One of the largest shareholders of Nabi Pharmaceuticals (NABI) is pushing for a sale of parts of or the entire company. Shares of the stock climbed 5.8% yesterday after hedge fund Third Point, one of the most vocal dissident shareholders, disclosed in a Securities and Exchange Commission filing that it had increased its stake to 9.5% from 8.7% in April.
As part of his 13D filing, Daniel Loeb, founder of Third Point, attached a highly critical letter sent to the company's board in which he reiterated his commitment to maximize shareholder value. The letter also expressed frustration that management did not engage in some sort of discussion with the hedge fund since its last filing two months ago.
Third Point is not the only hedge fund to push for changes. Knott Partners, which owns 9.6% of the shares, also has agitated for the sale of the company. Nabi Pharmaceuticals, based in Boca Raton, Fla., develops vaccines to treat nicotine addiction, prevent hepatitis C and fight staphylococcus aurus, a bacterium that's the leading cause of hospital infections.
Loeb's letter took the market by surprise. Third Point lost a battle last month after dissident shareholders failed to change the composition of the board at the company's annual meeting. "It's going to be another 11 months before another board vote and that gives management more leverage," says Kevin Degeeter, analyst at H.C. Wainwright & Co.
Degeeter added that after the May meeting, some investors had believed that the dissident shareholders would cut their stakes. Loeb's filing proved them wrong.
"Maybe you thought we would go away or sell our position in frustration," Loeb wrote in his letter. "To the contrary, each day that passes without action by management increases our resolve."
Third Point's commitment to activism, as well as its track record, suggests strongly that Nabi Pharmaceuticals may get sold, partly or as a whole, even if management does not appear responsive at this point.
Loeb can be patient. Earlier this month, he gained board representation after a long battle against
( MEE) management. Such persistence may be interpreted by the market as a sign that Nabi's board will feel compelled to act now rather than a year from now to avoid confrontation at the next meeting, said Degeeter.
Loeb's letter was unequivocal on this point: "While the May 2006 annual meeting may have bought you time, unless a process is put into place to maximize shareholder value well prior to the next annual meeting, we will work assiduously between now and then to ensure that you will have ample time to pursue your golf games and to enjoy the Florida sun thereafter."
In his filing, Loeb called on management to hire a new investment banker without "pre-existing relationship" with the board. In a former filing two months ago, he already had asked for the removal of Lehman Brothers, the company's current adviser, which, he said, was too close to Thomas McLain, Nabi CEO.
In the letter, Loeb blamed McLain for the poor stock performance during his less-than-one-year tenure at the head of the company, saying that the stock lost 85% during that time. Loeb wants a "public auction of the company in its entirety," which he believes would bring the best value. However, he is not opposed to the less drastic sale of some of its assets, as long as the proceeds get returned to shareholders in the form of a one-time dividend.
Loeb says his ideas have the potential to double the stock price to $10. In midday session, the stock was recently trading at $5.23, after yesterday's close at $5.28. A Nabi spokesman did not immediately returned a call. Third Point declined to comment.