ValueAct Capital starts new positions in ALSN, MOS, and VLO and sells BCR and TECH—13F Flash C




ValueAct Capital (VAC) is a San Francisco–based investment company that manages more than $12 billion on behalf of several institutional and individual investors. The firm was founded in 2000 and is led by its founding partners, Jeffrey Ubben and George Hamel, Jr. It initially formed to manage its founders’ capital, along with the capital of a limited number of outside investors, in an investment strategy that combines intensive due diligence, a concentrated number of investments, and active constructive involvement in value creation through those investments. ValueAct Capital invests in both the public equity and hedging markets.

Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).

ValueAct Capital started new positions in Allison Transmission Holdings (ALSN), The Mosaic Co. (MOS), and Valero Energy Corp. (VLO) and it sold CR Bard Inc. (BCR) and Techne Corp. (TECH).

Why buy Valero Energy Corp. (VLO)?

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Valero Energy reported 4.1% increase in revenue to $36.14 billion for 3Q 2013, though operating income declined to $532 million compared to $1.3 billion in 3Q 2012. The decrease in operating income was due to lower refining throughput margins caused by lower gasoline and diesel margins as well as lower light sweet and sour crude oil discounts. Also contributing to the decline in operating income were higher costs for renewable identification numbers (RINs) to comply with the U.S. federal Renewable Fuel Standard. The decline was partially offset by strong performance in the ethanol business. Valero’s ethanol segment reported operating income of $113 million in the third quarter of 2013. This was an increase of $186 million from the third quarter of 2012, mainly due to higher gross margins per gallon and higher production volumes.

The company saw 3Q 2013 refining throughput volumes average 2.8 million barrels per day, an increase of 172,000 barrels per day from 3Q 2012. Refining throughput volumes increased mainly due to less unplanned maintenance activity and less weather-related downtime.

Valero Energy Partners LP, a master limited partnership (MLP) formed by Valero Energy Corp., announced on December 2 that it has commenced an initial public offering (IPO)  of 15,000,000 common units representing limited partner interests. The common units offered represent a 25.5% limited partner interest in Valero Energy Partners, or a 29.4% limited partner interest if the underwriters exercise in full their option to purchase additional common units.  Valero, through some of its subsidiaries, will own the remaining limited partner interests in Valero Energy Partners as well as the 2% general partner interest. Valero Energy Partners will own, operate, develop, and acquire crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets. According to news reports, it’s planning to raise up to $345 million via the IPO.

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By forming a logistics partnership, Valero Energy Corp. intends to unlock potential value in its assets. It said it’s also evaluating and pursuing investments that leverage the North American natural resource advantages, such as projects to process additional light sweet crude oil volumes and to upgrade natural gas and natural gas liquids. Along with these opportunities, it plans to continue returning cash to stockholders through dividends and share buybacks.


ValueAct Capital concentrates on acquiring significant ownership stakes in a limited number of companies that it believes are undervalued. These companies may be temporarily mispriced for a variety of reasons, including perceived unfavorable industry conditions, poor business performance, changes in management or ownership, reorganizations, or other external factors. These conditions can often result in fundamentally “good” businesses that are available at depressed valuations. ValueAct Capital is typically one of the largest independent shareholders at each of its core investments. VAC’s investment approach differs from typical “activist” investors that often act in a hostile manner to attempt to effect desired changes. In contrast, VAC builds constructive long-term relationships with management teams or boards and implements positive changes to unlock shareholder value. VAC has a well-diversified client base, including endowments, foundations, high–net worth individuals and families, corporate clients, and funds-of-funds.


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