Starboard sells off Mellanox stake at huge profit

Mellanox Technologies Photo: Reuters

Starboard bought Mellanox shares for $250 million in late 2017 and sold them for $525 million.

US investment fund Starboard did not wait for the sale of Mellanox Technologies Ltd. (Nasdaq:MLNX) to Nvidia to be completed; it sold its entire holding to Mellanox two days ago, when the acquisition was reported.

On Monday, Nvidia and Mellanox announced that Nvidia was acquiring the Israeli company for $6.9 billion at $125 per share. Mellanox's share responded by jumping 7.8% to $118 on an enormous turnover.

Starboard took advantage of the opportunity to sell Mellanox shares for $372 million at just over $118 per share. "In view of the announcement of the company's acquisition by Nvidia, Starboard has sold its entire holding in the company. The fund appreciates the actions taken by the company's management and board of directors to maximize value for its shareholders and supports the deal with Nvidia," Starboard stated.

Mellanox, managed by CEO Eyal Waldman, produces chips for high-speed data transmission. Starboard did particularly well with its investment in Mellanox. The fund, which is perceived as having brought about the change that eventually led to the sale of the company, invested in Mellanox in late 2017 when the share price was $44-51. Its total investment is estimated at $250 million.

Starboard then announced that it held 11% of Mellanox's shares, and demanded changes in the board of directors because of its dissatisfaction with the company's operating profit. Following a six-month proxy contest, during which Mellanox's share price surged, the company announced a compromise agreement involving the appointment of several directors and the setting of profit targets. Starboard sold some of its shares in Mellanox following this agreement. It sold shares for $37 million when the share price was $85, and later sold shares for $116 million when the share price was $86-101.

In less than 18 months, Starboard sold all of its shares in Mellanox for $525 million, more than double its original investment in the company.

Published by Globes, Israel business news - en.globes.co.il - on March 13, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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Mellanox Technologies Photo: Reuters
Mellanox Technologies Photo: Reuters
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