Jeffrey Smith’s Starboard Capital LP was recently crowned activist of the year by The Activist Investing Annual Review 2015, an annual publication released by Activist Insight, in association with Schulte Roth & Zabel LLP. Starboard Value knocked legendary activist Carl Icahn from the top spot, during a year in which activists took up positions in 344 companies, a nearly 20% increase from the 291 in 2013.
Jeffrey Smith founded Starboard Value in 2002 as a spin-off of Ramius Capital, after they merged with Cowen Group. The activist-focused fund has an equity portfolio valued at $2.87 billion as of September 30, with their most valuable holding at the time being their 11.64 million shares stake in Darden Restaurants, Inc. (NYSE:DRI).
It was Starboard’s successful proxy fight with Fortune 500 company Darden Restaurants, Inc. (NYSE:DRI) which was likely the crowning achievement of their 2014 year. After releasing a mammoth, nearly 300-page presentation that ripped the company’s management team to shreds and even went so far as to criticize the absence of salting the water that cooked their pasta at their Olive Garden restaurants, claiming they no longer did so to get a longer warranty on their pots, and that the result was soggy, often overcooked pasta. Starboard managed to get the entire Darden Restaurants, Inc. (NYSE:DRI) board ousted later that year, on October 10, to be replaced with all 12 nominees nominated by Starboard. Since then, Darden’s stock has risen by 22.55%.
2015 stands to be an even better year for Starboard Value, as many of the moves they cultivated in 2014 are already bearing fruit in 2015. One of those was its activist positions in both Staples, Inc. (NASDAQ:SPLS) and Office Depot Inc (NASDAQ:ODP), which we speculated last year could lead to them pushing for a merger of the two companies. On February 4, it was announced that Staples would indeed merge with Office Depot, purchasing them for $6 billion.
That announcement came just days after Yahoo! Inc. (NASDAQ:YHOO) announced they would spin off their remaining 15% stake in Alibaba Group Holding Ltd (NYSE:BABA) into a separate business entity currently dubbed “SpinCo”. That was a move also championed by Smith, and a boon for shareholders, resulting in a tax-free sale that provided the maximum return on the valuable asset for shareholders. Smith has also been pressuring Yahoo to merge with AOL, Inc. (NYSE:AOL), though Yahoo has thus far resisted on that front.
Earlier in January, MeadWestvaco Corporation (NYSE:MWV) announced their intentions to split their specialty chemicals business from the rest of their company, another move that was pushed by Smith and Starboard throughout the second half of 2014. MeadWestvaco’s stock is up 24.03% since Starboard first declared their activist position in the company last June.
Starboard has a number of other irons in the fire that could lead to more big news later this year. Among other things, they are pushing Insperity Inc (NYSE:NSP) to consider selling themselves, a move that was previously advocated by another Insperity shareholder, Stadium Capital Management. Starboard also initiated a stake in Integrated Silicon Solution, Inc. (NASDAQ:ISSI) towards the end of the year, and formed a stockholder group with other shareholders which will collectively seek to have a director to the board nominated at that company’s next shareholder meeting.
Starboard also has activist positions in LSB Industries, Inc. (NYSE:LXU), which they have had constructive talks with towards improving that company’s shareholder value, as well as RealD (NYSE:RLD), whom Starboard offered to purchase and take private last October, a move which was eventually shot down by that company’s management, which could lead to more sparks between the two later this year.
Needless to say, it’s been an impressive 2014 and early 2015 for Starboard Value, one which has generated themselves and anyone who has emulated their moves, a hefty return. This is precisely why we religiously track and report on the activity of such funds, particularly activist funds, as statistics show that their involvement in companies tends to lead to them outpacing the market and improving shareholder value.
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