Starboard builds Solstice stake and seeks $100 million in cost cuts

Starboard Value has built a stake in Solstice Advanced Materials, the chemicals company Honeywell spun off last year, and is pressing management for about $100 million of cost cuts, the Financial Times reported.

The position makes Starboard one of Solstice's top 10 shareholders, with stock worth several hundred million dollars, according to the FT. Starboard chief executive Jeff Smith presented the case at the 13D Monitor Active-Passive Investor Summit and told CNBC the firm sees an opportunity for management to reduce costs. Starboard manages about $8.2 billion.

For allocators evaluating the activist thesis, Solstice's largest segment is refrigerants and applied solutions at more than 70% of sales, while Starboard's argument centers on the smaller nuclear unit, the FT reported. The useful due-diligence question is whether Solstice's board specifies how it would deliver the $100 million in cost cuts.

Solstice agreed in July to buy Element Solutions in a $14.5 billion cash-and-stock deal, called the deal off in August and announced a $500 million share buyback. The FT put Solstice's market value at about $9.6 billion. Starboard argues the nuclear unit could gain value because Solstice is one of the few companies outside Russia and China able to carry out the first step in uranium enrichment, the FT reported. The US ban on imports of Russian enriched uranium takes full effect on Jan. 1, 2028.

The FT said the next milestone is whether Solstice's board answers with a cost plan of its own or Starboard seeks a larger say over the company's direction.