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

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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 Techne Corp. (TECH)?

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Techne Corporation’s stock is up 25% year-to-date. It posted a 14.2% increase in net sales to $85.7 million for the quarter ended September 30, 2013 (1Q 2014). It reported an increase in sales for both its Biotechnology and Clinical Controls segments. Clinical Controls sales didn’t include sales of Bionostics Holding Limited, which was acquired on July 22, 2013, for net cash of $103 million, or the impact of foreign currency exchange rate fluctuations. The increase in Clinical Controls sales was mainly the result of timing for shipments at both the beginning and end of the quarter.

As of September 30, 2013, Techne had $323 million in cash and available-for-sale investments—and no debt. The available-for-sale investments declined $54 million due to a decline in clinical-stage biopharmaceutical company ChemoCentryx’s (CCXI) market cap. The company said ChemoCentryx learned of some less-than-desirable clinical results, which negatively impacted its market valuation a few months back. The company said in its earnings release that its investment in ChemoCentryx is included in short-term available-for-sale investments as of September 30, 2013, at fair values of $35.2 million. ChemoCentryx is a biopharmaceutical company focused on discovering, developing, and commercializing orally administered therapeutics to treat autoimmune diseases, inflammatory diseases, and cancers.

Techne announced at the end of October that its board has decided to pay a dividend of $0.31 per share for the quarter ended September 30, 2013.

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Techne Corporation and its subsidiaries develop, manufacture, and sell biotechnology products and hematology calibrators and controls. TECH’s Biotechnology segment develops, manufactures, and sells biotechnology research and diagnostic products worldwide. This segment includes R&D Systems, Biotechnology Division, R&D Europe, Tocris, R&D China, BiosPacific, and Boston Biochem. The Clinical Controls segment develops, manufactures, controls, and calibrates worldwide sales. The segment now includes sales made through R&D Systems, Clinical Controls Division, and the newly acquired Bionostics.

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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