Fair Isaac Corporation
(NYSE:FIC) shares rose $2.58, or 6.9%, to $39.96 today after Sandell
Asset Management disclosed a 5% stake in the company and expressed
concerns over the company's restructuring plans. The activist hedge
fund insisted that the company may be better off exploring a possible
sale or conducting a leveraged recapitalization.
Sandell Asset
Management said they were encouraged by management's plan to improve
operating and financial results but questioned the board's decision to
opt for a turnaround instead of trying to sell the company to a
strategic or financial buyer. The hedge fund noted that such extensive
turnarounds tended to be fraught with risk and they feel strongly that
such actions may be best undertaken as part of a larger organization or
in a private ownership context.
As a result, Sandell Asset
Management made several recommendations to Fair Isaac going forward in
order to help them more quickly and safely unlock shareholder value.
The hedge fund first recommended that the company attempt to sell
itself as a whole, but if it was unsuccessful it could separate its
three divisions and attempt selling them separately. And if those
efforts are unsuccessful, the hedge fund recommended a leveraged
recapitalization as a public company. Finally, Sandell requested that
the company to be aggressive with its existing share repurchase program
and extend the program when appropriate.
Overall, these efforts
would unlock significant value if the company agrees to follow through
with them. Unfortunately, the board seems bent on attempting to turn
the company around, which can be a very risky procedure. While some
turnarounds are successful, we know that almost every sale of a company
comes at a premium! This makes FIC a stock
worth watching!
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