Hemmed In By Activist Funds, Juniper Unveils Buyback, Other Goodies

Hemmed In By Activist Funds, Juniper Unveils Buyback, Other Goodies

Activist hedge funds notched up another victory yesterday when network equipment maker Juniper Networks, Inc. (NYSE:JNPR) made a slew of announcements designed to please shareholders.

Succumbing to demands from Paul Singer controlled hedge fund Elliott Management Corp, Juniper Networks, Inc. (NYSE:JNPR) announced yesterday an Integrated Operating Plan that included an ‘aggressive’ plan to return at least $3B in capital to shareholders, including over $2B in share buybacks through Q1 2015. [See Elliott Management’s presentation on Juniper here].

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The plan also includes payment of $0.10 per share as a quarterly dividend starting Q3 2014, an amount the company indicated it would like to increase over time.

Elliott appreciates Juniper’s plan

“Today’s announcement is an incredibly positive development for Juniper Networks, Inc. (NYSE:JNPR) and its shareholders,” said Jesse Cohn, a portfolio manager at Elliott Management. “Shaygan and his team have developed a thoughtful and highly value-accretive plan to invest for growth, significantly streamline and target the operations, and meaningfully return capital to shareholders.”

The company also said, “The expanded capital allocation plan will be funded by a combination of onshore cash and newly issued debt to preserve Juniper’s financial flexibility to invest in future growth opportunities and maintain the Company’s current investment grade credit rating.”

Validation also for Jana Partners

Another activist fund, Jana Partners LLC unveiled in a filing last week that it had accumulated a 2.65% stake in the company. Last month, it said in a letter to shareholders that Juniper Networks, Inc. (NYSE:JNPR) could save an estimated $300M by implementing its suggested business plans, and focus on revamping its core routers and switches business. It said Juniper had an “unfocused product line up, a lazy balance sheet and share price underperformance.”

The company, meanwhile, announced in its integrated plan that it intends to improve its operating margins in 2015 to 25% through enhanced operational efficiency, as well as a strategic focus on high growth opportunities where it excels.

Elliott gets its way on Board composition

It also bowed to Elliot’s demands for a change in the board by agreeing to nominate for election at the 2014 Annual Meeting of Stockholders Kevin DeNuccio and Gary Daichendt as new independent directors. Elliott Management was said to have prepared its own slate of director nominees that it planned to propose in case the company did not take adequate steps in favour of shareholders. The company’s acceptance may have averted a possible proxy war.

The company said in its statement that it had “reached an agreement with Elliott whereby Elliott has agreed among various customary terms, to support the Company’s changes announced today and to vote in favor of Juniper’s nominees at its 2014 Annual Meeting of Stockholders.”

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