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Blue Harbour Boosts Babcock & Wilcox Co (BWC) Stake after Company Announces Spin-Off Plans

Clifton S. RobbinsBlue Harbour Group has surged its activist stake in Babcock & Wilcox Co (NYSE:BWC), as a new filing with the Securities and Exchange Commission showed. Blue Harbour reported ownership of approximately 9.14 million shares of the company, representing 8.6% of the common stock. Previously, the fund held around 7.03 million shares of Babcock & Wilcox, as it reported in its latest 13F filing.

Clifton Robbins Blue Harbour

Blue Harbour is an activist fund that was founded in 2004 by a former partner at private equity firm KKR, Clifton Robbins. The fund has an equity portfolio worth over $2.5 billion, which is relatively diversified and mainly consists of stocks from Technology, Services, and Basic Materials sectors. The fund has made some bullish moves over the last couple of months, such as raising its exposure to Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) to 12.64 million shares, equal to 7% of the common stock. The investor has also been increasing its position in Rowan Companies PLC (NYSE:RDC), of which it owns 9.78 million class A shares, representing 7.9% of the class.

Blue Harbour Group has been bullish on Babcock & Wilcox Co (NYSE:BWC) since the end of 2013. The fund initiated a stake during the fourth quarter of 2013, reporting ownership of approximately 1.10 million shares. During the first quarter, the stake was surged to 5.21 million shares and during the April-June, the investor raised its stake further to 7.03 million shares, the position amassing 8.84% of the equity portfolio, which was the second-largest stake in terms of value. Babcock & Wilcox lost around 11% since the beginning of the year.

Among the funds that we track, Blue Harbour is currently the largest shareholder of Babcock & Wilcox Co (NYSE:BWC). Moreover, many other great investors have also been bullish on the company. Jeffrey Smith‘s Starboard Value LP reported ownership of around 3.68 million shares in its latest 13F filing, up by 84% on the quarter. Israel Englander‘s Millennium Management raised its position by 145% during the second quarter to 853,900 shares. On the other hand, Larry Robbins‘ Glenview Capital cut its stake by 36% to 3.54 million shares. David Einhorn‘s Greenlight Capital reduced its position by 62% respectively 1.49 million shares, although the company is still one of his top picks among small-cap stocks.

However, Blue Harbour boosted its stake a day after the company announced its plan for a tax-free spin-off of its Power Generation business. The spin-off will result in the creation of two indepent publicly-traded companies, Babcock & Wilcox, which will comprise the Power Generation business and BWX Technologies that will focus on Government and Nuclear operations. Shareholders of the current Babcock & Wilcox Co (NYSE:BWC) will receive shares of the new Babcock & Wilcox by the middle of next year.

The impact of the spin-off is yet to be assessed by analysts and experts in the power generation business, but Blue Harbour’s ‘bullishness’ should also raise some flags for other investors. It often comes that spin-off companies become very successful and in some cases even manage to perform better than their former parent companies. In this way, tracking the activity of big investors can provide some insights to retail investors, because big funds usually invest large amounts of money and research thoroughly their next moves, which is why Babcock & Wilcox Co (NYSE:BWC) is a stock worth keeping on the radars.

Disclosure: none

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