M&A

Activist investor pushing to buy Cubic

Company responds with new shareholder rights plan

Another publicly-traded government contractor has drawn the attention of an activist investor group, but this one also acts as a private equity buyer and so there's been more of a public response by the company.

In a release Monday, Cubic Corp. acknowledged that Elliott Management Corp. owns a 15-percent stake in and wants to outright acquire the defense and transportation systems company along with an unnamed private equity firm.

San Diego-based Cubic responded with a poison pill -- a new shareholder rights plan that both limits all new investors from owning more than 15 percent of the company, plus generally halts current holders of 15 percent or greater from building on their stake. The plan will expire Sept. 19, 2021.

“The adoption of the rights plan is intended to provide the board with time to make informed decisions and prevent any third party from obtaining control of Cubic in a manner and at a price that are not in the best interests of Cubic’s shareholders,” Cubic’s lead independent director David Melcher said in the release.

A representative of Cubic declined to comment beyond that release. Cubic’s board has not initiated a process to seek a sale and touts the current strategic plan called NextCubic as the best path forward for achieving shareholder value.

Cubic said the new rights plan does not prevent the board from considering any fair offers for the company and would do so if it receives one. The plan gives shareholders the ability to call a special meeting for exempting a qualified offer, one the board of directors deems to be in good faith.

Shares in Cubic were up 32 percent to $58.76 as of 2:45 p.m. Eastern time, a price that puts its overall market value at around $1.9 billion.

This comes nearly a month after Cubic announced the consolidation of its two defense segments into one. Cubic’s transportation segment was unchanged by that realignment.

Elliott engaged with Cubic about a potential acquisition over the past several weeks but apparently no offer was made, and indicated some disappointment with the board’s decision to implement the new shareholder rights plan.

The investment group did say it is “pleased that the board has acknowledged its fiduciary duty to engage in good faith in pursuit of the value-maximizing outcome for Cubic and our fellow shareholders. We are fully prepared to acquire Cubic and look forward to immediate engagement with the company,” Elliott said in a release.

Founded by CEO Paul Singer in 1977, Elliott’s acquisitions in recent years have included bookseller Barnes & Noble and network traffic monitoring vendor Gigamon as the firm has sought to branch out beyond its more-known status as an activist investor.

Activist investors buy large amounts of stock in companies perceived in some corners as undervalued in the market and/or underperforming, then push for changes at those companies to increase value and performance.

That category of investors has been rare to enter the government contracting market, but Barry Rosenstein’s Jana Partners fund revealed in June that it gradually built up a stake in Perspecta. Jana is the same group that entered investments in Harris Corp. and Computer Sciences Corp.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.

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