Overview
Starboard Value revealed a new position in Solstice Advanced Materials, asserting that the shares trade below what the firm views as fair value and that tighter management oversight is needed to boost returns for shareholders.
Remarks at investor summit
During remarks at the annual 13D Monitor Active-Passive Investor Summit in New York, Starboard managing member and chief executive Jeffrey Smith described Solstice as trading "stupid cheap." Smith said the business has "great businesses but is undervalued," and attributed the discount to weakened investor confidence in management's ability to execute on the company's core operations.
Smith specified that he believes company management should concentrate on its primary refrigerants and nuclear businesses. He added that the company should pursue reductions of about $100 million in costs across the organization.
Background on Solstice
Solstice was spun off from Honeywell one year ago and initially saw notable gains in its share price following the separation. However, the stock has slid roughly 30% from its all-time closing high reached on June 30.
The decline followed a failed $14.5 billion acquisition of specialty chemicals company Element Solutions. That proposed cash-and-stock transaction - announced on July 6 and intended to capture demand from data centers and chipmakers - was terminated on August 27 after shareholder feedback from both companies prompted the parties to call off the deal.
Starboard's other positions
Smith also discussed Starboard's position in Knife River Corp. The firm has prepared director candidates for election to Knife River's board and has characterized the company as "a very attractive acquisition target." Starboard disclosed its investment in Knife River in September and has since pushed for improved profit margins at the company.
Implications
Starboard is pressing for a narrower strategic focus and substantial cost savings at Solstice while continuing its activist engagement at Knife River. The investor's public comments are an effort to signal both conviction in underlying business value and impatience with current management execution.