In a new filing with the U.S. Securities and Exchange Commission, Starboard Value LP, the hedge fund managed by Jeffrey Smith, revealed a letter it sent to Insperity Inc (NYSE:NSP) Chairman and Chief Executive Officer Paul J. Sarvadi, and the company’s board of directors. In the letter, Starboard Value asked Insperity Inc (NYSE:NSP) to consider a potential sale, as the fund believes that the company is deeply undervalued. Starboard Value has also disclosed in the filing that it owns 3.34 million shares of Insperity, Inc. (NYSE: NSP), the stake is equal to 13.2% of the company’s common stock.
Jeffrey Smith founded Starboard Value in 2002 via a spin-off from Ramius. Starboard Value is a fundamental oriented activist hedge fund focusing on small cap stocks. The fund has estimated over $1 billion of assets under management.
In the letter, Starboard Value outlines a broad plan to improve the performance of Insperity Inc (NYSE:NSP). The fund urges the company’s management to take actions to improve execution, reduce operating expenses, improve capital allocation, improve corporate governance, and explore all available alternatives to maximize shareholder value.
In addition, Starboard Value states that it believes that Insperity Inc (NYSE:NSP) can improve its operating margins through a combination of reducing excessive corporate overhead expenses, including selling its two large corporate jets, and more efficiently allocating advertising expenses, including shifting advertising away from expensive television advertising, golf tournaments, and other golf and sports-related marketing.
Further, Starboard Value adds that Insperity Inc (NYSE:NSP) should consider share repurchases and explore a potential sale of the company to either a financial or strategic buyer. In addition, the letter details several corporate governance policies of the company that Starboard believes are in need of improvement, including excessive executive compensation, numerous related-party transactions, the lack of an independent chairman, a staggered board, and the existence of a “Poison Pill.”
“We believe that there are numerous strategic and financial buyers that would be interested in acquiring the Company which would result in a robust sale process. We believe that financial buyers would be attracted to Insperity’s stable business characteristics and cash flow generation potential. In addition, there appear to be a handful of obvious strategic buyers for Insperity that would benefit from the company’s established customer base and would be able to realize substantial synergies. The Board must weigh the potential upside from a standalone plan against the execution risk associated with improving the growth profile and cost structure of the business and also against all other strategic alternatives. We believe the company should also engage a reputable investment bank to explore a sale of the company.”
Moreover, Starboard Value states that it is looking forward to discussing all of the points outlined in the letter in more detail with Mr. Sarvadi and the company’s board.
Insperity Inc. (NYSE:NSP) is engaged in providing human resources and business performance solutions, and has a market cap of over $920 million. On Wednesday, the company’ stock is trading at $39.38. Analysts set the consensus average target price of $34.75 for the stocks, while the consensus average recommendation is ‘Hold.’
Other investors holding big stakes in Insperity Inc. (NYSE:NSP) include Stadium Capital Management, led by Alexander Medina Seaver, which holds 2.38 million shares, and Renaissance Technologies, managed by Jim Simons, which owns 227,600 shares of the company, as of the end of the third quarter of 2014.
Last month, Starboard Value reported raising its position in MeadWestvaco Corp. (NYSE:MWV). The fund reported holding around 10.09 million shares of the company, up from 9.35 million shares held previously.
Also, in December, Starboard Value disclosed a letter sent to the President and CEO of Integrated Silicon Solution Inc. (NASDAQ:ISSI), Scott Howarth, in which the investor outlined several issues that might have a negative impact on the stock price. Starboard and Oliver Press reiterated that they consider the stock undervalued and therefore Integrated Silicon Solution, Inc. (NASDAQ:ISSI) should take advantage of the some opportunities within the control of management and the Board, in order to provide more value for shareholders.
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