By Svea Herbst-Bayliss
NEW YORK, Oct 19 (Reuters) - Starboard Value is preparing to nominate directors for election to the board of Knife River Corp as the activist investor steps up pressure on the construction company to improve its profit margins or put itself up for sale, people familiar with the matter said.
The hedge fund, one of the industry's busiest activists, recently acquired a significant stake in Bismarck, North Dakota, headquartered Knife River and has urged management to boost its margins
to 22% by fiscal year 2029. The company, which has a market value of $2.8 billion and has seen its stock price drop 24% over the last 12 months, reported margins of about 15% for the quarter that ended June 30.
Starboard first unveiled its new investment in Knife River last month, with Jeffrey Smith, Starboard's managing member, Chief Executive and Chief Investment Officer, telling Knife River CEO Brian Gray and its board that he wants to see a "clear plan, defined accountability, and decisive action to address years of underperformance."
The company responded to the letter in a filing, saying that it remains focused on margin expansion and profitable growth, and confident in both its existing leadership and strategy.
The reply did not address Starboard's concerns though, in particular in absence of more details on how to achieve the margin improvement at a time when Knife River's rivals have expanded their margins to roughly 30%. Starboard is now ready to take fresh action, said the people who are familiar with the hedge fund's thinking.
The fund has already lined up some director candidates, and is continuing to identify others it could nominate to the company's board, the people said.
Knife River, which supplies crushed stone, sand, and gravel and manufactures and delivers ready-mix concrete for commercial, residential, and large-scale public projects, currently has seven directors, according to its website.
Starboard's Smith is scheduled to address the annual 13D Monitor Active-Passive Investor Summit in New York on Tuesday where he discusses in detail some of the firm's investments.
Starboard often nominates director candidates to push for operational or strategic changes at underperforming companies.
Smith joined the board of Kenvue in early 2025 before it was sold, and Peter Feld, Starboard's managing member, Head of Research, joined the board of BILL Holdings a year ago.
(Reporting by Svea Herbst-Bayliss; Editing by David French and Nick Zieminski)
