Calgon Carbon pressed to buy back $200M in stock
A New York investment firm that pushed two nominees onto Calgon Carbon Corp.'s board in March is now pressing management to buy back up to $200 million of its stock, accelerate cost-cutting and restructure its main business in order to boost shareholder value.
Starboard Value LP is “encouraged” by management's progress to improve profit margins but believes there's “additional opportunities” to widen them further, Starboard CEO Jeffrey Smith said in a letter to Calgon Carbon CEO Randy Dearth.
The firm has raised its stake in Calgon Carbon to 9.7 percent, up from 9.2 percent in March and 7.7 percent in January.
Calgon Carbon disclosed the letter in securities filing.
Starboard's letter was issued as Calgon Carbon, based in Robinson, is scheduled to release its third-quarter earnings on Tuesday. The company provides air- and water-purification products and services internationally.
Wall Street expects the company to report quarterly earnings of 22 cents a share, according to a poll of analysts by Bloomberg.
Annual earnings fell 41 percent last year to $23 million, or 41 cents a share, from $39 million, or 69 cents a share, mainly due to restructuring charges. Revenue increased 3.9 percent to $562 million from $541 million.
The company said in May it would reduce annual expenses by $30 million this year, including possible layoffs. The company employs about 1,200, including about 400 in Western Pennsylvania.
Calgon Carbon officials could not be reached on Monday.
In addition to stock buybacks and deeper expense reduction, Starboard requests Calgon Carbon spin off its activated carbon business to a publicly traded master limited partnership that the company would still control, in order to slash income taxes. Activated carbon, used for water purification, accounts for the bulk of Calgon Carbon's revenue.
“This is pretty common for (Starboard). They buy stock with the idea of looking to influence management's strategy,” said Daniel Mannes, a director and analyst at Avondale Partners LLC, Berwyn. He called the Calgon Carbon letter “more supportive toward management” than most Starboard letters he's seen.
Mannes also noted Starboard's letter surfaces just days before Calgon Carbon hosts an analyst and investor day in Scottsdale, Ariz., on Thursday.
Following pressure from Starboard in late 2012, Calgon Carbon agreed to add two Starboard-backed candidates to the company's slate of director nominees in March.
Calgon Carbon stock closed up 8 cents at $20.03.
Thomas Olson is a Trib Total Media staff writer. He can be reached at 412-320-7854 or at email@example.com.