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Starboard's Smith unveils Colfax stake, talks Huntsman, Elanco

Stock MarketsOct 06, 2021 10:40AM ET
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By Svea Herbst-Bayliss

NEW YORK (Reuters) -Activist investment firm Starboard Value on Wednesday said it owns a stake in Colfax (NYSE:CFX) Corp and said the industrial equipment maker is undervalued.

"The company is at an inflection point," Starboard Value's founder Jeffrey Smith said at the 13D Monitor Active-Passive Investor Summit on Wednesday.

News that Starboard, one of the industry's most prominent activist investors, had taken a position pushed Colfax's stock price up 3.55% in pre-market trading.

Earlier this year Colfax announced plans to separate its industrial and medical devices businesses into two publicly traded companies following a strategic review of its operations.

By improving operational performance through improved execution at MedTech, which will ultimately lead to a higher valuation multiple, Smith said he believed Colfax can create significant value for shareholders. Colfax, which is currently trading at $47.34, could see its share price trading closer to $76 a share in 2023 with a chance to trade near $94 in 2025, Smith said.Smith also said Starboard plans to push for changes at chemicals producer Huntsman (NYSE:HUN) Corp., in which it owns a 8.4% stake and which is valued at roughly $6.8 billion.

Huntsman has improved its portfolio mix and has strong businesses, Smith said, however saying there is room to improve revenue. "The company is not getting credit for what it has done," Smith said, adding "We believe this company is a good company."

But Smith also said there is room for Huntsman to improve its valuation multiple by accelerating revenue growth and increasing profitability, which should lead to greater value creation for all shareholders. He said average annual revenue growth could top 5.5% instead of hovering below 1%. Adjusted EBITDA margins could top 18% compared to 13% where they are now, Smith said, underscoring that the company offers differentiated products and has barriers to entry which make it a "compelling investment."

Huntsman was founded by Jon Huntsman and is now run by his son, Peter. It listed its shares in 2005.

Smith also discussed the firm's investment in animal health company Elanco, noting that it has opportunities that are similar to its rival Zoetis (NYSE:ZTS). "We believe there is an opportunity to narrow the margin gap with Zoetis through operational improvements," Smith said.

But he also said "execution has disappointed and credibility has eroded." Financial results have remained largely stagnant despite alleged productivity improvements, Smith said.

Starboard is known for pushing for operational fixes and has at times pushed a company to put itself up for sale.

The 13D Monitor conference is one of the first conferences to have in-person participants, requiring attendees to prove they are vaccinated against the coronavirus.

Previously Starboard pushed for changes at Corteva (NYSE:CTVA) Inc where the company agreed with the hedge fund to add three Starboard-backed directors earlier this year.

It is known in the industry for having won big victories at Darden Restaurants (NYSE:DRI) in 2014 and at GCP Applied Technologies (NYSE:GCP) last year and traditionally wins more board seats than any other activist investor, according to bankers and analysts. This year it lost a proxy battle at Box Inc, its first in nearly a decade.

Starboard's Smith unveils Colfax stake, talks Huntsman, Elanco

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