Jeff Ubben’s ValueAct Partners has upped its stake in Motorola Solutions to 5.9 percent. It is now his largest position.
Ubben says in an interview that he has had discussions with management and believes sometime in July management and the Board of Directors will come up with a capitalization plan to boost earnings per share, most likely a huge share buyback. He figures if the company uses $5 billion of its $7 billion in cash to repurchase its stock, next year’s earnings per share could surge from $3 to $4.
Ubben also still believes Motorola Solutions would be a perfect leveraged buyout candidate if mega deals come back to the market. “The stock is cheap, the markets are low and it has cash to finance a deal,” Ubben explains.
In May I pointed out that at the end of the first quarter that Motorola Solutions also was one of just 14 stocks held by the activist investor and one of two stocks that recently “graduated” to his core portfolio, along with Moody’s.
Motorola Solutions also is one of the largest holdings of Carl Icahn — and the largest shareholder of Motorola Solutions with 9 percent of the stock — and one of Icahn’s key people, Vincent J. Intrieri, sits on the company’s board of directors. “I think it is undervalued,” Icahn said back in May.
According to sources, in the past month Icahn and Ubben — who had never met before then — have spoken at least three times on the telephone.
Icahn acquired his shares from the early January break up of Motorola while ValueAct went into the market and bought shares of the newly public company after it started trading.
Motorola Solutions is the name for the former Motorola and in early January it spun off its mobile phones division into Motorola Mobility. The newly named Motorola Solutions — formerly the Enterprise Mobility Solutions and Network divisions of Motorola — is a data communications and telecommunications equipment provider, specializing in security devises. It sells to both companies and governments, including police and fire departments.
Its Government segment includes its two-way radio business and public safety systems business. The Enterprise segment includes enterprise mobile computing and scanning devices.In late April, Nokia Siemens closed on its acquisition of the wireless network infrastructure assets of Motorola Solutions.
“It is a wonderful business,” says Ubben. “It has a predictable installed base.” He also believes its 13.5 percent margins — which he says are at the low end — could be restored to the former level of 20 percent.
Ubben’s recent purchases were roughly between $43 and $47 per share. The stock is up more than 1 percent, to $45.71 in Friday morning trading.
Since 2001, ValueAct has made at least 60 “core” investments. During that time its partners or other key people have sat on 27 Boards of Directors and helped to sell 18 businesses.
According to an analysis made by FactSet SharkWatch, two years after Ubben was named a director, the stocks of those companies were up, on average, 9.69 percent compared with a loss of 3.77 percent for the S&P 500, for an outperformance of nearly 14 percentage points.
Other large holders of the stock at the end of the first quarter included George Soros and Highfields Capital, another hedge fund that takes activist roles from time to time.
