Activist Investor Takes Large Stake in Juniper Networks
Published on: 14th Jan 2014
By: Ian Mansfield
Shares in Juniper Networks jumped sharply on news that the activist hedge fund Elliott Management has bought a significant stake in the company.
The hedge fund, which is run by billionaire investor, Paul Singer has revealed that it has bought 6.2 percent of the company, and is seeking a meeting with its board of directors.
The shares jumped by 10 percent on the news, although settled down a bit later.
According to a filing by the investor, it is seeking more effort in cost cutting at the network equipment vendor, a streamlining of its product portfolio and for more cash to be returned to shareholders.
They estimate that there is USD200 million that can be cut from annual operating costs, and the potential to buy back some USD3.5 billion in stock over the next two years. The company has around USD3 billion in cash and equivalents available to it.
Elliott estimates that could send the share price up to between US$35-40 per share, as compared to its current average of US$22-25 per share.
Juniper said it has returned about $1.7 billion to shareholders over the last three years, although its shareprice has lagged the stock market average.
"Juniper's new CEO along with its existing management team and board have a unique opportunity to immediately unlock significant value at the company," Jesse Cohn, portfolio manager at Elliott, said in the statement.
The company is in a phase of transition as its new CEO, Shaygan Kheradpir has only just taken on the top job at the company, following the retirement of Kevin Johnson.
Responding, Juniper said that it had received the proposal from Elliott Management, and "intends to review it carefully" before commenting.