Activist Starboard Nominates Four Directors at Huntsman
(Bloomberg) -- Activist investor Starboard Value has nominated four directors to the board of Huntsman Corp. as it believes additional oversight is needed to deliver on the chemicals group’s promises to improve performance.
Starboard, which owns a 8.6% stake in Huntsman, said in a letter to the company’s Chairman Peter Huntsman on Wednesday that it believed a decade-long valuation discount is “a clear sign of investor skepticism.”
The New York hedge fund has nominated James Gallogly, Sandra Beach Lin, Susan Schnabel and Starboard’s managing member Jeff Smith to the Huntsman board to add additional oversight and hold management accountable, it said.
The company’s shares closed up 4.5% to $37.52 in New York on Wednesday, giving Huntsman a market value of $8.2 billion.
Smith said in the letter that he was pleased with the recent announcements around financial targets, capital allocation and portfolio changes, which he said incorporated some of his firm’s suggestions.
“However, we hope that the board recognizes that it is not lack of aspiration, but a lack of execution, that has historically frustrated shareholders,” Smith said in the letter, a copy of which was obtained by Bloomberg News.
Huntsman has said in recent weeks it plans to add three new directors to its board as part of its ongoing board refreshment. It has also launched a strategic review of its textile effects division and realigned its management compensation practices. Its shares have gained about 13% in the last month through Tuesday’s close.
The company said in a statement Wednesday that the latest initiatives were part of a strategy it began in 2017 that has seen a significant repositioning of its portfolio and has generated meaningful shareholder value.
It said it has held numerous meetings with Starboard in recent months, and has tried to work constructively with the firm, including on its board refreshment initiatives. Despite several good faith attempts it said it was unable to reach an agreement, it said.
“There was, and continued to be, no misalignment with Starboard on the company’s objectives and strategic initiatives,” it said. “Starboard is more concerned with installing their handpicked candidates on Huntsman’s board than allowing the board and management team to create shareholder value, through our multiple initiatives that Starboard supports.”
Smith said he believed the company has excellent assets and said Starboard is excited for the potential upside at the company. But he argued that the company has a long history of overpromising and underdelivering.
“We believe shareholders are not only skeptical that management will finally begin to deliver on its commitments, but also that the board will hold management accountable if it falters,” he said. “After years of poor governance, we recognize that the company has reactively added new directors. Unfortunately, the board’s actions over the past two weeks have left us incredibly concerned that new faces are simply perpetuating old shareholder-unfriendly tendencies.”
Smith said he has been particularly frustrated by the company’s unwillingness to engage with Starboard on its board refreshment efforts, and reacting in a highly defensive manner. It argued the board quickly implemented its own board refreshment strategy, and shortened the nomination period from nearly a month to 10 days. In continued “poor form,” it announced the changes in a press release on New Year’s day, he said.
Huntsman has also refused Starboard’s requests to use a universal proxy card, which would allow investors to pick and choose which directors to support from the company’s slate of directors and Starboard’s own nominees. Regulators have said they will make such cards mandatory starting in September.
“It is clear to us that direct representation of shareholders is needed, especially in light of recent actions taken by the board, including its newest directors, which serve to disenfranchise the company’s shareholders,” Smith said.
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