SAC Capital Suggests Clearwater Split

SAC Capital Suggests Clearwater Split

Clearwater Paper Corp (NYSE:CLW)’s third largest shareholder, Steven Cohn’s  hedge fund SAC Capital, has indicated that it would like to see the company split up in order to fully realize the value of the firm. SAC, which owns 7.2% of the shares in Clearwater Paper Corp (NYSE:CLW), indicated in a securities filing that it sent a letter to the management of the firm, arguing that the stock is undervalued in the market and the individual parts are likely worth more than what the market is currently valuing the firm at.

Clearwater produces and sells private label tissue products, as well as paperboard. Primary customers include both major retailers and wholesalers. The firm manufactures its line of products in a variety of locations in both the United States and Canada. The company reported earnings of $0.16 per share in the first quarter of 2012, down from $0.24 in the same period of 2011. However, much of this decline had to do with unique tax items, and EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) was actually up to $45.2 million compared to $41.7 million in the prior year.

It is uncertain whether substantial value could be realized by Clearwater by divesting assets as it currently trades at a substantially higher price to earnings and price to book ratio than its peers, which include P.H. Glatfelter Company (NYSE:GLT), Boise Inc. (NYSE:BZ), Mercer International Inc. (NASDAQ:MERC). and Tembec Inc (TSE:TMB). While these companies do differ in their specializations in the paper and pulp industry, most are valued substantially below Clearwater. Clearwater also has a lower return on equity and lower operating margins than the majority of its peers. This suggests that struggles at Clearwater may be more related to operations than the business arrangement.

With that considered, the market certainly was willing to entertain the suggestion and Clearwater rallied up today nearly 7% on the news.


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