(Reuters) - New York-based hedge fund Sachem Head Capital Management on Wednesday urged Eagle Materials Inc to separate its cement and wallboard businesses and nominated two candidates to the company’s board.
Sachem, which disclosed a 9 percent stake in Eagle Materials in March, said the diversion of Eagle’s cash to fund its expansion into oil and gas proppants has resulted in “substantial underperformance” in the company’s stock price.
“In our view, this discount (in the company’s share price)can be eliminated by separating (cement and wallboard) businesses into more focused entities,” Scott Ferguson of Sachem Head Capital Management said in a letter to Eagle’s investors.
Eagle Materials’ stock was slightly down at $89.44 in morning trading. The company’s shares have fallen 11.8 percent in the past 12 months, underperforming a 7.7 percent increase in the Dow Jones U.S. Industrials index.
Eagle announced a strategic review of its businesses in April and has undertaken similar reviews in the past, but the hedge fund believes the company has not been able to take action to unlock value for its shareholders.
“Without changes in the company’s boardroom, there can be no assurances that this time will be different,” said Ferguson, managing partner at Sachem and also one of the nominees to Eagle’s board.
Wendy Lane, a director at insurance broker Willis Towers Watson, is Sachem’s other nominee for election to Eagle’s board at the company’s 2019 annual shareholder meeting.
Reporting by Ankit Ajmera in Bengaluru; Editing by Saumyadeb Chakrabarty