Activist investor Starboard Value LP called on Magellan Health Inc. to explore “all potential strategic alternatives,” including a sale of the company, to unlock shareholder value. Starboard, which said it owns 9.8% of the healthcare management company’s outstanding shares, also nominated a “full slate” of candidates for election to Magellan’s board. In an open letter to shareholders, Starboard said the company is “deeply undervalued,” as operational missteps have resulted in “frustratingly extensive periods of share price underperformance.” Among the execution issues Starboard listed were key legacy contract losses, bringing on “significant yet unprofitable” new business and “haphazard” execution in its pharmacy benefit management business. “When comparing a revised standalone plan to a sale of the company, it is crucial for the Board to appropriately assess the risks inherent in the internal plan and the time required to achieve that plan, compared to the certainty of a sale transaction,” Starboard wrote in the letter. The stock, which was still inactive in premarket trade, has lost 25.5% over the past 12 months while the SPDR Health Care Select Sector ETF has climbed 9.2% and the S&P 500 has gained 2.6%.
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