Starboard Value threat: Holds 10.7% Stake in Mellanox

21 November, 2017

According to Starboard Value, "Tremendous value can be created through operational improvements or other strategic alternatives." Mellanox's shares up 10%

Mellanox HQ

Mellanox Technology from Yokneam, Israel, is facing new reality following a surprising disclosure made by the activist fund, Starboard Value LP. Starboard posted a report on Mellanox SEC Filings, saying it acquired 10.7% stake in Mellanox during the last months, through successive stock purchases. In the paragraph called “Purpose of Transaction”, Starboard writes: “The Reporting Persons’ interest in the Issuer is solely based on their view that tremendous value can be created through operational improvements or other strategic alternatives.”

Starboard also revealed unknown fact about Mellanox: “In the past, Marvell has expressed an interest in discussing with the Issuer a potential strategic transaction on a negotiated friendly basis. The Issuer has declined to enter into any such discussions. To the knowledge of the Reporting Persons there are no current discussions regarding a strategic transaction between Marvell and the Issuer.”

This is not the first time Starboard is targeting an Israeli Semiconductor company. During the first half of 2012 Starboard quietly collected common stocks of DSPG and when it had fetched approximately 9% of the stocks, it demanded control over the board in order to redirect the company to new policy: stopping R&D investments, cutting engineering overhead and focus on sales of current products.

This was the same strategy Starboard implemented a year before, when it took over MIPS (that was sold to Imagination), and the Israeli company Zoran, that was finally sold to the British CSR.

Mellanox has probably learned about Starboard, and sent Reuters a short statement: ““In line with our commitment to drive enhanced shareholder value, the Mellanox board of directors and management team continually review our operational and strategic priorities and are committed to acting in the best interests of our shareholders.”

Mellanox’s shares in NASDAQ rose today approximately 10%, to $56.3 and to a Market Cap evaluation of $2.9 billion.

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