional common shares, this special meeting is scheduled just four months in advance of the regular annual shareholder meeting which typically takes place in April. Ramius believes that this may suggest that LMS is eager to pursue a transaction that has not yet been identified and may not be in the best interest of Lamson & Sessions shareholders. About Ramius Capital Group, L.L.C. Ramius Capital Group is a registered investment advisor that manages assets of approximately $7.4 billion in a variety of alternative investment strategies. Ramius Capital Group is headquartered in New York with offices located in London, Tokyo, Hong Kong, Munich, and Vienna. Text of the letter follows: December 4, 2006 Michael Merriman Lamson & Sessions Co. President and CEO 25701 Science Park Drive Cleveland, OH 44122 CC: Board of Directors Michael, As we have discussed in several meetings and conference calls with Jim Abel, we believe Lamson & Sessions ("LMS" or the "Company") is significantly undervalued. As a 5.9% owner, and one of the largest shareholders of LMS, we are writing in advance of the special shareholder meeting scheduled for December 15, 2006 to highlight several concerns about certain aspects of the strategy and direction of the Company. We believe that the Company's current path is not in the best long-term interest of shareholders. In particular, we believe that Lamson & Sessions has a terrific opportunity to build upon the strong brand names and value-added product portfolios of the Carlon and Lamson Home Products businesses. Those opportunities deserve the full attention of management and the Board of Directors. The PVC Pipe business, however, is highly cyclical, volatile, and a distraction to the management team. We firmly believe that the PVC Pipe business hinders the value of LMS, and we strongly urge the Company to pursue a competitive sale process for PVC Pipe immediately. Over the past several years, the Carlon and Lamson Home Products businesses, which represent approximately 70% of revenue, have shown consistent improvements in revenue and operating income driven by strong end market demand, the ability to pass through raw material price increases to customers, and significant process improvements including manufacturing automation, inventory management, and distribution efficiencies. Carlon's revenue has grown by approximately 42% from $188 million in 2001 to $267 million expected for 2006, and operating margin has improved from 7.8% in 2001 to 14.8% expected for 2006. This represents a 7.3% revenue compound annual growth rate ("CAGR") and a 700 basis point improvement in operating margin. Lamson Home Products revenue has grown by approximately 84% from $62 million in 2001 to $114 million expected for 2006, and operating margin has improved from 6.0% in 2001 to 13.2% expected for 2006. This represents a 12.9% revenue CAGR and a 720 basis point improvement in operating margin. Even more important than these historical improvements, however, is that our industry analysis indicates that these businesses should continue to show consistent and sustainable long-term growth and margin improvement as LMS continues to penetrate deeper into their respective end markets. In 2007, analysts expect Carlon and Lamson Home Products to grow revenue 11.2% and 10.0%, respectively. Carlon and Lamson Home Products, in our opinion, are well positioned to continue on the trajectory of profitable growth and, therefore, deserve the full and undistracted attention of management and the Board. Conversely, despite meaningful operational improvements over the past several years in plant automation and distribution, the PVC Pipe business, which represents the remaining 30% of revenues, continues to be extremely volatile based on cyclical end market demand and high correlation to raw material input costs. Despite tremendous performance in 2006, with EBITDA approaching the $30 million level, 2007 is expected to be significantly weaker driven by a revenue decline of 16.9% and operating margin deterioration of 1,030 basis points from 14.1% to 3.8%. From a valuation perspective, we feel that a sale of the PVC Pipe business will significantly enhance shareholder value by bringing in additional cash resources to the Company while removing the negative perception and distraction associated with the Company's exposure to the highly cyclical and volatile PVC pipe market. Based on both our analysis of the current market conditions and the relative valuation of a comparable public company currently exploring a sale process, we believe that the PVC Pipe business can be sold now for a value in the range of $35 million to $70 million. This valuation range is based on conversations with financial buyers and industry experts who believe the PVC Pipe business would be valued in a sale at between 5.0x and 7.0x normalized EBITDA. We have estimated normalized revenue and operating margins in a range of $125 million to $150 million and 2.8% - 4.2%, respectively. Using these assumptions, a sale of the PVC Pipe business could produce between $2.22 and $4.44 per share of gross proceeds that could either be redeployed into Carlon and Lamson Home Products or returned to shareholders. To the extent that there is strategic interest in the asset, we believe a sale price could be even higher than under our assumptions. We understand that there may be some customer overlap between the PVC Pipe business and Carlon. We believe that a well-structured agreement could be negotiated that would enable a sale of the PVC Pipe business without materially impacting sales and profitability at Carlon. As we have told Mr. Abel, we believe that without the exposure to the PVC pipe end market, Carlon and Lamson Home Products would command a valuation multiple approaching the levels of other electrical and building products companies shown below, which are materially above the current LMS valuation. (CHART OMITTED) The Company's management has recently stated in several presentations and conference calls that the strategy going forward will be to pursue acquisitions to diversify away from the commodity-driven PVC Pipe business and expand further into industrial and commercial products. However, according to our research, recent M&A transactions in the commercial / industrial products segment have traded at multiples in the 7.0x - 10.0x Enterprise Value / LTM EBITDA range, which is significantly higher than Lamson & Sessions' current valuation of 4.1x Enterprise Value / LTM EBITDA and 5.9x Enterprise Value / 2007E EBITDA. Furthermore, the Company recently increased the size of its credit facility from $125 million up to a maximum of $300 million and called a special shareholder meeting to double the Company's share authorization from 20 million shares to 40 million shares to facilitate the issuance of shares for future acquisitions. In addition, over the past several quarters, the Company has repaid all but the term loan portion of its debt and with its new facility in place will most likely be close to debt-free at the end of 2006. Based on the issues we have outlined above, we believe that the Company's current strategy is somewhat backward. Lamson & Sessions should not be making any acquisitions at this time. More specifically, the Company should not be issuing stock for acquisitions as it would presumably be paying a significantly higher multiple than LMS stock trades for today, creating dilution for current shareholders. Nor should the Company be using cash for acquisitions as it would be meaningfully more accretive to current shareholders for LMS to repurchase its own stock given the wide discrepancy in valuation between LMS stock and comparable transaction multiples. Therefore, rather than pursuing an acquisition strategy now to diversify away from the PVC Pipe business, we believe the Company should address the valuation discrepancy at its core by repurchasing $60 million - $120 million of its stock, representing approximately 15% - 30% of the current shares outstanding, and selling the PVC Pipe business. Pending the successful completion of a transaction, it is our view that the stock price of LMS would accrete, closing the gap in valuation with its closest peers. At that time, the Company would have a much stronger stock currency, supported by a healthy balance sheet, to pursue strategic acquisitions that leverage the Carlon and Lamson Home Products brand names and distribution channels. We have chosen to express these views now because we are disturbed by the apparent sense of urgency to execute on acquisitions. To this end, we are particularly concerned about the urgently called special shareholder meeting to authorize the issuance of up to an additional 20 million shares, which if approved, would double the share authorization from 20 million shares to 40 million shares. According to the Company's proxy statement dated November 16, 2006, the Company currently has no specific plans to issue the additional common shares. However, this special meeting is scheduled just four months in advance of the regular annual shareholder meeting. We are alarmed that this apparent sense of urgency suggests LMS is eager to prepare for a transaction that has not yet even been identified and which we believe may not be in the best interest of Lamson & Sessions shareholders. In summary, we strongly believe that it would be a disservice to shareholders to make any acquisitions before repurchasing LMS stock at current valuation levels and pursuing an auction process to divest the PVC Pipe business. Regardless of whether the shareholders approve the additional share authorization, management and the Board need to know that we, as one of the largest LMS shareholders, expect the Company to repurchase stock and explore a sale of the PVC Pipe business before any acquisitions take place especially since any target company would likely be acquired at multiples far in excess of where LMS is currently trading. We would appreciate your consideration of the topics we have highlighted above and would be happy to discuss these views with you and the rest of the Board of Directors at your convenience. We look forward to continuing our discussions and are confident that the best interest of all shareholders will remain of paramount importance. Best Regards, /s/ Jeffrey C. Smith Jeffrey C. Smith Executive Managing Director Ramius Capital Group Ramius Capital Group, L.L.C. ("Ramius") today disclosed in a Schedule 13D filed with the Securities and Exchange Commission that it beneficially owns approximately 5.9% of the common stock of Lamson & Sessions Co. ("LMS" or the "Company") (NYSE: LMS). Admiral Advisors, LLC, a subsidiary of Ramius, has also delivered a letter to Michael Merriman, LMS's President and Chief Executive Officer, raising concerns that the Company's stated business strategy of pursuing acquisitions to diversify away from the commodity PVC Pipe business is not in the best interest of shareholders. Ramius believes that the Company should repurchase its own stock and pursue a competitive sale process for the PVC Pipe business. Ramius is also alarmed by the apparent sense of urgency surrounding the special shareholder meeting scheduled for December 15, 2006 to authorize the issuance of up to an additional 20 million shares, doubling the Company's current share authorization. Ramius believes that Lamson & Sessions has a terrific opportunity to build upon the strong brand names and value-added product portfolios of the Carlon and Lamson Home Products businesses, which represent approximately 70% of revenue. The PVC Pipe business, however, which represents the remaining 30% of revenue, is highly cyclical, volatile, and a distraction to the management team. Ramius notes that a share repurchase combined with a sale of the PVC Pipe business would be highly accretive for shareholders and could increase the Company's current share valuation significantly. The Company would then be well positioned to pursue strategic acquisitions with a strong stock currency supported by a healthy balance sheet. In the letter, Ramius states that, "...the Company's current strategy is somewhat backward. Lamson & Sessions should not be making any acquisitions at this time. More specifically, the Company should not be issuing stock for acquisitions as it would presumably be paying a significantly higher multiple than LMS stock trades for today, creating dilution for current shareholders. Nor should the Company be using cash for acquisitions as it would be meaningfully more accretive to current shareholders for LMS to repurchase its own stock given the wide discrepancy in valuation between LMS stock and comparable transaction multiples." Ramius has chosen to come forward now because of its concern about the speed and direction with which the Company is moving toward the stated strategy of pursuing acquisitions. Ramius points out that the Company has scheduled a special shareholder meeting to authorize the issuance of up to an additional 20 million shares, which, if approved, would double the share authorization from 20 million shares to 40 million shares. While the Company has stated it has no specific plans to issue additional common shares, this special meeting is scheduled just four months in advance of the regular annual shareholder meeting which typically takes place in April. Ramius believes that this may suggest that LMS is eager to pursue a transaction that has not yet been identified and may not be in the best interest of Lamson & Sessions shareholders. About Ramius Capital Group, L.L.C. Ramius Capital Group is a registered investment advisor that manages assets of approximately $7.4 billion in a variety of alternative investment strategies. Ramius Capital Group is headquartered in New York with offices located in London, Tokyo, Hong Kong, Munich, and Vienna. Text of the letter follows: -0- *T December 4, 2006 Michael Merriman Lamson & Sessions Co. President and CEO 25701 Science Park Drive Cleveland, OH 44122 CC: Board of Directors Michael, As we have discussed in several meetings and conference calls with Jim Abel, we believe Lamson & Sessions ("LMS" or the "Company") is significantly undervalued. As a 5.9% owner, and one of the largest shareholders of LMS, we are writing in advance of the special shareholder meeting scheduled for December 15, 2006 to highlight several concerns about certain aspects of the strategy and direction of the Company. We believe that the Company's current path is not in the best long-term interest of shareholders. In particular, we believe that Lamson & Sessions has a terrific opportunity to build upon the strong brand names and value-added product portfolios of the Carlon and Lamson Home Products businesses. Those opportunities deserve the full attention of management and the Board of Directors. The PVC Pipe business, however, is highly cyclical, volatile, and a distraction to the management team. We firmly believe that the PVC Pipe business hinders the value of LMS, and we strongly urge the Company to pursue a competitive sale process for PVC Pipe immediately. Over the past several years, the Carlon and Lamson Home Products businesses, which represent approximately 70% of revenue, have shown consistent improvements in revenue and operating income driven by strong end market demand, the ability to pass through raw material price increases to customers, and significant process improvements including manufacturing automation, inventory management, and distribution efficiencies. Carlon's revenue has grown by approximately 42% from $188 million in 2001 to $267 million expected for 2006, and operating margin has improved from 7.8% in 2001 to 14.8% expected for 2006. This represents a 7.3% revenue compound annual growth rate ("CAGR") and a 700 basis point improvement in operating margin. Lamson Home Products revenue has grown by approximately 84% from $62 million in 2001 to $114 million expected for 2006, and operating margin has improved from 6.0% in 2001 to 13.2% expected for 2006. This represents a 12.9% revenue CAGR and a 720 basis point improvement in operating margin. Even more important than these historical improvements, however, is that our industry analysis indicates that these businesses should continue to show consistent and sustainable long-term growth and margin improvement as LMS continues to penetrate deeper into their respective end markets. In 2007, analysts expect Carlon and Lamson Home Products to grow revenue 11.2% and 10.0%, respectively. Carlon and Lamson Home Products, in our opinion, are well positioned to continue on the trajectory of profitable growth and, therefore, deserve the full and undistracted attention of management and the Board. Conversely, despite meaningful operational improvements over the past several years in plant automation and distribution, the PVC Pipe business, which represents the remaining 30% of revenues, continues to be extremely volatile based on cyclical end market demand and high correlation to raw material input costs. Despite tremendous performance in 2006, with EBITDA approaching the $30 million level, 2007 is expected to be significantly weaker driven by a revenue decline of 16.9% and operating margin deterioration of 1,030 basis points from 14.1% to 3.8%. From a valuation perspective, we feel that a sale of the PVC Pipe business will significantly enhance shareholder value by bringing in additional cash resources to the Company while removing the negative perception and distraction associated with the Company's exposure to the highly cyclical and volatile PVC pipe market. Based on both our analysis of the current market conditions and the relative valuation of a comparable public company currently exploring a sale process, we believe that the PVC Pipe business can be sold now for a value in the range of $35 million to $70 million. This valuation range is based on conversations with financial buyers and industry experts who believe the PVC Pipe business would be valued in a sale at between 5.0x and 7.0x normalized EBITDA. We have estimated normalized revenue and operating margins in a range of $125 million to $150 million and 2.8% - 4.2%, respectively. Using these assumptions, a sale of the PVC Pipe business could produce between $2.22 and $4.44 per share of gross proceeds that could either be redeployed into Carlon and Lamson Home Products or returned to shareholders. To the extent that there is strategic interest in the asset, we believe a sale price could be even higher than under our assumptions. We understand that there may be some customer overlap between the PVC Pipe business and Carlon. We believe that a well-structured agreement could be negotiated that would enable a sale of the PVC Pipe business without materially impacting sales and profitability at Carlon. As we have told Mr. Abel, we believe that without the exposure to the PVC pipe end market, Carlon and Lamson Home Products would command a valuation multiple approaching the levels of other electrical and building products companies shown below, which are materially above the current LMS valuation. (CHART OMITTED) The Company's management has recently stated in several presentations and conference calls that the strategy going forward will be to pursue acquisitions to diversify away from the commodity-driven PVC Pipe business and expand further into industrial and commercial products. However, according to our research, recent M&A transactions in the commercial / industrial products segment have traded at multiples in the 7.0x - 10.0x Enterprise Value / LTM EBITDA range, which is significantly higher than Lamson & Sessions' current valuation of 4.1x Enterprise Value / LTM EBITDA and 5.9x Enterprise Value / 2007E EBITDA. Furthermore, the Company recently increased the size of its credit facility from $125 million up to a maximum of $300 million and called a special shareholder meeting to double the Company's share authorization from 20 million shares to 40 million shares to facilitate the issuance of shares for future acquisitions. In addition, over the past several quarters, the Company has repaid all but the term loan portion of its debt and with its new facility in place will most likely be close to debt-free at the end of 2006. Based on the issues we have outlined above, we believe that the Company's current strategy is somewhat backward. Lamson & Sessions should not be making any acquisitions at this time. More specifically, the Company should not be issuing stock for acquisitions as it would presumably be paying a significantly higher multiple than LMS stock trades for today, creating dilution for current shareholders. Nor should the Company be using cash for acquisitions as it would be meaningfully more accretive to current shareholders for LMS to repurchase its own stock given the wide discrepancy in valuation between LMS stock and comparable transaction multiples. Therefore, rather than pursuing an acquisition strategy now to diversify away from the PVC Pipe business, we believe the Company should address the valuation discrepancy at its core by repurchasing $60 million - $120 million of its stock, representing approximately 15% - 30% of the current shares outstanding, and selling the PVC Pipe business. Pending the successful completion of a transaction, it is our view that the stock price of LMS would accrete, closing the gap in valuation with its closest peers. At that time, the Company would have a much stronger stock currency, supported by a healthy balance sheet, to pursue strategic acquisitions that leverage the Carlon and Lamson Home Products brand names and distribution channels. We have chosen to express these views now because we are disturbed by the apparent sense of urgency to execute on acquisitions. To this end, we are particularly concerned about the urgently called special shareholder meeting to authorize the issuance of up to an additional 20 million shares, which if approved, would double the share authorization from 20 million shares to 40 million shares. According to the Company's proxy statement dated November 16, 2006, the Company currently has no specific plans to issue the additional common shares. However, this special meeting is scheduled just four months in advance of the regular annual shareholder meeting. We are alarmed that this apparent sense of urgency suggests LMS is eager to prepare for a transaction that has not yet even been identified and which we believe may not be in the best interest of Lamson & Sessions shareholders. In summary, we strongly believe that it would be a disservice to shareholders to make any acquisitions before repurchasing LMS stock at current valuation levels and pursuing an auction process to divest the PVC Pipe business. Regardless of whether the shareholders approve the additional share authorization, management and the Board need to know that we, as one of the largest LMS shareholders, expect the Company to repurchase stock and explore a sale of the PVC Pipe business before any acquisitions take place especially since any target company would likely be acquired at multiples far in excess of where LMS is currently trading. We would appreciate your consideration of the topics we have highlighted above and would be happy to discuss these views with you and the rest of the Board of Directors at your convenience. We look forward to continuing our discussions and are confident that the best interest of all shareholders will remain of paramount importance. Best Regards, /s/ Jeffrey C. Smith Jeffrey C. Smith Executive Managing Director Ramius Capital Group *T