Starboard buys 10.7% Mellanox stake amid takeover speculation

US activist investor Starboard Value LP last night announced that it has acquired a 10.8% stake in Israeli big-data connectivity company Mellanox Technologies Ltd.

At the same time, the US activist investor was critical of Mellanox saying that it needs to “improve its margins and stock and explore a potential sale.” These comments have fueled speculation that Starboard is targeting a takeover of the Israeli company.

Starboard said that Mellanox spends too much money on R&D and other corporate expenses to try to boost revenue, sacrificing margins compared with peers, according to people familiar with the matter.

Starboard is an activist investor which buys stakes in companies and tries to improve their performance and value and acts from within by taking places on the boards of directors.

Mellanox’s share price was up 2% in after-hours trading at $51.05, giving a market cap of $2.6 billion. The company was founded by CEO Eyal Waldman.

The Wall Street Journal adds that Marvell Technology recently approached Mellanox about a potential deal but was rebuffed, Starboard says, a response that convinced the activist investor that Mellanox was hostile to potential deals.

Mellanox said, “We became aware of Starboard’s investment in Mellanox on Monday. Mellanox maintains an open dialogue with all of our shareholders and we welcome their input and investment.

“In line with our commitment to drive enhanced shareholder value, the Mellanox Board of Directors and management team continually review our operational and strategic priorities and are committed to acting in the best interests of our shareholders,” it said.

Starboard is already known to Israeli investors because it holds a stake in pharmaceutical company Perrigo Company.