Activist Engine Capital Urges Government Contractor KBR to Explore a Sale
KBR is in the midst of splitting its businesses; Engine thinks that is unnecessary
- Activist investor Engine Capital, with a roughly 2% stake, is urging government contractor KBR to explore a sale.
- KBR’s stock price has fallen over 25% since it announced plans last September to separate its businesses into two companies.
- Engine Capital believes a full-company sale could fetch from $48 to $55 a share, mitigating risks of KBR’s planned separation.
Activist investor Engine Capital has a roughly 2% stake in KBR KBR 0.64%increase; green up pointing triangle and is urging the government contractor to explore a sale because it believes the company’s businesses are being undervalued in the public market, according to a letter viewed by The Wall Street Journal.
The details
KBR has a market value of roughly $4.5 billion, with its stock price down more than 25% since it announced plans last September to separate its businesses.
KBR, run by Chief Executive Stuart Bradie, is an engineering, consulting, logistics and training company.
It is in the process of dividing into two, with one firm focused on so-called mission technology solutions, serving military and other government agencies, and another firm (being called New KBR) focused on sustainable technology, centered on energy transition and emissions reduction.
KBR said the split would let investors value their underlying businesses better.
Engine argues that the planned separation would be costly and create new risks and tax difficulties, according to the letter that was delivered to KBR’s board of directors on Monday.
Instead, Engine believes KBR could attract both private-equity and strategic buyers for the company and could fetch from $48 to $55 a share in a transaction. KBR shares closed Wednesday at $36.02.
“A full-company sale would offer shareholders a clear and immediate realization of value,” Engine Managing Member Arnaud Ajdler wrote in the letter. “It would also mitigate execution risk, eliminate incremental standalone costs and allow an acquirer to optimize the business under its own management and operating structure.”
The context
Another activist investor previously supported plans for KBR to separate its segments. Irenic Capital Management built a stake in KBR in late 2024 and pushed the company to spin off the private-sector part of its business, the Journal previously reported.
Engine, founded in 2013 by Ajdler, has roughly $1.5 billion under management. Earlier this year, Engine successfully pushed for the sale of uniform supplier UniFirst to Cintas.