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




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 sell C.R. Bard Inc. (BCR)?

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C.R. Bard reported 3Q 2013 net sales of $758.0 million, an increase of 5% over the same quarter last year on a reported basis. Net income was $93.2 million, and diluted earnings per share were $1.15. This was a decrease of 28% and 23%, respectively, compared to 3Q 2012. The company said that the overperformance versus expectations on the bottom line was driven by stronger sales on the top line and controlled cost management. In the second quarter, the company had reported a net loss of $161.6 million, reflecting a net charge for estimated costs related to product liability matters of $293.0 million. The company is facing costs associated with numerous product liability lawsuits, including cases involving vaginal mesh implants, hernia repair products, and IVC filters. On the Gore royalty payments in 3Q 2013, the company said it expects Gore to appeal those rulings again, and it added that recognizing the Gore royalty as revenue now looks like a 2014 event. The long-standing dispute between the company and W.L. Gore & Associates is over infringing a patent for prosthetic vascular grafts.

In 3Q 2013, C.R. Bard continued to see global growth in the low single digits as net sales in the U.S. grew 3%, Europe grew 3%, and Japan grew 4%. Emerging markets represented 8% of total sales for the quarter.

On the positive side, the company announced acquisitions of Loma Vista, Medafor, and Rochester in the quarter, which are expected to improve its growth profile on a sustained basis. The projected double-digit revenue growth of the acquired sales from the three deals essentially replaces the sales from the Electrophysiology Division assets that were acquired by Boston Scientific and provides the company with stronger growth platforms moving forward. With these plans in place, the company said it believes it’s on track to bring the year in from both sales and profitability perspectives.

C.R. Bard is headquartered in Murray Hill, New Jersey. It’s a leading multinational developer, manufacturer, and marketer of innovative life-enhancing medical technologies in the fields of vascular, urological, oncological, and surgical specialty products.


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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