April 28, 2020 / 11:19 PM / a month ago

Large investor backs activist Starboard's push for board seats at GCP Applied Technologies

BOSTON (Reuters) - An investor group that owns almost one-quarter of GCP Applied Technologies is backing activist investor Starboard Value’s plan to remove most of the chemical company’s current board members, arguing the committee is not making the best decisions for the company or shareholders.

Standard Industries Inc and affiliated entity 40 North Management LLC, which together own 24.4% of GCP’s stock, told GCP’s board about their decision in a letter on Tuesday, throwing huge support to Starboard’s ongoing proxy contest at the company. Starboard nominated eight directors to the board, which the company said will be expanded by one to 10 members.

Together, Standard Industries, 40 North and Starboard own roughly one third of GCP’s shares, putting the three in a very strong position to push for changes on the board.

GCP’s board “has proven itself incapable of making sound strategic and tactical decisions,” Standard Industries’ co-chief executives, David Millstone and David Winter, wrote in the letter, which was made public in a regulatory filing.

“We are left with no other tenable course of action but to support Starboard Value’s call for an almost complete replacement of GCP’s Board,” they continued.

Standard Industries is a privately held global industrial business, and 40 North, an investment vehicle, is a related entity.

Cambridge, Massachusetts-headquartered GCP defended the stewardship of its board and management.

“GCP’s Board and management team have articulated a clear strategy to enhance performance at GCP and are successfully executing against that plan, as demonstrated by the company’s recent business momentum and operating performance, including strong expected first quarter 2020 results,” the company said in a statement. It added that it has “also implemented substantial governance enhancements, including significant Board refreshment.”

Millstone and Winter disagree. They say the company has no coherent strategy and blame the board for not overseeing management appropriately. They criticize certain executive compensation and the fact that a former CEO was made executive chairman. “The GCP Board has not been held accountable for the failure of its 2019 strategic review process and, at this point, the Board appears to have no strategy at all,” the letter said.

Nearly four weeks ago Starboard, one of the industry’s most powerful activist investors and the owner of a roughly 9% stake in GCP, nominated eight directors, arguing that its nominees would steer GCP through the current economic crisis more successfully than the current board.Starboard, whose nominees include one of its partners, Peter Feld, said its slate have experience in finance, operations, strategy as well as construction products.

GCP last year handed the New York-based hedge fund two board seats.[nL1N2BQ39R] Since then the company has run a strategic process toconsider options, changed its chief executive officer and cutcosts.

Reporting by Svea Herbst-Bayliss; Editing by Leslie Adler

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