Activist Jana, in letter, urges Wolfspeed to eye sale, other strategic alternatives (updated)

Mitsubishi Electric

23/04/2024 03:09

(Updates with Wolfspeed's statement in paragraph 4)
    By Svea Herbst-Bayliss
       NEW YORK, April 22 (Reuters) - Activist investor Jana
Partners is urging the world's largest maker of silicon carbide
Wolfspeed Inc  WOLF.N  to explore all ways to improve
shareholder value, including a potential sale, according to a
letter reviewed by Reuters. 
    Jana, which owns what it called a "significant" stake in
Wolfspeed, wrote in the letter that it is high time for the
37-year old company with a market value of $2.8 billion to
pursue "all avenues to improve WOLF's performance" and begin a
"comprehensive review of strategic alternatives."
    "Such an exploration of alternatives could uncover numerous
ways to highlight and realize value, including through a sale,"
the letter to the board of the Durham, North
Carolina-headquartered company said.
    Wolfspeed said in a statement that its board would carefully
review JANA's letter, adding that it looked forward to engaging
with JANA in the near future. 
    Wolfspeed's stock price has tumbled nearly 50% since January
and has lost 63% of its value over the last 52 weeks as the
company missed financial and operational milestones, leading
investors to worry about its strategy and capital allocation at
a time when growth expectations in its core electric vehicle end
market have moderated.
    Despite the company's differentiated manufacturing
capabilities and its critical role as an American supplier
supporting the energy transition, every current shareholder
appears to have lost money on their investment, Jana said in the
letter.
    "The board's efforts to reverse its woeful performance for
shareholders must also include a commitment to promptly engage
in a comprehensive review of strategic alternatives," Jana
managing partner Scott Ostfeld and the firm's founder, Barry
Rosenstein, wrote.
    Investment bank Goldman Sachs assigned a $126 per share M&A
price target to the company, a nearly 500% premium over
Wolfspeed's current share price of $22.12 on Monday, according
to the letter.
    It also said Wolfspeed's strategic value was highlighted by
Coherent Inc's  COHR.N  recent sale of a minority stake in its
silicon carbide business to two Japanese companies, DENSO
 6902.T  and Mitsubishi Electric  6503.T .
    Jana called for a "back to basics" strategy prioritizing
execution and delivering on key milestones at Wolfspeed's new
Mohawk Valley and Siler City plants, setting realistic targets
and showcasing a path to acceptable returns on capital.
    The letter also urged the company to re-evaluate the size
and timing of future investments, including a planned European
manufacturing facility, until Wolfspeed shows it can deliver on
its existing business.
    Jana owned a small stake in Wolfspeed during the third
quarter of 2023 but did not list a stake in the company on its
regulatory filings for the fourth quarter of 2023. 
    Jana has a 23-year long track record of investing in
companies, including Frontier Communications  FYBR.O  which
recently launched a formal strategic review following pressure
from Jana and Freshpet  FRPT.O  which has generated a return of
approximately 250% in the two years since Jana began engaging
with the company.
    Before that, Jana pushed for changes at companies such as
Whole Foods Market, which sold itself to Amazon.com Inc  AMZN.O 
in 2017. 

 (Reporting by Svea Herbst-Bayliss; Additional reporting by
Chandni Shah in Bengaluru; Editing by Miral Fahmy)
 ((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))