Veritiv Corp. (VRTV) rallied the most on record after Seth Klarman’s Baupost Group LLC disclosed a 14 percent stake in the paper and packaging distributor.
The stock jumped 17 percent to a record $44.99 as of 4 p.m. in New York, the biggest advance since it started trading in June. The Norcross, Georgia-based company was created this year after International Paper Co. agreed to merge its Xpedx distribution business with closely held Unisource Worldwide Inc. and spin off the new company.
“Baupost has taken a large position in the stock and people probably view that as a good sign,” Joe Cornell, an analyst for Spin-Off Advisors LLC, said in a phone interview. The Chicago-based firm raised its rating on Veritiv to neutral, the equivalent of hold, from sell on July 7.
Ed Patterson, vice president of corporate communications for Veritiv, and Diana Desocio, director of communications at Baupost, declined to comment.
Klarman, whose firm managed $27 billion at the start of this year, is a bargain hunter who wrote the preface to the sixth edition of “Security Analysis,” a landmark 1934 book by Benjamin Graham on value investing.
Baupost, based in Boston, owns 2.25 million shares of Veritiv, according to a regulatory filing. Bain Capital LLC owned 49 percent of Veritiv, or 7.84 million shares, as of a July 1.
Xpedx and Unisource had combined income from continuing operations of $239.9 million in the nine months ended September 2013 and sales of $7.2 billion, according to a filing from February.
Veritiv shares fell to a low of $32.50 on July 3, one day after the stock started regular trading. It rebounded to $40.29 by July 29.
“It’s not surprising in the sense that spinoffs attract value investors,” Todd Wenning, an analyst at Morningstar Inc. who covers International Paper, said in a phone interview. Veritiv will need to demonstrate if it can generate sustainable economic profit, or returns after subtracting a company’s cost of capital, Wenning said.
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