Building Materials Holding Company (NYSE:BLG) shares moved up $1.92, or 13.38%, to $16.27 today after Chapman Capital disclosed a 7.4% stake and expressed their concerns over the company's performance. Specificially, the activist hedge fund suggested that the stock's value could best be unlocked through a sale of part or all of the company.

Chapman first noted that while management cannot be blamed for the steep correction in the U.S. homebuilding market, the board's generous reward distribution to management during this downturn should not be overlooked. Equally troubling is the fact that management and the board have very little stake in the company while much of what they do own was granted to them free of charge. This lack of a stake in the future of the company is certainly a cause for concern.

Chapman then argued that the company is undervalued. To unlock this value the hedge fund recommended that the company immediately hire financial advisors to explore selling all or part of the company. After all, the building materials sector is clearly amid a consolidation wave. Chapman has also recently made personal contact with BLG’s peers and leveraged consolidators of the building supply industry, and they can convey an extremely high level of interest from both private equity and strategic building supply players in the acquisition of the company.

Chapman Capital recognizes the unique value of BMHC’s assets, the years and efforts required to assemble and integrate them. As a result, they are not encouraging an inopportune, undervalued sale, but instead a methodical auction timed to consummate into the inevitable cyclical recovery. And this would be great news for the company's shareholders who have suffered since the downturn in 2006!

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