Starboard Value, an activist investment firm that has been a thorn in the side of many chemical company management teams over the years, is now targeting Huntsman, aiming to get four new directors on the specialty chemical maker’s board.
Starboard owns 8.6% of Huntsman’s outstanding shares, making it one of the company’s largest shareholders. In a letter to Huntsman CEO Peter Huntsman, Starboard managing member Jeffrey C. Smith says Huntsman has a history of overpromising and underdelivering, which has led to “investor skepticism.”
Smith likes some of Huntsman’s financial and capital allocation targets. He also endorses the company’s recent decision to consider selling its textile dyes business, which had 2020 sales of nearly $600 million.
“However, we hope the Board recognizes that it is not a lack of aspiration, but a lack of execution, that has historically frustrated shareholders,” Smith writes.
For example, in 2014, Huntsman set a goal of reaching before-tax profits of $2.0 billion in 2–3 years. However, by 2016, its results had instead declined, Starboard says. Huntsman also fell short on targets it set in 2016, the letter points out.
The four directors that Starboard has nominated to Huntsman’s board for election at its annual meeting in March include Smith; James L. Gallogly, former CEO of LyondellBasell Industries; Sandra Beach Lin, a former Celanese executive; and Susan C. Schnabel, former chief financial officer of PetSmart.
In a statement in its defense, Huntsman says it is engaged in a board “refreshment process.” It appointed David B. Sewell, CEO of the packaging maker WestRock, to its board earlier this month. A week before that, it appointed Curtis E. Espeland, former chief financial officer of Eastman Chemical, and José Muñoz, chief operating officer of Hyundai Motor.
Huntsman’s statement notes other strategic measures the firm has taken in recent years, including the $2 billion sale of its commodity chemical business to Indorama and the authorization of a $1 billion share repurchase.
“Starboard is more concerned with installing their handpicked candidates on Huntsman’s Board than allowing the Board and management team to create shareholder value through our multiple initiatives that Starboard supports,” the Huntsman statement says.
Starboard has targeted a number of chemical companies over the years. In 2021, it sought to oust Corteva CEO James C. Collins Jr. and put eight directors on the agricultural company’s board. It got three directors on the board, and Collins later left. Starboard won two seats on the board of GCP Applied Technologies in 2019. The construction chemical firm is now being acquired by Saint-Gobain.
In 2015, Starboard pressured MeadWestvaco to divest its pine chemical business, forming Ingevity. That same year, it installed five directors on LSB Industries’ board. It targeted Calgon Carbon but was fended off in 2013.