Activist Investor Starboard Value Aims to Shake Up Corporate America

Activist Investor Starboard Value Aims to Shake Up Corporate America.

Starboard Value, a well-known activist investor, has been making waves in corporate America by pushing companies to improve their performance and governance. They have a proven track record of success, with notable wins including a 2012 campaign that led to the ousting of Yahoo!'s then-CEO Scott Thompson.

Starboard Value's founder, Jeffrey Smith, has a clear vision for the companies they invest in. He believes that by shaking up the status quo and implementing changes, they can unlock value for shareholders and drive long-term growth.

Starboard Value's approach is centered around identifying undervalued companies with untapped potential. They then work closely with management to implement changes that will improve the company's performance and increase shareholder value.

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Starboard Value began as part of Ramius Capital in 2002. Peter Feld joined Smith and Mitchell in 2005.

Starboard Value merged with the Cowen Group in 2008, and was Cowen's hedge-fund until 2011, when it went independent. Smith, Mitchell, and Feld all stayed with Starboard.

In its first year, the firm waged a proxy battle with AOL, though it failed to win any of the three board seats it wanted.

Starboard Value has made a significant impact on various companies through its activist investments.

In 2011, Starboard won seats on the boards of SurModics and Regis, a chain of hair-cutting salons.

The firm's most notable success came when it sought to gain seats on AOL's board, charging that the firm's CEO was "wasting money by funding the losses at Patch, a network of local-news websites." Although Starboard lost the proxy battle, the CEO followed its advice, spinning off Patch and returning the $1 billion from Microsoft to its shareholders, causing the value of Starboard's AOL stock to more than double.

Here are some of the notable investments made by Starboard Value:

In December 2014, Starboard revealed it had a 6.1% stake in Staples. This marked the beginning of its efforts to push the two office-supply chains to merge.

Starboard increased its holding to 9.9% in Office Depot, setting the stage for a potential deal between the two companies. The acquisitions were a key factor in the eventual merger agreement in February 2015.

Staples nominated a Starboard-approved director to its board just three months after the merger agreement. This move was likely a result of Starboard's significant stake in Staples.

Here's a summary of Starboard's involvement in the Staples and Office Depot merger:

By the end of 2015, Starboard reduced its stake in Office Depot to 5.5% and sold its shares in Staples. This move suggests that Starboard was satisfied with the progress made in the merger between the two companies.

Wausau Paper Corp was persuaded by Starboard to give it five seats on the board from 2012 to 2014. This was a strategic move to avoid a proxy fight.

In 2012, Wausau agreed to expand its board from six to eight directors, letting Starboard nominate two directors not affiliated with the firm. This was a significant expansion, showing the company's willingness to listen to Starboard's concerns.

Starboard announced it would nominate three candidates in 2013, prompting Wausau to expand the board to nine directors and give a seat to Starboard. This move helped to appease Starboard and prevent a proxy fight.

In January 2014, Starboard nominated three candidates to the board and told Wausau it needed to cut costs, buy back shares, and replace management or explore a sale. This was a clear indication of Starboard's expectations for the company.

Wausau eventually settled with Starboard in July 2014, giving the activist investor another seat on the board. The company also agreed to reimburse Starboard up to $350,000 in expenses.

Starboard Value's involvement with Darden Restaurants is a notable example of its activist investing approach.

In 2013, Starboard pushed Darden to create a real-estate investment trust for its property holdings and another entity for its brands.

Starboard completely replaced the 12 directors on the board of Darden Restaurants, a restaurant group that included Olive Garden and Red Lobster.

Red Lobster was sold to Golden Gate Capital for $2.1 billion in 2014 after Starboard criticized the company for a proposed spin off of the brand, saying it undervalued the brand.

After the sale was finalized, Darden said it would nominate nine directors, conceding three seats to Starboard. But shareholders voted for all 12 of Starboard’s nominees, and Starboard CEO Jeffrey Smith was appointed independent non-executive chairman.

At the annual meeting, Smith said: “I love Olive Garden unlimited breadsticks.”

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Starboard Value's investment strategies are centered around identifying undervalued companies and pushing for operational improvements to boost margins.

The firm has a history of taking activist positions in companies it believes are not living up to their potential. In the case of Mellanox Technologies, Starboard Value accumulated a 10.7% stake and urged the company to improve its margins by reducing research and development expenses.

Starboard Value has also been known to take a long-term view, holding onto its investments for extended periods of time. For example, the firm held a 15% stake in AOL and saw the value of its stock more than double after the company spun off Patch and returned $1 billion to its shareholders.

In some cases, Starboard Value's activism has led to significant changes at the companies it invests in. At Office Depot, the firm asked for the CEO to be fired and urged the company to complete its merger with Office Max. Although the merger was ultimately blocked by the Federal Trade Commission, Office Depot did give Starboard Value three board seats.

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Here are some notable examples of Starboard Value's investment strategies: