Jeffrey Smith Sends Another Letter to Wausau Paper Corp. (WPP)

Starboard Value Lp, managed by Jeffrey Smith, has sent a new letter to Wausau Paper Corp. (NYSE:WPP), expressing its disappointment after the company reported negative earnings for the fourth quarter of 2013.  The fund owns 7.50 million shares of the company, the stake amassing 15.2% of the common stock.

Jeff Smith

Starboard Value believes that there are lots of opportunities, which, if applied, can add value to the company, but the company has failed to monetize them. Starboard Value has several times pointed out the inability of the company to meet its laid down guidance.

Wausau Paper Corp. (NYSE:WPP) has also lowered its EBITDA guidance for FY2014 to $60-70 million, this is lower than the EBITDA achieved before the company spent  than $200 million on a new ATMOS tissue machine. Starboard further stated that the company is underperforming after the installation of the ATMOS tissue machine.

The company has lost $34.9 million, representing a 34.9% miss in EBITDA, after the installation of the ATMOS tissue machine. The investor considers that the company should have saved $25 million after the installation of the ATMOS. Instead the company has lowered its guidance for the fiscal year 2014.

“Unfortunately, Wausau’s Board has still not demonstrated a desire or willingness to work constructively with the Company’s largest shareholder to reconstitute the Board. It is hard to understand why the Board would continue to support directors that have proven unable to create value for shareholders and managers that have proven unable to execute on their own plans,” the letter states.

Last month, Starboard Value sent another letter to the board of Wausau Paper Corp. (NYSE:WPP),  asking for a change in the board of Wausau Paper Corp. Starboard plans to elect three new members to the board, two of them being industry experts and one a direct representative of the shareholders. This is in contrast to the members nominated by the company who have no relevant operating experience.

According to the letter, the company has not shown interest in nominating the desired members of the Starboard Value to its board, leaving the fund disappointed. Along with Starboard, Altai Capital Management and LionEye Capital Management, two other large shareholders of the company are also frustrated with non-performance of the company.

Last month, Rishi Bajaj, Toby Symonds, and Steve Tesoriere‘s Altai Capital purchased 2.6 million shares of Wausau Paper Corp (NYSE:WPP). Lioneye Capital Management, led by Stephen V. Raneri initiated a stake in Wausau Paper Corp. (NYSE:WPP) during the third quarter of 2013, and at the end of last year, held 1.6 million shares.

Starboard Value a spin-off from Ramius, is a fundamental oriented activist hedge fund that focuses on small cap stocks.

Starboard’s Letter to Wausau Paper (February 18)

Disclosure: none

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