Starboard Value took the mudslinging in its activist battle against Huntsman up another notch.
In response to the specialty chemical firm’s recent investor presentation, the activist investor on Tuesday “dismisse[d] and [set] the record straight on the most blatantly false, misleading and disingenuous claims from the [Huntsman] investor presentation.” Starboard alleged that “management’s willingness to mislead its board and shareholders emphasized the dire need for strong, capable and independent directors that are willing to hold management accountable.”
Starboard, which took on Macy’s years ago, ultimately wants shareholders to vote its “Blue” proxy card so the activist can foist its director nominees onto the Huntsman board.
Starboard reiterated its claims that the chemical firm has an alleged history of overpromising and underdelivering. It cited a 2016 investor program when Huntsman promised shareholders it would reach a certain adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) target by 2017. It also claims Huntsman missed that goal by 11 percent, despite the chemical maker IPOing a business unit in 2017. Starboard said Huntsman arbitrarily excluded the IPO from its financial results, part of its claim that the firm reports “fictitious target[s] and make-believe results.”
The activist also charged that Huntsman promised shareholders it would organically grow adjusted EBITDA at a 10 percent compound annual growth rate, or CAGR, through 2020, or an implied 2020 adjusted EBITDA target of $1.4 billion. It noted that the chemical firm’s adjusted EBITDA in 2020 during the Covid pandemic was 52 percent below target, and that Wall Street had expected a miss even before the start of the Covid outbreak. It went on to claim that Huntsman “deceitfully” claimed to have almost achieved its adjusted EBITDA target by 2021, adding that its analysis was “fundamentally flawed” to fool shareholders.
Starboard also accused Huntsman of poor capital allocation, alleging that the chemical firm “falsely suggest[ed]” that its Textile Effects division “had always been a restructuring project.”
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Singapore-base Textile Effects manufactures and markets textiles dyes and chemicals to enhance apparel and home textile performance, including fade resistance, UV-blocking, and water and stain repellence. Huntsman in December said its board gave permission to look at all options for the division, including putting it up for sale.
“We have been transparent about our continued evaluation of divestment opportunities that are both in line with our strategic goals and in the best interests of our shareholders,” Peter R. Huntsman, the chemical firm’s chairman, president and CEO, said at the time. “We believe now is the right time to explore options for Textile Effects. We expect that the division will generate close to $100 million of [adjusted[ EBITDA in 2021, recovering much of what was lost due to Covid-19.”
Starboard also reiterated why its four nominees, including Starboard CEO and chief investment officer Jeffrey C. Smith, should be voted onto the Huntsman board.
In response, Huntsman urged shareholders to choose the “White” proxy card and vote for company directors standing for election at the March 25 annual shareholders meeting.
Calling Starboard’s proxy fight “unnecessary and distracting,” the chemical firm said: “We remain puzzled, like most of you, as to why we are even in this fight. Regardless, your Board and management team remain focused on what matters most—continuing to deliver to you record results and sustained momentum in 2022.”
Taking the high road and sticking to its version of the facts without any innuendos or disparaging language, Huntsman reminded shareholders that Starboard has inundated them with more than 350 pages and nearly a dozen misleading arguments relying on “incredibly outdated views of the company” to convince them to vote for its board nominees.
Huntsman said it delivered record results in 2021 and even increased guidance for the first quarter of 2022. The company’s fourth quarter adjusted EBITDA was $349 million, representing a 45 percent increase from the prior year.
Huntsman’s transformed portfolio “focus[es] on higher-margin downstream, differentiated and sustainable products and solutions, while it also “deleveraged” its balance sheet and achieved an investment grade rating, it added.
Huntsman also completed a “substantial refreshment” of its board, adding eight new directors since 2018.
“Huntsman’s successes are the result of thoughtful strategic initiatives well executed by management and overseen by our Board. Every one of our initiatives predates Starboard’s investment in our stock and they have yet to offer a single suggestion we were not already doing,” the chemical firm said.