By David Benoit
Activist Barington Capital Group LP wants chemicals company
Omnova Solutions Inc. to break up, according to a letter the
activist sent the company on Wednesday.
Barington, which garnered attention last year when it first
proposed splitting up Olive Garden parent Darden Restaurants Inc.,
believes Omnova has underperformed and would do better focusing on
its largest operations, the letter said.
The investor controls a roughly 2% stake.
Omnova operates two business segments: performance materials,
which includes chemicals and coatings used in a broad range of
markets from magazine printing to the oil and gas industry, and
engineered surfaces, which includes specialty fabrics and plastics
used in autos and carpets, among other things. The
performance-materials unit makes up about 75% of total revenue and
operating profit.
Barington is calling on Omnova to explore selling the smaller
engineered-surfaces business and bulking up the remaining
businesses with hiring and acquisitions. The letter criticized the
stock performance and said the company should use its cash to buy
back the beaten-down shares.
Omnova's stock rose about 3% to $6.93 Wednesday morning. It has
fallen about 24% this year, dragging down the company's market
capitalization to about $330 million.
Several companies in the chemicals industry that have diverse
business lines are facing calls from activist investors to break
apart. Dow Chemical Co. last month added two new board members
proposed by activist Daniel Loeb, who had previously called for
splitting up the company. DuPont Co. is facing similar pressure
from Trian Fund Management LP. Both Dow and DuPont have rejected
the activists' specific calls, though both have taken their own
steps to shed some business lines.
Omnova's August-ended quarter saw profit drop sharply, which it
blamed on weak underlying paper and carpet markets. Chairman and
Chief Executive Kevin McMullen called the results disappointing,
but he said the company was taking steps to hire sales people and
explore acquisitions in the core businesses, while also cutting
costs. At the time, he said the company's management was aligned
with creating shareholder value.
Barington will seek to discuss changing the board and splitting
the chairman and CEO roles, the letter said. Those are typical
requests from the firm, which earlier this week r eached a pact to
add its founder and Chief Executive James Mitarotonda to the board
of software company Ebix Inc.
Mr. Mitarotonda has experience in similar businesses as Omnova,
and been on the board of an industrial plastics company A. Schulman
Inc. since 2005.
Write to David Benoit at david.benoit@wsj.com
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