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Starboard’s Track Record As An Activist Investor

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Dec. 24 2014, Updated 10:19 a.m. ET

Interest in Starboard’s stakes

On December 10–11, company filings revealed that Starboard Value owned significant stakes in the first and second players in the office supplies market—Staples (SPLS) and Office Depot (ODP). Starboard increased its stake in ODP from 8.6% to 9.9%. Also, it acquired a 5.1% stake in SPLS. SPLS is the market leader.

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About Starboard

Starboard was founded in 2002. It’s based in New York. Starboard’s strategy uses fundamental investing principles to identify deeply-undervalued, publicly-listed US corporations. It’s also widely known as an activist investor. One of its major strategies includes dialogue with corporate management teams and boards of directors to identify opportunities that can benefit shareholders.

M&A speculation

As soon as the positions were known, markets speculated about a possible M&A (mergers and acquisitions) opportunity that Starboard was looking to bring about. The office supplies market has been threatened for a number of years now. We discussed this in the last part of this series.

Markets speculated that Starboard would merge SPLS and ODP, find synergies, cut costs, and rationalize the business model. Later in this series, we’ll discuss the benefits and drawbacks of such a deal in more detail.

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Starboard’s track record

Starboard has a history of instituting changes at companies where it holds a significant stake. Recently, it acquired stake in Yahoo (YHOO). It’s trying to bring about changes there. It’s also trying to persuade YHOO to acquire AOL (AOL). AOL is YHOO’s competitor

Darden Restaurants

In October, with shareholder support, Starboard’s activism resulted in the entire board of Darden Restaurants (DRI) being replaced. The hedge fund and DRI shareholders weren’t happy with the sale of DRI’s Red Lobster restaurant chain.

ODP, SPLS, DRI, and YHOO are part of the SPDR S&P 500 ETF (SPY). SPY tracks the S&P 500 Index.

Starboard has been an activist investor in ODP since 2012. It was also involved in a high-profile deal last year. The deal involved ODP. We’ll discuss the deal in the next part of this series.

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