By Svea Herbst-Bayliss
NEW YORK, Oct 20 (Reuters) – Activist investor Starboard Value on Tuesday unveiled a new stake in Honeywell spin-off Solstice Advanced Materials, arguing the company is undervalued and needs someone to hold management accountable for boosting share price performance.
Solstice is trading “stupid cheap,” Starboard managing member and chief executive Jeffrey Smith said at the annual 13D Monitor Active-Passive Investor Summit in New York. Solstice has “great businesses but is undervalued,” Smith said, attributing the discount to the market losing faith in management’s ability to get the best out of its core business lines.
To improve performance, management should focus on its core refrigerants and nuclear businesses and cut roughly $100 million in costs across the company, Smith said.
“Solstice regularly engages with its shareowners and welcomes feedback aimed at enhancing shareowner value. We will review Starboard’s presentation carefully and look forward to engaging with the firm,” a company representative said in a statement. “Our Board of Directors and management team remain committed to acting in the best interests of all Solstice shareowners.”
Spun out of Honeywell a year ago, Solstice initially saw its share price gain significantly. However, it is down roughly 30% since closing at an all-time high on June 30, in part having failed to recover from an aborted $14.5 billion deal to buy specialty chemicals company Element Solutions.
The cash-and-stock deal was announced on July 6, and was billed as a way for Solstice to capitalize on growing demand from data centers and the chip industries. However, following feedback from shareholders on both sides, the companies canceled the agreement on August 27.
Smith also discussed the firm’s investment in Knife River Corp, where Reuters reported on Monday that Starboard has lined up director candidates for election to the company’s board.
On Tuesday, Smith said that the company is “a very attractive acquisition target.” Since making its investment public in September, Starboard has pushed Knife River to boost its profit margins. The company did not respond to a request for comment from Reuters.
(Reporting by Svea Herbst-BaylissEditing by Nick Zieminski)
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