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(Bloomberg) — Activist investor Starboard Value has built a significant stake in Flowserve Corp. and is speaking to the industrial company about potential changes, according to people familiar with the matter.
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Starboard and the company have been discussing ways the manufacturer could expand margins, the people said, asking not to be identified because the matter is private.
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The exact size of Starboard’s investment couldn’t be learned.
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“We regularly engage with shareholders and prospective investors to hear their views and appreciate their perspectives,” a representative for Flowserve said in a statement. “As a matter of practice, we do not comment on the specifics of our discussions.”
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A representative for Starboard couldn’t immediately be reached for comment.
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Flowserve shares were little-changed at $83.18 at 2:36 p.m. in New York trading Monday, giving the company a market value of about $10.6 billion. The stock has gained about 18% this year while competitor ITT Inc. is up about 25%.
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Flowserve is one of the world’s top providers of pumps, seals, valve controls and other equipment for moving and controlling fluids in the oil and gas, chemicals, power generation and other heavy industries. Its business model hinges on selling critical parts and then servicing them for years.
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The company has been looking to ramp up its exposure to the faster-growing power and nuclear markets, after jettisoning its legacy asbestos assets last year. To that end, it agreed in February to buy Trillium Flow Technologies’ valves division for $450 million. Analysts have said the company is well-positioned to take advantage of industry megatrends such as the buildout of artificial intelligence, which is generating a push for new energy sources including nuclear power.
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In February, the company also announced that it had reached its target for reaching adjusted operating margin of 14% to 16% two years ahead of schedule, setting a new target of 20% by 2030, according to Bloomberg Intelligence senior industry analyst Mustafa Okur.
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That would bring “it in line with best-in-class peers such as ITT,” Okur said in February.
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Flowserve has “significant margin expansion runway,” Citigroup Inc. analysts said in a research note on March 5.
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Last year, Flowserve agreed to merge with Chart Industries Inc. to create a $19 billion company that would have served industries including data centers, water, industrial gas and mining. The deal fell apart after Baker Hughes Co. agreed to acquire Chart in July.
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Starboard, led by Chief Executive Officer Jeff Smith, has targeted some of the world’s largest companies and is currently pushing for changes at CarMax Inc., Lamb Weston Holdings Inc. and Riot Platforms Inc., according Bloomberg’s activism database.
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