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Why Relational Investor Sells Hologic, Inc. (HOLX) Shares?

Ralph Whitworth‘s fund, Relational Investors, has just reported the sale of a bunch of shares of Hologic, Inc. (NASDAQ:HOLX). Relational revealed the sale of approximately 3.83 million shares in open-market transactions at an average price of approximately $23.84 apiece. Following the disposal of shares, the investor still owns a significant position in Hologic, which amasses around 13.61 million shares. The activist stake currently amasses 4.90% of the company.

Ralph V. Whitworth

Relational Investors first disclosed ownership of Hologic, Inc. (NASDAQ:HOLX) shares in a filing in December, 2013. In the same filing, the investor revealed that it started buying shares of the company in August and went activist later in September. Relational considered that Hologic was a leading producer of women healthcare devices, but was trading at a discount to fair value. Moreover, the investor outlined its position regarding the company and proposed several strategies to be implemented to increase the stock price of the company. Among other things, Relational said that the company had a low return of capital, below the cost of capital because of its over-priced acquisitions. The fund also urged Hologic, Inc. (NASDAQ:HOLX)’s leadership to adopt a disciplined capital allocation program to avoid future acquisitions and adding shareholder representatives to the company’s board.

Following Relational’s talks with the board, the stock of Hologic, Inc. (NASDAQ:HOLX) jumped by over 18%. However, Relational was not the only activist fund that urged for changes at the company. Carl Icahn is another large shareholder of the company and has also pushed for changes at the company. Mr. Icahn revealed a new stake in the company in November, which amassed 12.63% of common stock, which led to the company adopting a poison pill to prevent a hostile takeover. At the beginning of December, Mr. Icahn, who owns 34.15 million shares of the company (17.8% of his equity portfolio) got two of his nominees on the board of directors.

Therefore, after the involvement of the two big activists, the company started to turn things around. Despite some rumors that Hologic, Inc. (NASDAQ:HOLX) might become a takeover target (a strategy often followed by Carl Icahn), the company improved its position. The company hired the former CEO of Stryker Corporation (NYSE:SYK), Stephen MacMillan, who from the start said that his goal is to grow the company rather than sell it. Even though some investors were disappointed at the beginning, in the end, the company showed a potential to grow. The company turned to profit in the last quarter, reporting EPS of $0.04, versus -$0.04 a year ago. Moreover, the revenue of the company went up to around $633 million, versus $626 million in the same quarter of last year.

In this way, Relational Investors, which initially held 19.95 million shares of Hologic, Inc. (NASDAQ:HOLX), later increased to 22.2 million, started reducing its stake in the company during the second quarter, amid the stock gaining ground. However, this might be not the only reason of the fund beginning to sell shares. Since July, Mr. Whitworth took a leave from Relational on the back of health issues. Moreover, recently Relational announced its plans to dissovle, as Wall Street Journal reported.

Disclosure: none

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