NEW YORK (AP) — Investment management firm Starboard Value LP has acquired an approximately 5.6 percent stake in MeadWestvaco, saying it believes the packaging company is "deeply undervalued."
In a letter sent to MeadWestvaco Corp. Chairman and CEO John A. Luke Jr. on Monday, Starboard said that it feels MeadWestvaco has "excessive corporate overhead" and that its value is also being hurt by a "conglomerate structure."
Starboard is making several recommendations to MeadWestvaco that include: continuing with cost-cutting efforts, exploring the sale or spinoff of its non-core businesses such as the specialty chemicals business and looking at options to get more value out of its real estate assets. The activist shareholder also suggested that MeadWestvaco repurchase about $500 million of its stock in order to create more shareholder value.
In January MeadWestvaco announced that it was launching a program to lower costs by up to $125 million annually by the end of 2015. The program included plans for workforce reductions and other initiatives to generate increased earnings and cash flow.
Shares of MeadWestvaco, based in Richmond, Virginia, added $1.52, or 3.8 percent, to $42.10 in morning trading.