Starboard Value has acquired a $1 billion stake in pharmaceutical company Pfizer. Jeff Smith's hedge fund has become one of the most feared activist investors. Starboard has doubled its assets over the past 10 years, targeting companies across all industries.
Thank you for registering!
Access your favorite topics in a personalized feed on the go. Download the app
By clicking “Sign Up”, you agree to our Terms of Service and Privacy Policy. You can opt-out at any time by visiting our settings page or by clicking “unsubscribe” at the bottom of the email.
Pharmaceutical giant Pfizer sounded the alarm Sunday evening after one of Wall Street's most feared activist investors revealed a stake in the company.
Starboard Value notified the pharmaceutical company that it had acquired a position worth $1 billion in the company.
The objectives of activists vary depending on the target, such as corporate break-ups, M&A, and cost reductions. Starboard's turnaround strategy is not yet clear, but Pfizer's stock price and earnings have fallen from record highs reached at the height of the pandemic, and Starboard, led by 52-year-old co-founder Jeff Smith, has It has a long history of exercising minority stakes. Steal board seats and profits from famous brand companies.
Over the past decade, Mr. Smith has more than doubled the hedge fund's assets under management to $8.5 billion, targeting companies such as the owner of Salesforce, Starbucks and Olive Garden. During that time, Starboard has developed a reputation for making life uncomfortable and sometimes dismissing executives and directors who resist his proposals for change.
With a market capitalization of more than $160 billion, Pfizer is one of the largest companies Starboard's Smith has targeted to date. Still, investors appeared to applaud news of the company's investment Monday, with Pfizer shares up about 3% in morning trading and adding nearly $5 billion to the company's market capitalization.
Additionally, Starboard reportedly secured campaign support from former Pfizer executives Ian Reid and Frank D'Amelio.
Starboard has experience in a wide range of fields, but specializes in shareholder activities, saying he is particularly good at instilling discipline at the board level and “improving profitability and reducing costs in bloated companies.” said Ken Squire, founder and president of research firm 13D Monitor. .
Starboard declined to comment.
Who is Jeff Smith?
Investor activity has exploded in recent years. According to a July report from investment bank Lazard, 147 new campaigns were launched globally in the first half of 2024, a record second only to the record high of 252 campaigns in 2023.
Related articles
Even if Mr. Smith has not yet reached the name recognition of activist investors such as Paul Singer (Elliott Management), Carl Icahn (Icahn Enterprises) and Dan Loeb (Third Point Capital), he is a star. Bode has become one of the most formidable names in the industry. .
Smith launched Starboard in 2011, spinning it out of a small division of Cowen Group with several partners, including Peter Feld. According to a 2014 Fortune magazine article, early targets included AOL, which Starboard lost a proxy fight for but pushed for changes that boosted its stock by 250%, and Starboard's three seats on the board. This included Office Depot, which acquired .
Starboard attracted the attention of American companies in 2013 with a campaign against Darden Restaurants, owner of restaurant chains such as Olive Garden and Longhorn Steakhouse. Mr Smith replaced the entire 12-member board and assumed the role of chairman, with less than 10% of the shares. By the time Mr. Smith resigned in 2016, Darden stock had risen nearly 50% and Starboard had made more than $500 million in profits.
According to a 2015 Wall Street Journal report, one of the hedge fund's biggest sources of fame has to do with improving Olive Garden's breadsticks, which Starboard said helped the company sell up to 500 He estimated that he could save $10,000.
Starboard acquired a stake in software giant Salesforce in 2022, asking the company to cut costs and improve profit margins. The company's stock has nearly doubled in the two years since then.
Salesforce CEO Marc Benioff. His company's stock price soared following an activist campaign by Starboard Value and others. (Photo by Bronte Whitpen/San Francisco Chronicle, via Getty Images) Bronte Whitpen/San Francisco Chronicle, via Getty Images
Starboard's record is not without blemishes. In 2013, the company's campaign against meat processor Smithfield Foods failed. The hedge fund lost a proxy battle with software maker Box in 2021. And in 2019, it withdrew its bid to break Bristol-Myers Squibb's merger with Celgene after failing to convince two major proxy advisory firms.
Starboard has launched a total of 151 activist campaigns, generating an average return of 25%, according to data from 13D Monitor.
Dangerous if ignored
More recently, the hedge fund has taken positions in dating app owner Match Group, software companies Autodesk and Starbucks.
Mr Squire said Mr Smith had a reputation for being fierce but intelligent and outspoken. “They can be friendly, but they can also be fearful and harsh if ignored,” Starboard said.
Starbucks replaced its CEO in August amid a campaign from Starboard and Elliott Management.
Given Mr. Smith's track record of winning or forcefully dislodging concessions from companies, Pfizer CEO Albert Bourla may be next in the spotlight. Bourla took over in 2019 and guided the drugmaker through the pandemic, pushing annual revenue to $100 billion in 2022 with sales of the COVID-19 vaccine and antiviral treatment Paxrobid.
However, failures continued. WSJ reports that Pfizer's revenue plummeted after it misjudged future demand for its coronavirus treatment. Since then, the company has embarked on a multibillion-dollar cost-cutting campaign.
Pfizer executives made a big bet on cancer treatment as their next move. Last year, the company spent $43 billion to acquire Seagen, a Washington-based biotechnology company focused on developing new cancer drugs. The company expects Seagen products to generate $3.1 billion in revenue this year and reach $10 billion in annual revenue by 2030.
Still, the stock price has fallen more than 50% since hitting an all-time high in December 2021.
According to 13D Monitor, Starboard's goals are cross-industry, including 23 campaigns in the healthcare sector. In addition to Bristol-Myers Squibb, previous targets include CVS and medical records and technology company Cerner.
Pfizer did not respond to a request for comment.
Biggest hit of 2012: Starboard is said to have encouraged AOL CEO Tim Armstrong to divest assets, including selling 800 patents to Microsoft for $1.1 billion. 2013: Starboard secures three seats on Office Depot's board of directors, and Office Depot subsequently agrees to merge with Staples prior to the merger in September 2016. The Federal Trade Commission blocked the merger on antitrust grounds. 2014: Starboard replaces the entire board of Olive Garden owner Darden Restaurants. By 2015, Starboard was widely credited with turning around Darden restaurants, in part by reimagining how the iconic breadsticks were served at Olive Garden. 2019: Jeff Smith is named chairman of the board of pizza chain Papa John's. He immediately expanded the board of directors with two independent directors. 2022: Starboard urges software giant Salesforce to cut costs and improve profit margins. The stock has nearly doubled since Starboard acquired the stake. 2024: After facing pressure from Elliott Management and Starboard, Starbucks replaces its CEO.
Source link
