NEW YORK (GenomeWeb News) – An activist investment fund disclosed a 7.3 percent stake in Hologic and called for continued disclosure of the company's plans to pay down its debt and return cash to its shareholders.
In a document filed with the US Securities and Exchange Commission on Friday, Hologic disclosed Relational Investors' stake in the firm. Based in San Diego, Relational Investors is a privately owned asset management firm that "seeks to produce superior returns by using its combination of capital and experience to influence the direction of its portfolio companies," it said on its website.
In the SEC document, Relational Investors said that Hologic trades at a "discount to fair value," and attributed this to Hologic's "subpar operational execution and a history of deploying capital to overpriced acquisitions," that have weighed the company down with excessive leverage and pushed its return on invested capital below its cost of capital.
Relational Investors began amassing shares of Hologic in August, and the following month presented its concerns to the firm, telling Hologic that it "should use its discretionary cash flows to normalize debt levels and accelerate debt reduction with selected divestitures."
It further emphasized to Hologic the need to adopt a capital allocation program to avoid continued dilutive purchases, Hologic said in its SEC document.
While recent action by Hologic — including changes to management as well as its board — have been encouraging, Relational Investors said the firm needs to "regularly" report how it plans to pay down its debt and return cash to investors.
Relational Investors will "monitor the company's adherence to this strategic plan and capital allocation disciplines," Hologic said.
The Bedford, Mass.-based firm is in the midst of a shakeup to turn around its business and increase shareholder value. In July Jack Cumming replaced Rob Cascella as president and CEO, only to be replaced by Stephen MacMillan two weeks ago.
Carl Icahn has also acquired a greater than 12 percent stake in Hologic and quickly asserted his influence by negotiating MacMillan's appointment to the company, as well as the appointments of MacMillan and two others to Hologic's board.
In afternoon trading on the Nasdaq on Monday, Hologic shares rose a fraction of 1 percent to $22.45.