Starboard Value Takes 10.7% Stake in Mellanox Technologies

11/20/17 05:38 PM EST
By David Benoit 

Starboard Value LP has taken a 10.7% stake in Mellanox Technologies Ltd., urging the company to improve its margins and stock and explore a potential sale, a thesis in part helped by deal talks at Marvell Technology Group Ltd., where Starboard has a seat.

Starboard believes Mellanox is spending too much on research and development and other corporate expenses to try to grow revenue, sacrificing margins compared with peers, according to people familiar with the matter. The activist wants the company to improve its operations and potentially explore a deal to boost the stock, the people said.

A spokeswoman for Mellanox wasn't immediately available for comment.

The New York activist investor has a long record of successful semiconductor investments, highlighted earlier Monday by Marvell's $6 billion deal for Cavium Inc., less than two years after Starboard arrived and the company promptly ousted its founders. The deal helped send Marvell stock higher, and it has now returned about 157% since before Starboard arrived in February 2016, compared with roughly 127% from the iShares Semiconductor exchange-traded fund.

Mellanox's stock has dramatically underperformed the same ETF in recent years. The Israel and Sunnyvale, Calif.,-based company has returned about 12% in the past year but has lost 38% over the past five years, both worse than the ETF's 54% and nearly 300% return.

Marvell recently approached Mellanox about a potential transaction but was rebuffed, a response that helped inform Starboard's belief that Mellanox was hostile to potential deals, according to people familiar with the matter. Starboard's Peter Feld is on the board of Marvell.

No discussions are ongoing between the sides at this time, and Mr. Feld has said he would recuse himself from anything that could happen in the future, the people added.

 

(END) Dow Jones Newswires

November 20, 2017 17:38 ET (22:38 GMT)

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