UPDATE 4-St Joe CEO resigns, win for Fairholme's Berkowitz

Mon Feb 28, 2011 4:07pm EST

* St Joe replaces CEO, Fairholme to add 4 directors

* Fairholme's Berkowitz has battled Greenlight's Einhorn

* Shares end 3 pct lower (Adds analyst comment, background, adds closing stock price)

By Jonathan Stempel and Ilaina Jonas

NEW YORK, Feb 28 (Reuters) - Mutual fund manager Bruce Berkowitz got a big victory in his quest to shake up money-losing Florida landowner St Joe Co (JOE.N), winning the resignation of its chief executive and gaining a majority on its board of directors.

Chief Executive Britt Greene is stepping down this week "in light of the feedback the board of directors has received," St. Joe Chairman Hugh Durden said in a statement.

Berkowitz, whose Fairholme Capital Management LLC is St. Joe's largest shareholder, had quit the company's board two weeks ago amid disagreements over strategy and executive pay.

St. Joe has lost money for 10 straight quarters. It has also become a target of hedge fund manager David Einhorn, whose firm Greenlight Capital LLC has been shorting the company's shares, betting they will fall.

Einhorn has argued St. Joe is significantly overvaluing its holdings. These include roughly 576,000 acres in Florida, one of the nation's hardest-hit real estate markets.

Berkowitz, though, has said he sees untapped opportunity in St. Joe's real estate. Most of its land is in northwest Florida, known as the Panhandle.

In early February, St. Joe said it had hired Morgan Stanley to advise on strategic options, including a possible sale of the Watersound, Florida-based company.

The shake-up could complicate that review, Raymond James analyst Buck Horne wrote in a research note. He said future builders interested in the land also may postpone decisions until the company becomes more stable.

Shares ended 3.2 percent lower at $26.78 on Monday.

The stock is roughly two-thirds below its peak above $85 in 2005, but it is up 23.5 percent since the start of the year.

Fairholme owns a 28.9 percent stake in St. Joe, worth about $742 million as of Friday's close. Morningstar Inc named Berkowitz its domestic fund manager of the last decade.

Berkowitz declined to comment, citing a St. Joe board meeting set for Wednesday.

FOUR SEATS

St. Joe said its board will add four directors whom Fairholme previously proposed including Berkowitz, Fairholme President Charles Fernandez, former Florida Gov. Charlie Crist, and cruise line Carnival Corp (CCL.N) Chief Operating Officer Howard Frank.

St. Joe said it also expects to add another independent director to its board.

St. Joe began in 1938 as a paper company, created by a trust established after the death of industrialist Alfred I. duPont. The trust today owns less than 5 percent of St. Joe.

Durden, who also is chairman of the The Alfred I. duPont Testamentary Trust, will remain on the board. But another trustee, John Lord, is resigning.

Also leaving the board are Greene; Michael Ainslie, former Sotheby's Holdings CEO and Walter Revell, chairman and CEO of Revell Investments International.

St. Joe postponed the release of fourth-quarter results, which had been scheduled for Tuesday.

Four money managers own about 71 percent of St. Joe shares. Others with big stakes are BlackRock Inc (BLK.N), Janus Capital Group Inc (JNS.N) and T. Rowe Price Group Inc (TROW.O).

SEEING POSSIBILITIES

Berkowitz has said he has toured St. Joe's land holdings, comparing them with once-fledgling and later successful developments in southern Florida, Hilton Head, South Carolina and the Hamptons in New York. [ID:nN15197500]

"You have to see the possibilities and you have to be long-term," Berkowitz said in an October interview.

In contrast, Einhorn has argued that St. Joe would have to take "substantial" writedowns, saying its holdings are too weak to cover their operating costs.

A Greenlight spokesman declined to comment on Monday.

In January, St. Joe said the U.S. Securities and Exchange Commission had begun an informal inquiry into its policies on real estate writedowns. (Reporting by Jonathan Stempel in New York; Additional reporting by Jennifer Ablan and Ilaina Jonas, editing by Maureen Bavdek, Dave Zimmerman and Matthew Lewis)