Starboard says GCP Applied Technologies 'deeply undervalued'
Starboard announced that it has delivered a letter to the Board of GCP Applied Technologies. The letter states: "Starboard Value LP, together with its affiliates, currently owns approximately 8% of the outstanding shares of GCP Applied Technologies, making us one of the cxompany's largest shareholders. We continue to believe that GCP is deeply undervalued and significant opportunities exist within the control of management and the Board of Directors to unlock substantial value for all shareholders. As you know, we have been shareholders of GCP for over a year. We invested in the company because we believe that GCP has a strong product portfolio with differentiated capabilities and strong end market positioning. Furthermore, our research indicates that the company has significant opportunities to improve revenue trends, operating margins, and free cash flow generation. However, despite this untapped potential, GCP has suffered from a prolonged period of disappointing operating and financial results, poor corporate governance, and excessive executive compensation. It has been approximately one year since we first highlighted our concerns to you regarding the operating and financial performance, governance, and compensation issues that are plaguing the company. Despite our efforts to engage constructively, very little progress has been made to put GCP on a better path. Although we were pleased to reach agreement on the appointment of two new independent and highly-qualified director candidates last year, it is clear now that those appointments have not created enough change to address these very serious issues. For that reason, and as described in our formal nomination notice delivered to the company today, we are nominating nine highly-qualified director candidates for election at the 2020 Annual Meeting, whom we believe can ensure that GCP takes the correct actions to improve performance and enact best-in-class corporate governance. This slate of directors, if elected, would represent a change in a majority of the Board, which we think is needed and appropriate given the severe issues at GCP. Despite its recent problems, GCP is fundamentally a great company with promising future prospects. The Specialty Construction Chemicals business should be a market leader. Our research indicates that SCC has industry leading products with differentiated technology that should result in above market growth and profitability. We believe that with the appropriate focus and execution SCC can drive meaningful profitability improvements while continuing to drive improved revenue trends. Throughout our research process, we have not heard any feedback that indicates there is any structural reason for this business not to achieve higher operating profits. Similarly, in the company's Specialty Building Materials segment, GCP is also a market leader and frequently designed into some of the largest and most visible construction projects globally. Our diligence has indicated that there is significant untapped potential in this business through further product line expansion and development. If the company can merely achieve historical levels of profitability in SBM, we believe significant value will be created by winning new business. We believe that GCP needs a new plan, with improved execution and greatly enhanced board oversight. Starboard has significant experience in these areas with a long, successful track record of driving operational, financial, strategic, and governance changes that benefit employees, customers, and shareholders. We firmly believe that with the right Board in place, GCP can be a best-in-class company in its industry and generate significant value for all shareholders. We are confident you will find the slate of professionals we are nominating to be incredibly well-qualified to serve as directors of GCP. As you can see from our nominees' detailed biographies in the following pages, this group of extremely impressive director candidates has backgrounds spanning operations, finance, private equity, mergers and acquisitions, restructuring, strategic transformation, and public company governance. As a group, they have substantial and highly successful experience in the chemical, construction, and broader industrial industries. Collectively, they have decades of experience as CEOs, senior executives, chairmen and directors of well-performing industrial companies. Our goal is to represent the best interests of all shareholders, and we believe that our nominees have the experience and track record to drive the much needed change at GCP that will put the company on a path to significant shareholder value creation. We remain available to discuss this - and other topics - with you, and, of course, remain open-minded about reaching a mutually agreeable solution to put GCP on a better course."