Starboard Value Chief Executive Officer Jeff Smith laid out the activist fund's approach to its three latest investments at the annual 13D Monitor Active-Passive Investor Summit in New York. The first, construction company Knife River Corp., produces the sand, gravel and crushed stone used to make asphalt and concrete. It was spun out of MDU Resources Group in 2023, but Starboard argues that didn't improve margins. Smith said the current management at the Bismarck, North Dakota-based firm has touted its 15% margin on earnings before interest, taxes, debt and amortization, but they could easily reach 22%. That would be attractive to buyers in a sector that consolidates often.
The activist also acquired a stake in Skyworks Solutions Inc. via its takeover of Qorvo Inc. earlier this month. Smith said the deal, valued at about $22 billion, created an "industry leader" in radio frequency semiconductors, which are used in wireless transmission as well as in military and satellite communications. He called the announced $500 million in cost savings within three years "conservative," saying it could actually be double that number.
Finally, the activist announced a position in Solstice Advanced Materials, the Honeywell International Inc. spinoff. Smith indicated Starboard is mostly interested in its refrigerants and nuclear businesses, adding the company was undervalued after a poorly timed acquisition. The company terminated a $14.5 billion acquisition of Element Solutions Inc. in August after strong shareholder pushback on both sides. Smith said the company should take out $100 million in costs.
"The challenge is shareholders have lost confidence in if management is focused on improving value as opposed to getting bigger at all costs," Smith said at the conference. "That's where we come in."
Source: Bloomberg Markets · Summarized by HeadlinesBriefing