Activist Firm Jana Pushes for Sale of Mercury Systems

(Bloomberg) -- Activist investor Jana Partners has built a position in Mercury Systems Inc. and plans to push for a strategic review of the U.S. defense electronics manufacturer, including exploring a potential sale, according to people familiar with the matter. 

The New York-based firm believes the company is undervalued and plans to meet with management and the board to discuss ideas to improve shareholder value, the people said, asking not to be identified because the matter is private. Jana confirmed that it had a 6.6% stake in the company in a regulatory filing Thursday. 

A representative for Jana declined to comment, while a representative for Mercury Systems wasn’t immediately available for comment. 

Jana, run by Barry Rosenstein, has partnered with three industry experts on the investment who could serve as director nominees once the window for nominations opens in May, the people said. They include former Boeing Co. executive Jim Albaugh, Carol Lowe, the former chief financial officer of FLIR Systems Inc., and Blackboard Inc.’s former chief executive officer, Bill Ballhaus. 

Mercury Systems is one of the last remaining independent public suppliers of sophisticated electronics for the aerospace and defense industry after a wave of consolidation in the sector. In March, private equity firm Veritas Capital agreed to sell Abaco Systems Inc. to Ametek Inc. in deal valued at $1.35 billion, following FLIR Systems’ agreement in January to sell to Teledyne Technologies Inc. 

Mercury Systems’s shares have fallen roughly 40% in the past year through Wednesday’s close. They rose 8.6% to $55.05 at 2:11 p.m. in New York on Thursday, giving the company a market value of about $3.1 billion. 

Mercury Systems’s business continues to be impacted by issues around the resolution of the federal defense budget, the impacts of vaccine mandates and supply chain issues in the semi-conductor industry, CEO Mark Aslett said in a conference call last month. 

He said he expected to deliver substantial year-over-year growth this fiscal year though bookings would be weighted to the back end of the year, particularly the fourth quarter. 

Jana has a history for agitating for changes at the companies it invests in, including successfully pushing for sales of CyrusOne Inc., Vonage Holdings Corp. and Perspecta Inc.

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