Scott Ferguson’s Sachem Head Capital Management’s latest activist target is specialty chemicals maker Olin Corporation. Sachem owns 9.4 percent of the company, has launched a proxy fight, and nominated four directors to the board — including Ferguson, a Bill Ackman protégé — according to the filing.
Sachem Head said in a filing that Olin’s stock is “undervalued and is an attractive investment.”
It added the hedge fund has held or intends to hold discussions with management, the board, other shareholders, and other interested parties. These talks could relate to the business, management, operations (including cost structure), assets, capitalization, financial condition, strategic plans, governance, board composition, and the future of the company.
But Sachem Head has not laid out specific proposals for unlocking value at Olin, and the hedge fund declined to comment.
The investment firm built its entire Olin stake since mid-January, paying roughly between $16 and $19 per share, according to regulatory filings.
This is at least the third company formally targeted in less than a year. In 2019 Sachem Head was one of the better performing activist hedge funds, posting a 23.6 percent gain, according to a knowledgeable source.
Sachem Head runs a very concentrated book: at year-end it held just 13 U.S. common stocks, and only six in the in the second quarter. But Sachem Head’s 13F portfolio can be a somewhat misleading snapshot of the firm’s overall portfolio, according to a person familiar with the matter. This individual said that at the end of June Sachem Head actually held about 20 positions, including derivatives and non-U.S. listed securities.
[II Deep Dive: Sachem Head’s Portfolio Is Bigger Than You May Think]
In early November, Bloomberg reported that Sachem Head built a huge stake in education software provider 2U, making it one of the company’s top shareholders. It also said the hedge fund planned to push the company to seek some sort of strategic alternative, including selling the company altogether.
The stock was Sachem Head’s smallest position at the end of the third quarter, according to a filing. But the hedge fund recently disclosed it boosted its stake by more than 120 percent in the fourth quarter. The stock is up nearly 19 percent since the close of trading the day before the Bloomberg article was published.
On February 14 2U announced a so-called “severance pay and change in control plan” covering the company’s chief executive officer and other key employees, according to a regulatory filing. The stock had plunged 65 percent on July 31 after the company lowered its guidance, spooking shareholders and analysts who began questioning the company’s business model.
Sachem Head chalked up another win last year with Eagle Materials, currently its largest long accounting for nearly 22 percent of U.S. long common stock assets.
In March 2019, Sachem Head disclosed it owned 9 percent of the building 1materials maker. In May, it nominated two directors, including Ferguson and told the firm it planned to propose a non-binding resolution at the 2019 annual meeting to declassify the board of directors.
Ferguson also called on the company to sell its core cement and wallboard businesses.
Sure enough in April Eagle announced it had begun a strategic review of its businesses and would expand its stock buyback program. At the end of May Eagle agreed to spin off its heavy materials and light materials businesses into two publicly traded companies. In a May 30 announcement, Eagle also said it was actively pursuing alternatives for its oil and gas proppants business. In November Eagle announced a deal to acquire certain assets from Kosmos Cement Company. Shares of Eagle are up around 10 percent or so from the prices it paid for the stock back early last year.
Meanwhile, network security company ForeScout Technologies announced several weeks ago it is being acquired by two private equity firms for $33 per share.
This was one of Sachem Head’s smallest positions at year-end after it established its stake in the fourth quarter, along with specialty auto-parts maker LKQ.
At the other end of the portfolio, Sachem Head’s second largest long is drug giant Allergan, accounting for 19 percent of assets.
