Activist Jana Partners stocks up on HD Supply shares


Michael Flaherty

Oct 27, 2016

Activist investor Jana Partners LLC disclosed an 8.1 percent stake in HD Supply Holdings Inc, and said it had held discussions with the company's management about possible strategic options.

HD Supply, the industrial product distributor that separated from parent Home Depot Inc in 2007 under pressure from a different activist investor, saw its stock rise 3 percent to $33.11 on Thursday.

Jana, which owns $449 million worth of HD Supply's shares, is one of the largest U.S. activist investors, with $9.9 billion in assets. The New York-based firm has taken on companies such as chip-maker Qualcomm Inc and packaged food maker ConAgra Foods Inc.

The HD Supply stake makes the hedge fund the company's second-biggest shareholder, according to Thomson Reuters data.

"HD Supply welcomes open communications with our shareholders and we value constructive input," the company said in a statement, adding that it will continue to take action to increase shareholder value.

HD Supply's stock plunged in September after its second-quarter earnings missed analyst expectations, falling by as much as 16 percent on the morning it published the results.

"We suppose part of this bet is predicated on that issue being transitory," said Don Bilson, head of event driven research at research firm Gordon Haskett.

Bilson also pointed out that HD Supply could be an acquisition target for Home Depot and Lowe's Cos Inc, which have been pushing into the facility maintenance sector that the company supplies.

HD Supply's separation from Home Depot in 2007 came amid pressure from another activist hedge fund, Relational Investors, which launched a proxy fight against the company. The two sides settled before the fight came down to a vote, and resulted in a Relational founder joining Home Depot's board.

Jana's regulatory filing did not offer specific plans that it wants the company to follow to increase its share price, which has risen 14 percent in the last year.

Jana said in the filing that it believes HD Supply's shares are undervalued and that it has discussed strategic options with the company's management team. Jana added that it may have further discussions related to the composition of HD Supply's board of directors.

(Additional reporting by Ankit Ajmera in Bengaluru; Editing by Sriraj Kalluvila and Phil Berlowitz)