Starboard's Smith: No Newell Divestitures Until Proxy War Concludes
Starboard's Jeff Smith

Starboard Value's Jeff Smith escalated his total board takeover effort at Newell Brands Inc. (NWL) on Monday with a letter "strongly" urging the maker of Rubbermaid containers, Mr. Coffee machines and Elmer's glue to table all major divestiture decisions until after shareholders had a chance to vote on the company's directors.

"We are concerned that the company's latest divestiture plan was a hastily-designed action to deflect blame from the recent poor performance," Smith said in a letter. "We strongly urge the Company to table all major divestiture decisions - unless the company is certain of both the strategic rationale and value-creation, on an after-tax and risk-adjusted basis, and polls its shareholders in this regard..."

Newell Brands shares have mostly been on a downward trajectory over the past year until the Starboard campaign pushed its price up a bit. The Hoboken, N.J. company's shares ticked up 2% in pre-market trading on the news.

At issue in Smith's proxy war, which seeks to replace all nine Newell director candidates at a meeting in May, is Newell Brands announcement Jan. 25 that it was planning to sell its industrial and commercial products assets, including Rubbermaid products, Rawlings baseball gloves, and the U.S. playing cards businesses, among others. Newell Brands also offered up preliminary results and an initial 2018 outlook on Jan. 25, all of which pushed the stock down about 21% that day.

Smith and his fund are aligning with three ex-executives of Jarden Corp., which was acquired by Newell in 2015 for $17.4 billion. According to Starboard's letter, among other board candidates, Smith is nominating Martin Franklin, the co-founder of Jarden as well as two other Jarden executives.

The Jarden directors resigned from their Newell board seats recently after attempting unsuccessfully to take control of the board and reverse the divestiture plans, according to a person familiar with the situation.

The full Newell Brands board, including the then-Jarden executives that served on it, were only informed of Polk's divestiture plans a few days before the public announcement last month, he added.

Franklin also took issue with Newell's integration of the two companies and the move to combine Mr. Coffee machines in the same company as Elmer's glue and Rubbermaid containers and Graco strollers, he said.

Starboard may have some success targeting select members of Newell's board, many of whom are overtenured, which suggests they may be overly cozy with the chief executive and make easy targets.

According to relationship mapping service BoardEx, a service of The Deal's parent, TheStreet, six of eight directors have held their seats for more than 11 years, and three of those have been on the board for about 15 or more years. All of the six are far over the average tenure for S&P 500 board members, which is 8.3 years.

Activists rarely seek to take over the entire board of a target company - instead, they usually try to obtain a minority-slate of director positions, which is a much easier goal. However, Starboard is one of only a tiny group of activists that have succeeded in these kinds of situations. In 2014, the fund took over the entire board of Olive Garden owner Darden Restaurants Inc. (DRI)  in a campaign that was considered the most consequential insurgency of the year.

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