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Will Standard Industries Acquire GCP Applied Technologies Inc.?

We noticed that 40 North Management has been buying shares of GCP Applied Technologies Inc. (NYSE:GCP) since it filed a 13D 1.5 years ago. GCP shares lost around 20% since that filing, so it hasn’t been a very good investment.

There were two new 13D filings in GCP Applied Technologies yesterday. The first one was a brand new 13D filed by billionaire Mario Gabelli. The second one was filed by 40 North Management disclosing an 8.8 million share position. On August 8th 40 North Management owned 8.04 million shares of GCP. So, it bought nearly 800K shares in the last 40 days.

We haven’t paid a lot of attention to 40 North Management’s transactions but it is among the funds we track. After yesterday’s transaction we did some research about this “activist” fund. It is actually an affiliate of a privately held Standard Industries. 40 North Management’s co-founders and co-CIOs, David Winter and David Millstone, are also co-CEOs of Standard Industries. That isn’t the only thing they have in common. They are both married to Ronnie and Samuel Heyman’s daughters. They took over the CEO position after Samuel Heyman passed away in 2009.

Samuel Heyman was a corporate raider and hedge fund manager. He used to invest Standard Industries’ cash in merger arbitrage and other hedge fund strategies. His son-in-laws apparently share the same passion for investing. We don’t believe 40 North Management is a traditional activist hedge fund even though it went activist against non-construction companies like Mattress Firm Holding Co. For example in June 2016, 40 North Management purchased 29.1% of Braas Monier Building Group, a roofing products manufacturer in Europe. Brass Monier was later acquired by Standard Industries for 1.1 billion euros. It looks like 40 North Management isn’t an independent hedge fund.

This also tells us that it is a possibility that before Standard Industries makes an acquisition in a building materials company, it may start building a position in the target company through 40 North Management. It is also interesting to see Mario Gabelli’s new position in the stock.

Our goal is to extremely attractive investment opportunities for our premium subscribers. In the last issue of our monthly activist newsletter, we just closed a 2-year recommendation at a 503% profit. We are now in the process of searching for new recommendations to fill the gap left. Unfortunately GCP Applied Technologies Inc. (NYSE:GCP) doesn’t look like a slam dunk investment with tons of upside potential. Even though Standard Industries might attempt to take over GCP at some point in the future, the stock price might decline even more before that happens.

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