Starboard Urges Wausau to Increase Dividend to $1

Starboard Value LP, the activist investor that’s the biggest shareholder of Wausau Paper Corp., called on the paper-products company to return more cash to investors.

“Wausau needs to commit to returning a large portion of cash flow before growth capex, ensuring that a meaningful amount of cash is actually returned,” Starboard Chief Executive Officer Jeffrey Smith wrote today in a letter to Wausau CEO Henry Newell that was filed with regulators.

Starboard, which owns 15.2 percent of Wausau, sent two private letters this year asking Wausau to reduce costs and return capital to investors, according to the letter. Wausau’s commitment to returning 50 percent of free cash flow after capital expenditure didn’t satisfy Starboard, because it could mean “little-to-no” money would be left after investments to give back to shareholders, Smith wrote in the letter.

Wausau has gained 50 percent in the last year. The Mosinee, Wisconsin-based company sold its specialty paper business to a new company sponsored by private equity firm KPS Capital Partners LP earlier this year for $105 million.

Wausau declared a quarterly dividend of 3 cents a share on Oct. 17. Starboard wants the company to buy back $100 million in stock and increase the annual dividend to $1 per share and then to $1.50 “or more over time.”

Perry Grueber, a spokesman for Wausau, didn’t immediately respond to e-mail and telephone requests seeking comment.

“Given our disappointment with the company’s actions thus far, and the compelling value creation opportunities available, we feel it is important to now share our views publicly,” Smith wrote in the letter.

Wausau rose 1.6 percent to $12.95 as of 10:59 a.m. in New York.