Overview of Starboard
Founded in 2002 by Jeffrey Smith, Starboard Value LP is a New York-based activist hedge fund. As such, Starboard takes large, long-term positions in companies that it believes to be undervalued or mismanaged. These positions allow the fund to gain a certain amount of control of a company’s decision-making process. The fund then actively engages the management and the board to pursue strategies to unlock or maximize value for shareholders.
Starboard and MeadWestvaco
In December 2014, as part of an amendment to its 13D filed in June, Starboard announced that it had raised its activist stake in MeadWestvaco Corp. (MWV). According to the December filing, the fund has accumulated approximately 10.09 million shares in the global packaging company, up from 9.35 million shares reported on September 30, 2014. Jeff Smith’s fund now holds 6.1% of the company’s outstanding common stock.
In a June letter to MeadWestvaco investors, Starboard asserted that the company was “deeply undervalued” due to its excessive corporate overhead and conglomerate structure. It outlined a plan to engage management and have it spin off the company’s non-core assets. By improving operating margins and capital allocation, this action would unlock hidden value for MeadWestvaco’s shareholders.
Share prices pop on positive news
MeadWestvaco’s January share prices are on an uptrend thanks to the proposed spin-off of the specialty chemicals arm, the announcement of a merger with RockTenn Company (RKT), and solid fourth-quarter results.
MeadWestvaco’s share prices are up by 21% since Starboard revealed its activist position in June last year. The merger announcement and fourth quarter results on January 26 saw share prices appreciate by 14% in a single day.
Other notable activist positions include a 7.1% stake in the semiconductor packaging company Tessera Technologies (TSRA), a 13.2% stake in the human resources outsourcing firm Insperity (NSP), and an 8.8% stake in Darden Restaurants (DRI), where it succeeded in replacing the entire board.