Intertape Polymer Group Targeted by FrontFour, Zelman

  • Hedge funds advocate for changes including possible sale
  • FrontFour, Zelman argue firm worth 52% premium to last close

Two U.S. hedge funds are agitating for change at Intertape Polymer Group Inc., urging the board to consider ways to unlock value including a possible sale of the Quebec-based packaging company.

FrontFour Capital Group and Zelman Capital have sent a letter to Intertape Chief Executive Officer Gregory Yull urging him and the board to explore ways to immediately unlock value, including a share buyback, improved disclosures, board changes and a U.S. listing.

Intertape Polymer rose 10 percent to C$16.65 in Toronto as of 10:23 a.m., the biggest gain in six months.

FrontFour and Zelman Capital said they collectively hold 6.5 percent of the company’s outstanding common stock, or 3.8 million shares. The funds believe the company could be worth C$23 ($17.33) a share, a 52 percent premium to their Monday closing price. Intertape shares have fallen 18 percent in Toronto this year, giving the company a market value of C$894 million.

“We also believe that IPG is a highly attractive acquisition candidate due to its strong market position within its product lines,” the funds wrote in the letter to Yull, which was dated Nov. 10. “We strongly believe that IPG is a highly sought after strategic asset that would garner a significant premium to either a strategic buyer or private equity sponsor with a pre-existing portfolio company within the packaging space.”

While the funds say the financial performance of the company has improved in the past five years, they said it still trades at a significant “management discount” and the stock “has become a ‘show me’ story.” The investors argue management missteps have exacerbated the situation, with a cut in its fourth-quarter earnings due to manufacturing issues and a year’s delay at its plant in Blythewood, South Carolina.

FrontFour, based in Greenwich, Connecticut, is run by Zachary George, the son of former Suncor Energy Inc. Chairman Richard George. Zelman is based in Beachwood, Ohio, and managed by David Zelman and Jason Bernzweig.

FrontFour’s George confirmed the authenticity of the letter, declining to comment further. Representatives for Intertape Polymer and Zelaman didn’t return calls for comment.

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