Helen of Troy may not be as famous as its classical namesake. But the consumer company, whose brands include the housewares maker OXO International, may be the subject of a fight all the same.
Sachem Head Capital Management, a $1 billion activist hedge fund led by a protégé of William A. Ackman, sent a public letter to Helen of Troy’s board on Tuesday, demanding that the company explore strategic alternatives including a sale of some of its assets.
The brewing battle is the latest in a growing wave of shareholder activism, as hedge funds increasingly push management teams to return more money to shareholders or explore sales of their companies. Even with relatively small stakes â€" Sachem Head said that it owns only 3.7 percent of Helen of Troy’s shares â€" such investors are able to push for significant changes.
Based in El Paso, Tex., Helen of Troy focuses on making consumer products for brands like Revlon and Dr. Scholl’s. But it also owns OXO, the well-known maker of cooking and storage products.
In its letter, Sachem Head criticized the company for poor corporate governance and for limiting its review of strategic moves to return capital to shareholders. The firm pointed to high compensation plans for Helen of Troy’s former chief executive, Gerald Rubin, and a relative paucity of debt on the company’s balance sheet.
Among the catalysts for the hedge fund’s campaign was the sudden replacement of Mr. Rubin with Julien R. Mininberg, an internal candidate.
“While the market reacted positively to Mr. Rubin’s departure, we believe that with the benefit of the full context, shareholders should share our entirely different view,†Scott Ferguson, the founder of Sachem Head, wrote in the letter. “We believe the circumstances surrounding his hasty resignation are, ironically, yet another example of inadequate board stewardship.â€
According to the letter, Helen of Troy could reap substantial benefits from a deal, thanks to its unusual corporate structure. Though the company’s main operations are in Texas, its headquarters are in Bermuda. Sachem Head suggested that the company keep that setup in a merger, allowing the newly enlarged corporation to benefit from the lower taxes that come from being technically headquartered in a low-tax region.
The hedge fund added that it has spoken to what it described as a number of potential suitors for Helen of Troy, contending that at least one had reached out to the board in recent weeks only to be rebuffed.
If Helen of Troy isn’t able to sell itself, Sachem Head said, it should readjust its balance sheet, implying that the consumer goods maker should take on more debt that could go toward dividends or other shareholder payouts.
Shares in Helen of Troy were up nearly 4 percent in midafternoon trading on Tuesday after the activist’s letter was made public.
