UPDATE 2-St Joe names Berkowitz chairman

Fri Mar 4, 2011 6:11pm EST

* Largest shareholder becomes chairman

* Shares close up 2.9 pct, stock slips after hours

* Fairholme president becomes Vice Chair (Rewrites; adds Berkowitz letter, background, stock price, byline)

By Ilaina Jonas

NEW YORK, March 4 (Reuters) - St Joe Co (JOE.N) new chairman, Bruce Berkowitz, head of its largest investor mutual fund company Fairholme Funds Inc, said he has been traveling the world drumming up interest in the Florida land developer.

On Friday, the company's board elected Berkowitz chairman and Fairholme President Charles Fernandez as St. Joe's vice chairman. It also elected two Fairholme picks, Carnival Corp Chief Operating Officer Howard Frank and former Florida Governor Charles Crist to the board, according to a filing with the U.S. Securities and Exchange Commission.

Fairholme's Fairholme Capital Management LLC, controls 28.9 percent of St. Joe stock and successfully waged a battle with the former board, prompting Chief Executive Officer Britt Greene and some other board members to resign.

The company said it has begun a search for a new CEO and authorized former Chairman Hugh Durden to take on the duties of CEO until a new one is named.

With such a large stake, Fairholme essentially controls the company, St. Joe said in an annual report filed earlier this week with the U.S. Securities and Exchange Commission.

St. Joe shares closed up 2.9 percent, or 76 cents at, at $27.42 on Friday on the New York Stock Exchange. After hours, the shares were trading at $27.36

In a letter to employees, Berkowitz said he has been traveling the world drumming up interest in the company he believes will eventually have great value, although it has posted 11 straight quarterly losses.

"Charlie Fernandez and I have traveled the globe twice in the past few months discussing all of the possibilities at Joe with top-class organizations," Berkowitz wrote in an email obtained by Reuters. "We have asked leaders from all over the world to see the opportunities for themselves ... and they're coming."

St. Joe, which owns about 574,000 acres, mostly in Northwest Florida, is focused on laying out and getting the necessary permits on which to build communities. Its fate is closely tied to the Northwest Florida housing market. The centerpiece of its plan is the Northwest Florida Beaches International Airport, for which St. Joe donated 1,400 acres.

"St. Joe is a national treasure, capable of developing world-class communities for work and play. We will not waste these opportunities," Berkowitz wrote."

The WaterSound, Florida-based company 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 argues St. Joe is significantly overvaluing its holdings.

"We are moving fast to create a new vision, a meritocracy where you are paid for performance, no matter your position. We will build a company with no ceilings," he wrote. "However, I will not sugar coat the current situation. St. Joe is losing money, selling valuable assets to cover losses and is under attack."

The company was incorporated in 1936 as a paper company, and it still has forestry and rural land businesses. St. Joe has not reported a profit since 2008. Most homebuilders have not reported profits, before tax benefits on losses in several years.

St. Joe has engaged Morgan Stanley to help it evaluate strategic alternatives.

Berkowitz and Fernandez joined the board in January, but quit disagreeing with the other board members over compensation and other issues less than six weeks later after their first board meeting, Berkowitz told Reuters last month.

At that time, Berkowitz had proposed becoming chairman, a representative of the former board has said.

The corporate office accounted for about half the company's expenses during the year, according to its annual report filed earlier this week. The company had 118 employees at year-end, according to the filing.

The new board also rescinded a shareholders rights plan the former board adopted last month that made it more difficult for a new or existing shareholder to buy a bigger stake. (Editing by Andre Grenon)

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