Stock Spinoffs

SAC Gets Active, Takes Scissors To Clearwater Paper

Spin Doctor
We have recently noted that activist investors have notched a bunch of wins recently. For example, Jana Partners (involved with Marathon and McGraw-Hill) recently cleaned up with a well-timed investment into Barnes & Noble (BKS) that led to quite the ‘victory lap‘ for managing partner Barry Rosenstein who said that “there is no point in fighting us,” and that “companies pretty much do what we ask them to do.” Are we reaching bubble territory? Maybe, but we all know the investing world loves to pile into winning trends and now Steve Cohen’s mega-fund SAC Capital is getting in on the act.

The firm sent a letter to Clearwater Paper (CLW) arguing that the company is significantly undervalued on a sum of

Clearwater Paper

the parts basis. The company operates two divisions, consumer products (tissue paper) and pulp and paperboard. The firm estimates that the consumer products business should be worth between $990-1,440m while the P&P business is slightly less valuable at an estimated $770-960m. Putting those numbers together provides a range of $1,760-2,400 which is a range significantly higher than the company’s current market cap of ~$780m. While the firm acknowledges some of the issues and investor concerns, it believes these can be solved. SAC owns ~1.64m shares or 7.2% of the company and wields some serious clout so I imagine the letter will be taken seriously.

Although the filing merely seeks to “initiate…more dialogue” with management and makes no recommendations, I always think of spin-offs whenever I see ‘sum of the parts’ analysis mentioned. That may be because I write for this blog and am completely biased. Whatever the case, investors were excited and CLW popped close to 7% on the announcement. We will keep you updated as this situation progresses.

Disclosure: Author holds no position in any stock mentioned.

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