The 10th Annual New York Value Investing Congress takes place in New York on September 8th and September 9th 2014. ValueWalk will be providing coverage of the event- below is a summary of a presentation by Jeff Smith of Starboard Value on using board dynamics to enhance shareholder returns.
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Jeff Smith is a Managing Member and the Chief Executive Officer and Chief Investment Officer of Starboard Value LP (“Starboard”). Prior to founding Starboard, Mr. Smith was a Partner and Managing Director at Ramius LLC and the co-founder and Chief Investment Officer of the funds that comprised the small cap value and opportunity investment platform. Prior to joining Ramius in January 1998, Jeff Smith served as Vice President of Strategic Development for The Fresh Juice Company, Inc. Mr. Smith began his career in the Mergers and Acquisitions department at Société Générale. Jeff Smith is a member of the Board of Regis Corporation and Quantum Corporation. He was Chairman of the Board of Phoenix Technologies Ltd. and graduated from The Wharton School at The University of Pennsylvania.
Jeff Smith: Using Board Dynamics to Enhance Shareholder Returns
Over 80% hit rate (make money when taking a position)
average return of 34% when starboard gets a board seat
VPP – undervalued, plan to unlock value, clear path
82 total 13D’s filed since 2004, 52 directors got board seats
Tessera Technologies, Inc. (NASDAQ:TSRA) (case study on something that worked)
Owned intellectual property and digital optics divisions
digital optics was supposed to be the holy grail for cameras in smart phones…they tried to license it, but no luck…then they bought a manufacturing facility in china, spent $500m in capital and were losing 150m per year
Starboard made them shut down the digital optics business and focus on their intellectual property
sold some patents, and got board seats. CEO resigned
2014 will be the first year of revenue growth in 4 years
$150m returned to shareholders
Office Depot Inc (NYSE:ODP) (next case study on something that worked)
Jeff Smith’s New Idea: Dardens Restaurant
Darden Restaurants, Inc. (NYSE:DRI) is the worlds largest full service restaurant company
Olive Garden + Longhorn steakhouse + a few specialty restaurants
DRI operating margins are 300bps below peers (when you back out rent, and sell the real estate)
agrues margins should be better than peers
stock has underperformed peer group by 300%
will be releasing a detailed presentation on opportunity and turn around plan at DRI