MeadWestvaco Corp. (MWV): Starboard Value Raises Activist Stake to 6%

In a new filing with the Securities and Exchange Commission, Jeff Smith‘s Starboard Value reported raising its position in MeadWestvaco Corp. (NYSE:MWV). The fund reported holding around 10.09 million shares of the company, up from 9.35 million shares revealed in its latest 13F filing. Following the increase, Starboard’s activist stake amasses 6.1% of the company’s common stock.

Jeff Smith

Starboard initiated a position in MeadWestvaco Corp. (NYSE:MWV) during the second quarter of 2014 and initially it held 9.35 million shares. At the beginning of June, the investor sent a letter to the company’s board, proposing a spin-off of the company’s non-core assets, an improvement of operating margins and a better capital allocation strategy. Starboard said in the letter that MeadWestvaco should spin-off its specialty chemical business, which at that time was worth more than $3.5 billion. In addition, Mr. Smith has recently pitched MeadWestvaco during his presentation at the Sohn Canada conference.

In their response, MeadWestvaco Corp. (NYSE:MWV) said that they would consider Starboard’s suggestions. However, the company added that the board of directors and management team had already done some steps in order to provide more value to shareholders such as a divestiture of around $6.0 billion worth of non-core assets and it had returned more than $4.0 billion to its shareholders through dividends and stock buyback programs.

MeadWestvaco Corp. (NYSE:MWV) is a company engaged in the packaging and paper business, providing packaging solutions to the healthcare, beauty and personal care and other segments. The company also provides specialty chemicals for the automotive, energy, and infrastructure companies. Its stock gained around 21% since the beginning of the year, while since Starboard added the company to its equity portfolio, the stock appreciated by approximately 13%.

Aside from Mr. Smith, other investors among those that we track are also bullish on MeadWestvaco Corp. (NYSE:MWV). In fact, out of more than 700 funds that we track at Insider Monkey, 27 funds disclosed long positions in the company. Even though the number of investors decreased from 28 funds in the previous quarter, the aggregate value of their stakes went up by some $13.02 million to $758.59 million. Clint Carlson’s Carlson Capital and Zac Hirzel’s Hirzel Capital Management have both raised their stakes in the company by 43% and 83% respectively. Carlson disclosed holding around 2.23 million shares as of the end of September, while Hirzel Capital owns approximately 1.78 million shares.

Mr. Smith has not further pushed the company regarding the spin-off of its specialty chemical business, but with Starboard recently having increased its position and Mr. Smith pitching the stock during an investors conference, it is clear that Mr. Smith is still bullish on MeadWestvaco Corp. (NYSE:MWV). Since he is still activist, he might come up with new proposals, or try to convince the company again for a separation of its chemical business. Meanwhile we should keep an eye on this story, since Mr. Smith is a notorious activist investor. Among Starboard’s recent moves we should mention Integrated Silicon Solution, Inc. (NASDAQ:ISSI), on which the fund has gone activist recently and sent a letter to the company’s management and board outlining that the stock is undervalued and stating the intention to nominate several candidates to be elected to the company’s board of directors. The investor holds 2.40 million shares of Integrated Silicon Solution, which represent 7.8% of the company.

Disclosure: none