By Svea Herbst-Bayliss
NEW YORK (Reuters) – Hedge fund Mountaineer Partners is urging discrete electronic components maker Vishay Intertechnology to buy back $600 million worth of stock this year, citing the company’s “irrationally low valuation,” according to a letter reviewed by Reuters.
New York-based Mountaineer, which owns 1.7% of Vishay, in a letter to the board on Monday said that Vishay has cash on its balance sheet it doesn’t need and could use more sensibly to repurchase stock.
“Given Vishay’s overcapitalized balance sheet, the Board should take advantage of Vishay’s irrationally low valuation by approving and implementing a $600 million accelerated share repurchase,” said the letter, signed by Mountaineer partner Greg Williams said.
A representative for Malvern, Pennsylvania-based Vishay was not immediately available for comment.
Mountaineer Partners argued that buying back $600 million in stock this year is a “prudent mechanism” for boosting shareholder returns given Vishay’s $1.5 billion of cash and revolver availability.
“A $600 million accelerated share repurchase … would serve as a significant catalyst to prompt market attention and bring Vishay shares closer to fair value,” the letter said.
Based on Vishay’s Friday closing price of $20.90, $600 million would buy back 28.71 million shares. Vishay has 137.6 million shares outstanding.
Mountaineer has been invested in the $2.8 billion company, whose products are used predominantly for electrifying the automotive and industrial sectors, for six years.
The letter comes days after the company held its first-ever investor day on April 2. Despite projections for strong revenue and earnings growth for the next several years plus an “exceptionally positive message” from CEO Joel Smejkal, Vishay’s shares traded lower after the investor day.
Since January, shares have dropped 11%. They dropped 5% in the last month. The Philadelphia Semiconductor Sector index has gained 3% since January.
Mountaineer said the market is feeling “apathy” toward the company and urged to board and management, which would benefit from a higher stock price in the wake of recent executive and director compensation plan changes, to act quickly.
(Reporting by Svea Herbst-Bayliss; Editing by Leslie Adler)
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