Jana Partners acquired more shares of QEP Resources Inc (NYSE:QEP), bringing its stake in the oil and natural gas producers to 7.5%.
Jana Partners’ regulatory filing
Based on its latest regulatory filing with the Securities and Exchange Commission (SEC), the activist hedge fund purchased 13.5 million shares including an option to buy 1,951, 700 shares. Jana Partners reported that it owns 19,517 call options with a strike price of $24, which expires on November 22, 2013.
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Jana Partners initially invested in the shares of QEP Resources Inc (NYSE:QEP) last year due to belief that the stock was undervalued and it was an attractive investment opportunity. Since then, Jana Partners engaged in discussions with the management of the oil and natural gas producer to boost shareholder value particularly from its midstream business (QEPFS).
Intention for QEP Resources Borad of directors
The activist hedge fund indicated its intention to engage in further discussions with the board of directors of QEP Resources Inc (NYSE:QEP) regarding certain issues such as hiring additional directors and executives with proven experience in midstream operations to develop growth strategy, and align management incentive with midstream success.
Jana Partners will also push for the breakup of midstream business (QEPFS) from QEP Resources Inc (NYSE:QEP), and a significant return of capital to shareholders.
Barry Rosenstein’s letter
In a letter sent to the board of the oil and natural gas producer, Barry Rosenstein, founder and managing partner of Jana Partners wrote, “We have attempted to work constructively to help refine the company’s strategic direction and to address the company’s consistent share price underperformance.” He added that the leadership of the company chose not to pursue any of the suggested strategies or opportunities for its midstream business to boost its value creation, and “offered no convincing reasons for its refusal to do so.”
Also see: Barry Rosenstein’s Jana Buys Japan Airlines, Oil States; Sells Gold
Rosenstein further emphasized that the failure of QEP Resources Inc (NYSE:QEP) to pursue value creation opportunities resulted in the significant decline of the stock price of the company. The stock only delivered 7.4% returns since 2010 compared with the 69.1% returns of its peers identified in its 10-K filing and 81.5% returns of the S&P 500 Energy Index.
Moreover, the hedge fund’s managing partner said underperformance of the stock price of QEP Resources Inc (NYSE:QEP) could be resolved easily by implementing immediate actionable plans to put the company on a path to long-term sustainable value creation for shareholders.
“Separation and specialization, not integration are keys to unlocking shareholder value,” according to Rosenstein based on evidences in the marketplace.