May 15, 2020 / 9:35 PM / 11 days ago

Proxy adviser ISS backs six Starboard candidates in campaign at GCP: report

BOSTON (Reuters) - Proxy adviser Institutional Shareholder Services Inc (ISS) said on Friday GCP Applied Technologies (GCP.N) investors should elect six of hedge fund Starboard Value’s eight director nominees to the chemical company’s board in an unusual step that would hand control of the board to an activist investor.

ISS said that GCP is “in need of a comprehensive turnaround plan that can be effectively executed by management and overseen by the board,” and said Starboard has laid out a plan and has experienced executives on hand to help put it into action.

Traditionally proxy advisers are cautious in backing an activist that is seeking control of the board but it is taking the step at GCP, noting that the company’s board appears to be resisting outside perspectives.

The company said in April that it plans to expand the board by one to 10.

Representatives for the New York-based hedge fund and the Cambridge, Massachusetts-based company did not immediately respond to requests for comment.

Reuters saw a copy of the ISS report on Friday.

GCP and Starboard, which owns 9% of the company, have been locked in an increasingly bitter proxy battle since early April when the hedge fund nominated eight candidates, including Peter Feld, Starboard’s director of research, to the board. Shareholders are scheduled to vote on the board’s composition on May 28.

GCP was spun out of W.R. Grace four years ago, and ISS said results have been disappointing since the company has been on its own. “The reported financial results continue to be mixed at best, with very limited evidence of stabilization within just a few parts of the business,” the report said.

Starboard won significant support for its campaign when Standard Industries, Inc. and its affiliated entity 40 North Management LLC, which together own 24.4% of GCP’s stock, last month said they backed the activist hedge fund.

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. Gabelli Funds and JP Morgan Asset Management are among the top 10 shareholders along with the three large index funds, BlackRock, Vanguard and State Street.

Starboard made history in the governance world six years ago when it unseated all 12 directors at Darden Restaurants. Since then the fund has won more board seats than any other hedge fund, all through settlements.

Reporting by Svea Herbst-Bayliss; Editing by Sandra Maler and Aurora Ellis

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