SPX Corp (NYSE:SPW)

CAPS Rating: 5 out of 5

A global multi-industry manufacturing company whose revenues are driven by infrastructure-related products & services such as wet & dry cooling systems, thermal service and repair work, heat exchangers and power transformers into the global power market.

Recs

2
Player Avatar TMFDeej (99.25) Submitted: 2/25/2013 7:46:03 PM : Outperform Start Price: $77.86 SPW Score: -18.30

This is a bet that Relational Investors is able to unlock value in SPX after taking an 8.76% activist position in the company. From the filing:"From the 13D filing: Despite the Company’s attractive business mix, total shareholder returns and profitability have lagged peers’ due primarily to excessive prices paid for acquisitions. This growth-at-any-cost strategy destroys shareholder value by overly emphasizing revenue growth over investment returns. The Reporting Persons believe that major improvements in a number of critical business processes will unlock significant intrinsic value for the Company’s shareholders. These essential improvements include: increasing operating profit margins to levels achieved by comparable peer businesses, accelerating divestment of non-core underperforming assets around the Company’s Flow business, establishing rigorous capital allocation disciplines and processes that properly balance growth and investment returns, and properly aligning executive compensation and shareholder value creation.The Reporting persons believe that the significant drop in the company’s stock price that occurred in December of 2012 and the subsequent stock price volatility reflected the market’s lack of confidence in the board and management’s ability to properly discipline capital allocation and assess acquisition opportunities. The Reporting Persons believe the Company should focus on improving its core assets and avoid future acquisitions unless they convincingly offer risk-adjusted returns well in excess of the Company’s weighted average cost of capital and compare favorably to share repurchases. Furthermore, executive incentives should be modified to drive and reinforce this capital allocation framework.If the Company fails to achieve operating margins consistent with peers and gain the confidence of investors, leading to a substantial increase in valuation, we believe the Company should explore strategic alternatives for better achieving the long-term intrinsic value of the assets.The Reporting Persons intend to closely monitor the Company’s progress in each of these areas and may modify their plans accordingly.The Reporting Persons may exercise any and all of their respective rights as shareholders of the Company in a manner consistent with their equity interests. The Reporting Persons and their representatives and advisers intend to discuss the Company and its performance with members of the Company’s board and management. In addition, the Reporting Persons may communicate with other shareholders, industry participants and other interested parties concerning the Company. Although the Reporting Persons do not have any current plans, other than the monitoring and communication program outlined above, the Reporting Persons may in the future decide to seek representation on the Company’s board of directors. Among other factors, the Reporting Persons will consider the Board’s oversight of the execution of operational improvements and capital allocation strategies for maximizing shareholder value as major factors in its decision of whether or not to nominate independent director candidates.The Reporting Persons may from time to time (i) acquire additional Shares (subject to availability at prices deemed favorable) in the open market, in privately negotiated transactions or otherwise, or (ii) dispose of Shares at prices deemed favorable in the open market, in privately negotiated transactions or otherwise. The Reporting Persons may formulate plans or proposals for, and may from time to time explore, or make proposals relating to, transactions or actions which relate to or would result in any of the matters specified in clauses (a) through (j) of Item 4 of Schedule 13D."Deej

Member Avatar MKArch (99.70) Submitted: 2/26/2013 1:21:22 PM
Recs: 0

Commonwealth REIT (CWH) is on the upside of a two day see-saw as activist investors are pushing to block a dilutive secondary offering announced yesterday that spooked the market as well as other changes including a new board. It's a similar situation to SPW so I thought I'd run it by you here assuming you haven't already looked into it yourself.

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