Starboard reveals Solstice stake, pushes management for changes

what happened

Activist investor Starboard Value said on Tuesday that it has taken a new position in Solstice Advanced Materials, the Honeywell spin-off that began trading a year ago. Starboard's managing member and CEO Jeffrey Smith said the shares are “stupid cheap” and that the company has strong businesses, but the market has lost faith in management's ability to get the most out of its core lines. Speaking at the 13D Monitor Active-Passive Investor Summit in New York, he argued that leadership should concentrate on refrigerants and nuclear operations and trim expenses by roughly $100 million. Reuters reported that Solstice had not yet replied to its request for comment.

Solstice shares rose sharply after the spin-off, but have fallen roughly 30% from their all-time high close on June 30. Analysts link part of the slide to the collapse of a $14.5 billion agreement to acquire specialty chemicals maker Element Solutions. The cash-and-stock transaction, announced on July 6, was pitched as a way to tap demand from data centers and the semiconductor industry, but shareholders on both sides pushed back and the companies scrapped it on August 27.

Smith also addressed Starboard's holding in Knife River Corp. Reuters reported that on Monday the fund put forward director candidates for the company's board, and on Tuesday Smith described Knife River as an appealing takeover prospect. Since disclosing the stake in September, Starboard has pressed Knife River to raise its profit margins. The company did not respond to Reuters' request for comment either.

why it matters

Activist campaigns often move the stocks of undervalued companies, especially when a clear improvement plan is on the table. For Solstice, the key question is whether the fund's pressure can restore investor confidence and actually lower costs. In Knife River's case, talk of a possible sale could draw interest to the shares, but so far these are only statements, not concrete offers.

market impact

Solstice and Knife River: activist pressure may support share prices and raise expectations of management change

tags

instruments