Key Takeaways
- • Starboard Value is preparing to nominate directors to the Knife River board, pressing the construction materials company to improve profit margins or explore a sale, according to Reuters citing people familiar with the matter.
- • Starboard has urged management to lift margins to 22% by fiscal 2029, versus roughly 15% reported for the quarter ended June 30 while rivals have expanded margins to about 30%.
- • Knife River, valued at about $2.8 billion in market capitalization, has seen its shares fall 24% over the past 12 months.
- • Knife River's September 24 response pointed to its EDGE initiatives and vertically integrated model but did not set out how it would close the margin gap, per Reuters.
- • Starboard has already lined up some director candidates and is identifying others; the next markers are formal nominations and whether Knife River seeks a settlement before a proxy contest.
Summary
Starboard Value is preparing to nominate directors for election to the board of Knife River, the Bismarck, North Dakota-based construction materials company, increasing pressure on management to improve profitability or put the company up for sale, Reuters reported on Monday, citing people familiar with the matter. According to the report, the activist has already lined up some director candidates and is continuing to identify others.
Starboard disclosed its stake last month in a letter from managing member and chief executive Jeffrey Smith to Knife River CEO Brian Gray and the board. Smith called for a "clear plan, defined accountability, and decisive action to address years of underperformance." The fund has urged management to lift margins to 22% by fiscal 2029. Reuters reported that Knife River posted margins of about 15% for the quarter ended June 30, while rivals have expanded margins to roughly 30%. The company's market value is about $2.8 billion, and its shares have declined 24% over the past 12 months.
Knife River responded on September 24 that it first learned of Starboard's investment on September 22, that its board and management welcome shareholder input, and that the board is confident in its leadership and strategy. The company pointed to its EDGE initiatives on pricing, operational performance and efficiency, and said its vertically integrated model across aggregates, ready-mix concrete, asphalt and contracting is central to how it creates value. Per the Reuters report, the response did not explain how the company would close the margin gap.
For institutional investors, the situation reflects a conventional activist setup: a mid-cap company spun out as an independent public company in 2023, a measurable operating gap to peers, and a seven-member board where a minority slate could shift the agenda. Starboard's explicit reference to a sale as an alternative also raises the possibility that strategic buyers or private equity firms could assess the company if the board does not deliver a credible margin plan.
Smith is scheduled to speak at the 13D Monitor Active-Passive Investor Summit in New York on Tuesday, where he is expected to discuss some of the firm's investments in detail. Key near-term markers are whether Starboard formally submits its nominations and whether Knife River seeks a settlement before a proxy contest takes shape.
Starboard disclosed its stake last month in a letter from managing member and chief executive Jeffrey Smith to Knife River CEO Brian Gray and the board. Smith called for a "clear plan, defined accountability, and decisive action to address years of underperformance." The fund has urged management to lift margins to 22% by fiscal 2029. Reuters reported that Knife River posted margins of about 15% for the quarter ended June 30, while rivals have expanded margins to roughly 30%. The company's market value is about $2.8 billion, and its shares have declined 24% over the past 12 months.
Knife River responded on September 24 that it first learned of Starboard's investment on September 22, that its board and management welcome shareholder input, and that the board is confident in its leadership and strategy. The company pointed to its EDGE initiatives on pricing, operational performance and efficiency, and said its vertically integrated model across aggregates, ready-mix concrete, asphalt and contracting is central to how it creates value. Per the Reuters report, the response did not explain how the company would close the margin gap.
For institutional investors, the situation reflects a conventional activist setup: a mid-cap company spun out as an independent public company in 2023, a measurable operating gap to peers, and a seven-member board where a minority slate could shift the agenda. Starboard's explicit reference to a sale as an alternative also raises the possibility that strategic buyers or private equity firms could assess the company if the board does not deliver a credible margin plan.
Smith is scheduled to speak at the 13D Monitor Active-Passive Investor Summit in New York on Tuesday, where he is expected to discuss some of the firm's investments in detail. Key near-term markers are whether Starboard formally submits its nominations and whether Knife River seeks a settlement before a proxy contest takes shape.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.